Richard Colbeck (Tasmania, Liberal Party, Parliamentary Secretary to the Minister for Finance and Administration) Share this | Link to this | Hansard source

I would like to place on the record that my family has an interest in Medibank Private by virtue of a policy that we hold.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I would like to take this opportunity to make a similar declaration.

Andrew Bartlett (Queensland, Australian Democrats) Share this | Link to this | Hansard source

I declare that my family has an interest in Medibank Private.

Michael Forshaw (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I declared that I was a member of Medibank Private in my speech in the second reading debate. I am happy to do so again if it is formally required.

John Hogg (Queensland, Deputy-President) Share this | Link to this | Hansard source

You do not need to, Senator Forshaw. I appreciate your honesty in this though. Are there any further declarations?

Kerry Nettle (NSW, Australian Greens) Share this | Link to this | Hansard source

I declare that I do not have private health insurance because I support the public health system in this country.

John Hogg (Queensland, Deputy-President) Share this | Link to this | Hansard source

Thank you, Senator Nettle, and that is not an appropriate declaration.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

In the spirit of levity, I declare that I do not have an interest in Medibank Private. I do have private health insurance and I do support the private health insurance industry, as well as the public health system. I move Democrat amendment (1) on sheet 5135 revised:

(1)    Page 3 (after line 9), after clause 4, insert:

5 Repeal

I am dealing with the amendments on sheet 5135 separately because they all attend to different aspects. This first item essentially gives the bill a time period by which the sale has to have occurred, which is by 2012, otherwise the bill is repealed. The amendment has been moved as a result of a query by the Senate Scrutiny of Bills Committee in its 11th report of 2006, published on 29 November. The committee had raised the issue of its concern with provisions that do not commence until an uncertain event occurs—in other words, the bill was open ended as to how long its provisions lasted. The committee said:

Such provisions make it difficult for readers to determine whether the provisions in question have commenced. The Committee prefers to see a time limit imposed on such provisions and seeks the Minister’s advice whether some appropriate time frame might be applied in this case.

The committee judged that problem to be in breach of principle 1(a)(i) of the committee’s terms of reference which refers to personal rights and liberties. This is a very longstanding principle of the Senate Scrutiny of Bills Committee and in my experience it is mostly strongly supported by the Senate. The minister gave a considered response and the committee thanked the minister for the response. Then it said:

The long-standing position of the Committee is that it is properly the role of the Parliament to determine the date upon which legislation ought to commence. Where it is not possible to specify a particular date, the Committee considers that the Parliament should set a defined period of time during which legislation might commence …

Provisions such as the one contained in this Act remove that role from the Parliament and place it in the hands of the Executive … The terms of reference for the Committee require that it report such diminution in Parliamentary oversight to the—

attention of the—

Senate.

I have taken note of what the committee has had to say. I think that if you, Minister, and your government have not sold Medibank Private and wrapped up all the details by 2012 then you do not deserve to have sold it. I have given you a long time in which to do it and I have said that that will be sufficient time. Hopefully, you will have the wisdom to recognise the validity of my arguments and support me.

Jan McLucas (Queensland, Australian Labor Party, Shadow Minister for Aged Care, Disabilities and Carers) Share this | Link to this | Hansard source

First of all, I place on the record the reasons that the Labor Party did not support any of the second reading amendments that have not been carried in this place. All three of those second reading amendments contemplated a sale of Medibank Private. The Labor Party totally opposes any sale of Medibank Private, so any support for second reading amendments that contemplate a sale cannot be provided.

Going to the substance of Senator Murray’s amendment, which attempts to resolve the issue that was raised by the Scrutiny of Bills Committee, the point that I have just made about our opposition to the second reading amendments still stands. Labor does not contemplate a sale of Medibank Private. That is why we opposed the second reading, and that is why we have spoken strongly in the chamber about why we oppose the sale of Medibank Private. There are no good reasons to sell Medibank Private. In fact, there are only poor public policy reasons that will eventuate from such a sale. Whilst I understand Senator Murray’s motivation—that is, to try to curtail the minister’s power; if they forget about it, by 2012 they might have to do something—Labor cannot support his amendment. We do not support the sale of Medibank Private; therefore, we cannot support this amendment.

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

The government does not support the Democrat amendment. It is my experience that it is unprecedented for the parliament to arbitrarily give the executive a time period in which to effect a sale. I am not aware of that occurring with respect to any previous sale of a government business, of which there have been a number.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

I tried to be original!

