Labor follows Adam Smith

Emerson defines Labor for new era

Lenore Taylor, National correspondent | June 13, 2008

RUDD Government frontbencher Craig Emerson has sought to define modern Labor as a party of “market democrats” who believe in smaller government, less middle-class welfare and free markets as the best way to deliver a fair society.

Dr Emerson outlined to the Sydney Institute last night his ideas for a “unifying political philosophy” for Labor, in the tradition of former British prime minister Tony Blair’s “third way”, which Dr Emerson claimed was a rebadged version of the Hawke and Keating government traditions.

“In this political philosophy, the role of policy-makers is to allow the market to create prosperity and out of that prosperity to expand opportunity, not the welfare state,” Dr Emerson said.

This philosophy would mean winding back “the relentless expansion of the welfare state, where higher taxes are used to support revenue for recycling, often to the same people, in return for political support” – a hallmark of the Howard government years, Dr Emerson said.

He pointed to decisions in the May budget to means-test the baby bonus and family tax benefit B as evidence of Labor’s bona fides, but told The Australian he was not suggesting that other government payments should be wound back.

“I am simply putting the philosophical position that people are better off keeping their money rather than paying higher taxes and having it recycled back to them in the form of government payments,” Dr Emerson said.

His vision would mean the Government only offered financial support to business for doing things that had a wider community benefit.

“That is why governments offer subsidies or tax breaks for private sector research and development … but care needs to be taken … poorly designed tax concessions may be little more than a gift to business if they simply reward research that would have been undertaken anyway,” he said.

Asked about suggestions by Toyota, later retracted, that the company would have invested in an Australian assembly line for the hybrid Camry even without $70million in state and federal government support, Dr Emerson said the green car fund grant to Toyota was exactly what he believed government should be doing, because it tackled the wider community benefit of reducing climate change.

Dr Emerson, who is Minister for Small Business, Independent Contractors and the Service Economy, envisages a modernised role for the trade union movement.

“Seeking to use industrial muscle to gain pay rises in excess of productivity growth is inflationary and ultimately self-defeating,” he maintained.

He said modern unions had to offer members advice on tax, education, insurance, financial planning and even personal counselling services, and had to represent members on a collective and individual basis.

Running a prosperous economy in this way meant governments had the resources to provide true equality of opportunity, particularly though increased spending on education, Dr Emerson said.