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

I must concede that Senator Murray came up with a novel approach of giving the government some five years in which to effect a sale. Through you, Madam Temporary Chairman Troeth, to Senator Murray: I certainly hope that we will have effected a sale in that time. As I said, it is the government’s clear intention that, if re-elected, a sale will take place in 2008. But, obviously, with respect to taxpayers and our obligations as a government, we would want to ensure that a sale took place in appropriate market circumstances. While that remains our current intention, I am not in a position to rule out the possibility that a sale, for some reason or another, might not occur in 2008. So I think it is rather arbitrary and rather odd for the parliament to set some arbitrary time frame. The parliament should properly consider the question of whether this business should remain in government hands and make a decision that it gives the executive the authority to sell the business and it should then be for the executive, with that authority, to determine the sale process. The executive is answerable to the people every three years. If a future parliament decides that, in the circumstances, the business has not been sold and that it wishes to repeal this act, then of course that is a matter for any future parliament. But we think it is inappropriate for this parliament to set some arbitrary time frame; therefore, with great respect to Senator Murray, we do not support his amendment.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

Of course, I refute the central proposition—that is, that it is not appropriate for parliament to determine what it likes about legislation. I actually regard the parliament as superior to the government and the executive. I regard the parliament as the pre-eminent body, not the government and the executive. So I think parliament is entitled to do what it feels it should. Of course, I recognise that parliament will not decide that matter today. But, more importantly, the difficulty is that the bill does not give a date, and I have attempted to provide a date. The problem with the minister’s answer is that it does not resolve the issue that the Scrutiny of Bills Committee has properly drawn to the attention of the Senate.

As this amendment will be rejected, I therefore have a question for the minister: is it the intention of the government to periodically report on whether and when a sale might occur? Let us take what I think is a silly example, but let me take it because in theory it is possible. If by 2015 a sale had not occurred, it would be a bit odd to have a bill out there which just says, ‘A sale could occur any time up to the 22nd century.’ I know that is a silly example and it is exaggerated to make the point. I am really asking: is there a reporting mechanism whereby the parliament will be aware that an open-ended bill is still out there?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

Remember that what we are talking about really is removing a legislative prohibition on the executive selling its shares in this business, and for that reason I do not see that it is appropriate to set some time limit on that proposition. But, as a matter of—I would have thought—normal political and public discourse, the executive would feel itself obliged to report to both the parliament and the public on progress with the implementation of the policy. As I said, it will be our policy going to the next election and, if re-elected, a policy which we will seek to implement, as I said, in 2008. If for any reason we deemed that 2008 was not an appropriate year in which to give effect to the policy, then we would keep the public properly informed as to the reasons we were not going to proceed and as to when we might proceed. So I have every confidence that the government in the future would be reporting regularly on progress towards the implementation of this policy. I think Senator Murray could rest assured that future ministers and any future coalition government would be keeping the electorate and this parliament properly informed of progress with the implementation of that policy.

Kerry Nettle (NSW, Australian Greens) Share this | Link to this | Hansard source

I want to indicate the Australian Greens’ support for this amendment. As I have indicated previously, we are not in support of this sell-off of Medibank Private. Also, we do not think it is the role of this parliament to pass legislation allowing for the government to make significant decisions that will have an impact on a particular industry and then for the government to be able to choose at what point in the electoral cycle it is most convenient for them to engage in the actual sale. Yet that is what we are seeing with this legislation.

The government announced their proposal to sell off Medibank Private. There was a negative response in the community from those people who had lived through the experience of the privatisation of a range of different institutions in Australia—be it the Commonwealth Bank and the impact of that on the closure of rural bank services or the sale of Telstra and the impact of that on telecommunications in regional areas. People have had a whole range of negative experiences of privatisation, and that was the response that this government got when it made the announcement that it intended to sell Medibank Private. Then, sometime down the track, we had an announcement to say, ‘Oh no, we’ll do that in 2008; we’ll do that after the election,’ the government having had a negative response from the community at the time when this sale was announced. So we are happy to support this amendment being put forward. As I have previously indicated, it is all in the context of not supporting the sell-off of Medibank Private but, nonetheless, we are prepared to support this amendment.

Judith Troeth (Victoria, Liberal Party) Share this | Link to this | Hansard source

The question is that amendment (1) on sheet 5135 revised, moved by Senator Murray, be agreed to.

Question negatived.

The Temporary Chairman:

We will now move on to more Democrat amendments, on sheet 5135 revised.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

What I propose to do with amendments 2, 3 and 4 on sheet 5135 revised is ask the chair to deal with them separately, but I will speak to the three together, if that is acceptable to the chamber, because they are linked in theme, although they have a different effect. Firstly, I move amendments (2) and (3):

(2)    Schedule 2, page 10 (line 11), at the end of paragraph (2)(a), add “with existing members of Medibank Private having the right of first refusal for that transfer”.

(3)   Schedule 2, page 10 (line 19), at the end of subitem (3), add “which must provide as the first method of sale the sale of Medibank Private to its existing members.

I think the minister may have misapprehended my views a little in his speech in the second reading debate. I put on record in the committee hearing, in my minority report and, indeed, in my speech in the second reading debate, that I accept the essential proposition that the library has put—but not just the library, of course; many others have put the proposition—that the government does have the right to sell Medibank Private. I think, though, in line with the others, that there is a risk with respect to possible compensation. I will quote to the minister the specific section of the library brief—which I agree with—which is on page 11 of the Bills Digest. There it says:

... it is arguable that members of Medibank Private could be entitled to compensation if the terms of any sale do not adequately account for their right to the benefit of fund assets. It was not asserted in the Research Brief, and is not asserted here, that this means that Medibank Private is owned by its members, or that members could block the sale.

I agree with that. I agree that Medibank Private is not owned by its members. I agree that they cannot block the sale. I agree that government is entitled to sell it. But I agree with the research brief that there is the potential for a claim against the fund assets. That is entirely different to a claim against the entity or over the shares of the entity.

I made the point that I think the government has accepted that position. I know you strongly reiterated in your own speech in the second reading debate that the government does not accept that there is any risk, but the point is that the bill itself has that risk covered off in a specific clause which states that, in the event of a claim for compensation, the Commonwealth will be liable. Under questioning, the department answered, ‘That’s a standard liability clause’, but my answer to that is: ‘If there is no risk you don’t need a liability clause—it’s a circular argument—and there could be no claim in the courts for compensation if there were no entitlement to compensation.’ So I do not think the government can have it both ways. I think there is a claim for compensation.

That has led me down the path to believing that the one sure-fire way to avoid any potential class action for compensation is, of course, to sell it to the members, because you cannot claim for compensation if you end up owning it. Then I had to look at these questions: ‘Is that practical?’ and ‘Would it realise the same moneys that the government would want?’ Of course they would realise the same moneys the government would want, because you would ask them for the amount of money you wanted to sell MPL for. And if members did not take it up, you could sell the residue elsewhere.

The second issue in my mind was whether it would be a lower cost option. Yes, it certainly would. The third issue was whether it would it be fair to do so. What could be fairer than to offer an entity like Medibank Private to its members? So I think you cover off risk and so on very successfully with this route.

You have specifically said you do not accept these propositions—and I am sure you are unlikely to change your mind—but the three amendments before you are of a very different character. The first amendment I am discussing in this little dissertation is:

(2)

Schedule 2, page 10 (line 11), at the end of paragraph (2)(a), add “with existing members of Medibank Private having the right of first refusal for that transfer”.

A right of first refusal, as you know, is not an exclusive option—it just says you have the first option—and that is very consistent with my reasoning and my approach. The second amendment is a much tougher one which, in view of your views, I think you might find difficulty in supporting. It states:

(3)

Schedule 2, page 10 (line 19), at the end of subitem (3), add “which must provide as the first method of sale the sale of Medibank Private to its existing members.

It essentially says that you have to sell it to the members—and I can understand that, with your attitude, you will not want to do that. The third amendment, which hopefully you will reconsider, essentially opens up the options to a future government—whether it is a coalition government or a Labor government. It says:

it does not affect that long list you have at schedule 2, after subitem (5)—

a Medibank Private sale scheme may involve:

(a)

mutualisation of Medibank Private; or

(b)

private float of equity in Medibank Private; or

(c)

private placement of equity in Medibank Private; or

(d)

any other method the Commonwealth considers appropriate.

The difficulty that I have with the minister’s position is that he is actively saying to the public at large and to the parliament, ‘I’ll only sell this on a public float basis.’ Yet the bill is silent on the matter—I think it implies a direction in that matter. What I am specifically saying to the government is that you should be indicating an open mind. How can you be sure that in 2008 you will not in fact think mutualisation, private placement or a float might be better? I think you should have a more open mind than you are exhibiting right now as to how much money you want to raise, how you propose to sell it and at what cost and on what basis you will sell it. It is difficult to throw principles at people, but I have understood the Liberal Party to be a party that talks about choice, and I think you should leave yourself an open choice in these matters.

So I have spoken to those three items. I do not intend to speak much more on this in the debate. I have covered these matters in far more depth in my minority report and, to an extent, in my speech in the second reading debate.

Jan McLucas (Queensland, Australian Labor Party, Shadow Minister for Aged Care, Disabilities and Carers) Share this | Link to this | Hansard source

Like Senator Murray, I will speak to all three proposed amendments. The amendments canvass different areas but I would like to go to the question of mutualisation in a general sense. The government afforded to the Senate Standing Committee on Finance and Public Administration one day of hearings for the inquiry into the sale of Medibank Private. The number of submissions made to this inquiry into what was in the community a huge potential sale was quite limited. It is no wonder that we did not go to the question of whether mutualisation was an option.

In another life, with a different balance of power in this place, I would imagine that such a significant proposal from the government of the day would not be referred to a legislation committee—as it was—but to a references committee. Whilst we are dealing with a piece of legislation, in my view the principle is that it would have been referred to a references committee by agreement of the senators who sit on this side of the chamber. If we had done that, we would have had a much broader inquiry which would have allowed these sorts of questions to be teased out. Senator Murray’s questions around first right of refusal and mutualisation might then have been answered.

But the government referred this bill, which will potentially bring it revenue of up to $2 billion, to a one-day hearing within a very truncated period. The submissions that were made were very specifically on the question of the legislation. That would not have happened prior to the last election. We would not have managed a policy proposal in this way. So the Senate inquiry does not inform the three amendments that Senator Murray has spoken about. We did not have a community view about mutualisation. It is referred to fleetingly in some of the submissions but there is no full discussion of whether mutualisation is an appropriate way to go.

Senator Murray, when Labor wins the next election we will not need this advice, but thank you very much anyway. The Labor position is very clear: we will not be selling Medibank Private Ltd. Thanks for the offer, but you will not need to provide Labor with options on how we might sell it, because we will not sell it. It is very kind of you to think of us in the future. There is a very clear choice for electors at the next election: if you want to keep Medibank Private in public ownership, vote Labor, but if you are happy with the ramifications of the sale for health generally, for the private health sector and for Medibank Private itself, then I suggest you vote for the Howard government.

We know what the community thinks. The community is quite clearly opposed to this privatisation. As I said in my speech in the second reading debate, we will make every effort in the next campaign to remind people of Labor’s position on this matter. Thank you for thinking of us, Senator Murray, but Labor will not be supporting your amendments.

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

I am interested that the Labor Party is now, under its new leadership, so cocky that it says ‘when’ Labor wins the next election. We note that with great interest. We are much more humble and are prepared to concede that it is possible that we could lose the next federal election. But we will be working hard to ensure that that does not occur.

Senator McLucas insisted that this should have been sent to a references committee. I have been wondering whether the Qantas or Commonwealth Bank sale legislation was referred by the then Labor government to a references committee; somehow, I doubt it. It is normal for legislation in this place to be referred to a legislation committee. It is then open to the whole community to submit as many submissions as they like to that committee for it to consider the submissions put before it. This bill has been dealt with in a perfectly normal and appropriate fashion, albeit I note that Senator McLucas is not actually supporting Senator Murray’s amendments.

With respect to Senator Murray’s arguments in relation to his amendments, the government is not in a position to support those amendments. I outlined a number of the reasons for that position in my speech on the second reading. We have thought about Medibank Private for any number of years within the coalition. We do genuinely have an in principle position that modern Western governments should, prima facie, not really be running businesses in competitive industries when they have the role of regulating them. We have been talking about and thinking about Medibank Private for many years and have been generally of the view that there is no public policy case for the government owning a private health insurance business. We have been the ones most profoundly committed to having a viable private health insurance industry, unlike the Labor Party and certainly the Greens. But, given our support for that industry, we do not see the need for the government to own one of those businesses. That has been our strong view.

In the course of our discussions, we have of course talked as a government, and as a coalition, about what the future ownership arrangement should be. After much advice and much consideration, we came to the view that the most appropriate method of sale is a public offering, as was the case with Qantas, the Commonwealth Bank and Telstra—other major government businesses which were properly sold to the Australian public by way of public floats. We think that is the appropriate method of sale in this case. In those cases, there was no contemplation of selling those businesses either at all or in the first instance to their customers, and we do not think that is the appropriate arrangement with Medibank Private. As I said before, we do not accept in any respect the false assertion that somehow when you take out an insurance contract with Medibank Private you acquire some proprietary interest in the business. That is simply not a valid argument.

Of course we have, as advised by our lawyers, allowed for every single theoretical possibility. As Senator Murray himself noted, the evidence before the finance and public admin committee was that it is standard practice, whether it is our government or any other government, based on the best legal advice, to allow for all of the most theoretical possibilities. And of course it is the case that you cannot, in a democracy like ours, and with a judicial system like ours, stop people either asserting that they will make various claims or indeed making claims. It is our strong position than any such claim with respect to Medibank Private has no standing and would not succeed.

But it is proper and appropriate as a responsible government to draft legislation to allow for theoretical possibilities. We have done that before and other governments have done that before, and that is the case with this legislation. But we do not concede that that argument holds any water; nor do we propose in the sale legislation and in the method of sale to concede that argument. We think, if you are going to have a public float, having decided that that is the best method of sale, that therefore the sale should be offered on the widest possible basis for every Australian to participate in, albeit acknowledging, as we have done with other sales, that there should be some form of entitlement to recognise the loyalty of Medibank Private’s many customers. On balance, and having considered Senator Murray’s amendments properly, we, given our policy position with respect to the method of sale, see no advantage to be gained by accepting those amendments.

Kerry Nettle (NSW, Australian Greens) Share this | Link to this | Hansard source

I wanted to indicate that the Greens are happy to support each of these amendments on the basis that they provide a range of options about how anyone may proceed with this bill. As I said at the outset, the Greens are opposed to the sale of Medibank Private.

I think there are some interesting issues that have been raised in the discussions. One of those issues was about how the Senate committee process has dealt with this legislation. I have been part of that debate previously to say that the one-day hearing—the bill being sent to a committee that considered this as nothing more and nothing less than a sell-off of public assets—did not allow for the same level of discussion about the health consequences of the sale of Medibank Private. That is the issue that has been the focus of the Greens concerns around this legislation and around the second reading debate. The next two amendments, which I will move later in the committee stage, are about the health consequences of this legislation, which we think would best have been dealt with in a different way than by the one-day hearing that they received under this government.

I want to talk about the financial position of Medibank and the issues that have been raised about the rights of existing Medibank Private members. I am sure everybody can find the section in the bill that deals with this issue; it is the compensation for acquisition of property section in part 8 of the bill. That is, of course, an acknowledgement by the government that this is a concern, regardless of what Senator Minchin may say to us in this chamber and on other occasions.

In regards to the contributions that members have made to Medibank Private, it is also worth pointing out that they are not the only people who have contributed to Medibank Private. Amongst those contributors is, of course, the Commonwealth, because the financial position of Medibank Private during the past 20 years has varied. It generated a loss in 2001-02 of $175 million, which resulted in the Commonwealth injecting into it $85 million in public funds. I suppose that comes to the issue of any role the public has in this particular asset and is central to the many reasons why the Greens are not supporting this particular sell-off. Given that these amendments seek to deal with ways that these issues may proceed, we are happy for there to continue to be discussion on how that may occur. Another issue that has been raised in the debate by Senator Minchin is that of a conflict of interest. The Parliamentary Library pointed out that the government has not provided any evidence of the likely forms of such a conflict of interest.

The final point I want to make is that Senator Minchin raised the view, as he has on many occasions, that there is no policy reason for the government to continue to own a health fund. I think this is the second time today that I have pointed to a former Prime Minister from the Liberal Party, Malcolm Fraser, who is opposing this sale. His opposition to this sale and the role that he has played in Medibank Private indicate that the Liberal Party of the past clearly had a policy reason for owning a health fund, and that is notably different to the views of the current Liberal Party.

With those comments, I indicate that the Greens are happy to support these proposals as options in the context of us not supporting the sale of Medibank Private and wishing primarily to deal with the health consequences of that, which have not been part of the way the government has sought to manage this sale or the Senate inquiry into this legislation, and hence the second reading amendment that the Greens moved and the next series of amendments that I shall move on behalf of the Greens in this committee stage.

Judith Troeth (Victoria, Liberal Party) Share this | Link to this | Hansard source

The question is that amendment (2) on sheet 5135 revised, moved by Senator Murray, be agreed to.

Question negatived.

The Temporary Chairman:

The question now is that amendment (3) on sheet 5135 revised, moved by Senator Murray, be agreed to.

Question negatived.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

I move:

(4)    Schedule 2, page 10 (after line 24), after subitem (5), insert:

     (5A)    Without limiting the generality of this Part or the operation of subitem (6), a Medibank Private sale scheme may involve:

             (a)    mutualisation of Medibank Private; or

             (b)    private float of equity in Medibank Private; or

             (c)    private placement of equity in Medibank Private; or

             (d)    any other method the Commonwealth considers appropriate.

I want to make a couple of brief remarks to add to those I made earlier. One remark I want to make in passing is that I do not respond well to calling the members of Medibank Private customers because I think ‘member’ has an entirely different meaning to ‘customer’. I think you would find that, in law, members of Medibank Private, by virtue of their payment system and the way in which they use products and services, would be considered different to, say, a customer who pops in and out of a retail shop. I am not likely to fall in easily with the minister’s terminology.

What I really want to say about this amendment is that I would have liked to see the mutualisation area discussed more. One of the difficulties we face is that there are claims about the effects on competition, price and products as a result of this sale through a public float. The strong view held both in the market and by most of those who made speeches in the second reading debate and who were part of the committee process is that, if there is a public float, the shareholders will want a return on their investment. There are a few things attached to that. The government refused an earlier amendment designed to ask it to ask the Productivity Commission to do work to recommend to the government ways in which the private health insurance market could be made far more competitive, because the government will not do that when it sells Medibank Private. It will sell it into an environment where the market is singularly imperfect—it is rigid, it is not mobile, there is a low level of portability and there is a low level of comparability. That is a danger. There is the potential for price gouging of members to occur.

Further, when you shift from a not-for-profit status to a for-profit status, you lose tax concessions which apply to not-for-profit entities. When moving to a for-profit status, shareholders will want a set return on investment, which is determined by the price they pay and the measures they use to determine what they want in return. Mutualisation is also a lower cost option. When you sell through a public float you pay the fee takers and the commission makers a vast sum of money. That will not happen to the same extent in a mutualisation process, in my view. You would not have the same demands on return if the members were to own their own outfit. In many ways, mutualisation is better from the point of view of product, service, price, cost and the competition that exists in the market. However, I know the minister has a closed mind on that particular option, which is unfortunate, but I did want to add those remarks in moving this amendment.

Question negatived.

I move Democrats amendment (5) on sheet 5135 revised:

(5)    Schedule 2, page 51 (after line 4), at the end of the Schedule, add:

63 Hypothecation of revenue

        (1)    A fund, to be called the Medibank Sale Health Fund, is established.

        (2)    The net proceeds of any sale which takes place under this Schedule must be placed in the Medibank Sale Health Fund.

        (3)    Funds in the Medibank Sale Health Fund may only be appropriated for the purpose of advancing health in Australia.

Amendment (5) relates to the hypothecation of revenue, which is unusual for me to contemplate because I am not generally a great fan of hypothecation; I think it unnecessarily restricts the government. But I bring to bear the assessment I made in my minority report—that is, as the minister outlined, I do not think the case has been adequately made for keeping Medibank Private in public hands. What the minister did not mention is that I also think the case has not been adequately made for Medibank Private not to stay in public hands. I think the case needed to be made better. If that is so, you are talking about the question of realising funds as the principal attraction of sale.

I happen to think that when Labor were selling assets whilst they were in government to some extent they were distressed sellers; they needed the dough. The shadow minister is welcome to contest that view but I think there was a far different environment for government budgets at that time. They needed the money and, to some extent, that is what is driving sales in the states, I might say—a sense that they need money. But quite often in the states, particularly in my own, they sell assets because they say that the opportunity cost of keeping an asset of one kind is such that they would rather take that money and put it into different forms of infrastructure that they are think are more in the public interest. I appreciate that sort of argument, because sometimes you are invested in one thing but you would be better off invested in another. Essentially that is my view.

If there is not a very strong a case for either selling or keeping Medibank, and therefore the greatest attraction is the amount of money you can raise, then you have to say what you are going to use the money for. I can see only three possibilities, although perhaps there are others. One option is to tip it into general revenue, which as a policy man, a finance man, I find very unattractive as a matter of principle—I think it is the wrong thing to do. The second option, and what I understand is the government’s preferred option, is to tip it into the Future Fund. While I can see the long-term benefits of putting a couple of billion dollars into that, it is not really attractive to me. The third option is to spend it on infrastructure in health itself, where I think there are some great needs. As people know, the Democrats have been on about the needs in the mental and dental areas for many years. It is not because we are all mad with bad teeth; we think these are areas of great concern. However, I have not gone so far as to say that the government of the day would have to be told where it puts its money. I have simply said that it should go into a Medibank sale health fund. That would be the most desirable use of the money based on the opportunity cost principle.

Jan McLucas (Queensland, Australian Labor Party, Shadow Minister for Aged Care, Disabilities and Carers) Share this | Link to this | Hansard source

I understand Senator Murray’s explanation of the motivation for amendment (5), but it underlines the lack of faith by the Democrats in the government’s commitments, as I understand them—and I will wait for Senator Minchin to clarify this—for a significant portion of the money to be used to fund medical research. I understand Senator Murray’s lack of faith, if in fact that is what it is—

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

It’s not $2 billion worth of research, is it?

Jan McLucas (Queensland, Australian Labor Party, Shadow Minister for Aged Care, Disabilities and Carers) Share this | Link to this | Hansard source

No. You are correct; it is not that amount of money, and I am sure the minister will explain. The indication was some $500 million, but we will get that clarified. I understand why Senator Murray has little faith in the government saying that this is what they are going to do with the proceeds of something and then it not occurring. Whilst it is not exactly the same, I do recall, prior to my entering this place, that the Democrats had some understanding with the government prior to the passage of the GST legislation, and certain funds were to be allocated to the environment in certain ways. Assessment of that agreement shows quite clearly that funds were not allocated in the way that that agreement stipulated. It is very clear that that agreement did not deliver what those members of the Democrats were interested in achieving back in 1999.

It is clear that the Democrats do not have any faith in the commitment the government has made, and that is the motivation for this amendment. However, as I have stated on a number of occasions this evening, the Labor Party does not contemplate the sale of Medibank Private, so any support of an amendment that contemplates the proceeds of the sale cannot be supported. I look forward to the minister’s response explaining how Senator Murray can have faith that the commitments that have been made will actually be delivered.

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

I put on the record that, after due and proper consideration, the government are not in a position to accept this amendment. Like Senator Murray, we do not believe in hypothecation. I think it is a very bad principle of government and one to be resisted at all costs.

One of the principal reasons for selling Medibank Private is that we do not think taxpayers should have moneys at risk in this business. It should be seen as an investment, as Telstra was. Taxpayers had huge sums of money tied up in a telephone company and, at the moment, taxpayers have a not insubstantial amount of money tied up in a private health insurance business, which, at least in theory, is at risk. And, as Senator Nettle reminded us, it is a business that lost money and required taxpayers to improve its capital adequacy two budgets ago. That is the fundamental reason: we do not think that money should be invested in a private health insurance business; it should be used elsewhere.

We also strongly agree with Senator Murray, unlike the former Labor government, that proceeds of assets sales should not be used for recurrent expenditure. That was what the former Labor government did with the proceeds of the asset sales it presided over: it stuck them straight into recurrent revenue. That is like selling the silver to go out to dinner. It is a completely and utterly irresponsible approach. Up until now, we have used the proceeds of asset sales to reduce government debt. Rather than put it into recurrent expenditure, we have used asset sales to get rid of the debt we were left. That was the appropriate and responsible action on the part of the government: to reduce the debt burden facing future generations and reduce the annual interest payments upon the debt, which were the equivalent of the expenditure on defence when we came into office.

So we are now in the luxurious position, rare among Western governments around the world, of not having any net government debt. We have the luxury of considering what to do with the proceeds of asset sales because we have been so successful in removing the debt, which had been the repository of previous asset sales. We have said that, with respect to the Future Fund, sources of future deposits into the Future Fund will be made on a discrete basis. A discrete decision will be made on an annual basis with respect to surpluses and on an individual basis with respect to asset sales as to whether those proceeds should go into the Future Fund. On the face of it, the appropriate place to put future surpluses and proceeds of asset sales is indeed into the Future Fund, up until the point where we believe it has the requisite deposits, in order to ensure it can meet the unfunded superannuation liabilities which we all know exist.

But we will make that decision as and when we have proceeds available. We have made that decision with respect to the proceeds of T3—all of those proceeds are going into the Future Fund. With respect to Medibank Private, we will make a discrete decision as and when the proceeds materialise. However, in the meantime, and as a direct consequence of the government’s policy to sell this business, we have announced that, as a result of this sale in this year’s budget—which seems to have passed the notice of some senators present—we have appropriated additional funding of $500 million over four years for research grants for the National Health and Medical Research Council. That was a formal government decision and was part of the appropriation bills, which have been considered by this chamber. So that is in law, in writing, a done deal, a decision made by this government as a direct result of the decision to sell Medibank Private. In anticipation of the proceeds of the sale, we have enhanced medical research to the tune of $500 million over the next four years.

In addition to that we have, in anticipation of sale proceeds, in the budget this year provided $170 million over nine years for the establishment of an Australian health and medical research fellowship scheme. I do not describe that as hypothecation per se but I do proudly proclaim it as a decision made by the government because we have made the decision that we will sell this business and not have whatever it is worth tied up in that business. It therefore gives us the opportunity to make these additional investments in health and medical research. These are decisions we would not have made if we had made a decision to hang on to this business. So, while it is not hypothecation, it is a decision to invest additional funds into medical research that do flow from the government’s anticipation of proceeds from the sale of this business.

The actual proceeds, as and when they materialise, will be the subject of a separate and discrete decision, which of course will be reported in full to the parliament and the public and the subject of public defence and justification. But we will not use the proceeds for recurrent expenditure, which, as Senator Murray properly pointed out, is not a good policy.

I would just say in relation to infrastructure per se that the Commonwealth government does not own any health or medical infrastructure directly. We do not own or operate hospitals. We do not own or operate medical research institutes directly. We do fund, on a recurrent basis, the states in their ownership and operation of hospitals and we do fund, on a recurrent basis through the National Health and Medical Research Council, private and public health and medical research institutes but we do not own any infrastructure. So there is no infrastructure of our own that we can invest in. So, as I say, we should look at the proceeds of the sale as an investment.

I for one will certainly want the cabinet to consider seriously these proceeds going into the Future Fund because I do think the most important responsibility we have is to ensure the unfunded liabilities that face the nation are met. The Future Fund is the way in which to do that. The fund is supported by this parliament and prima facie that is, in my view, the appropriate place for the proceeds of this sale to go, but that will be a decision made by the government at the time the proceeds materialise. So for those reasons we are not in a position to support this amendment.

Kerry Nettle (NSW, Australian Greens) Share this | Link to this | Hansard source

This is a very similar amendment to the second reading amendment I moved on behalf of the Australian Greens which said that if Medibank Private were sold it was the view of the Greens that the money should be spent on public health care. That was slightly different in that this amendment indicates health care in general. The intention of the Greens is that, if Medibank Private is sold, we would like the money spent on public health care. We think that position is covered in this amendment and therefore, whilst our position was slightly more refined than that, we are of a view to support this amendment.

Question negatived.

by leave—I move Greens amendments (1) and (2) on sheet 5161:

(1)    Schedule 1, page 6 (after line 13), at the end of the Schedule, add:

Private Health Insurance Incentives Act 1998

Taxation Laws Amendment (Private Health Insurance) Act 1998

These two amendments are amendments that the Senate has seen on several occasions from me. They are amendments that are designed to abolish the private health insurance rebate. It has been a long-held position of the Australian Greens that the over $3 billion of public funds each year that the government puts into subsidising those Australians who have private health insurance—predominantly wealthier Australians, incidentally, in Liberal held electorates—should not be going to subsidising that private health insurance. The Greens say that over $3 billion of public funds each year should be invested in our public health system.

I have spoken on many occasions about the reasons why the Greens are supportive of our public health system and about the way we recognise, as indeed the community recognises, that it is the best and most efficient way to ensure that health care is delivered to those Australians who most need it, regardless of their capacity to pay. There are many examples that I can go into where we have a more heavily privatised system that relies on private insurance. We see in the United States the outcomes of that. People’s health is not looked after as well as it is in this country when you compare Australia and the United States. And we spend far less money than they do in the United States, where they have gone down this path. All of those figures are there in recent studies by the Australian Institute of Health and Welfare and recent OECD reports, all of which point to the inefficiencies of the US style privatised healthcare system and why the Australian Greens defend our public healthcare system.

I have spoken previously today about the challenge this presents for the opposition and for the new team in particular. When Mr Rudd speaks about social justice, this is a key and fundamental social justice issue: should we be investing public funds in the public healthcare system, or should we be pouring public funds into the pockets of insurance companies in such a way that the poorer members of Australian society—incidentally, many of whom are in Labor held electorates—end up subsidising the private health insurance of those people who live in wealthier Liberal held electorates such as that of the health minister, Mr Abbott? I have indicated this before.

One aspect of this that truly astounds me is the level of subsidy that is provided to the private health insurance industry. There is no other industry that is given this level of government support. We see subsidies across the board going to a whole range of different industries. The Greens would support substantial subsidies going from this government to the renewable energy sector, for example. But what we see is that the subsidies from this government to the private health insurance sector are above all of the other subsidies that exist. For no other industry does the government use its taxation system to penalise people who do not take out the services of that particular industry. That is what this government does. This government, through its taxation system, chooses to penalise people who do not take out private health insurance. There may be a variety of reasons—perhaps their support for the public health system.

There are subsidies and there are subsidies, but this is the mother of all subsidies. The government is saying, ‘Not only will we give you a 30 per cent private health insurance rebate’—that is the over $3 billion per annum that this government takes from the public and puts into the hands of private health insurance, on top of a range of other subsidies that come from this federal government—‘but we will use our taxation system such that, if people do not take out the services, we will penalise them through the taxation system.’ There is no other industry I know of where that occurs. If Senator Minchin would like to enlighten me about others, I would be interested to hear that. But, in looking at this issue, as I have been for some time, I cannot think of another industry that gets that level of support from the federal government. I think that is just a clear indication of this government’s support for the private health sector and its lack of support for the public health sector. We see it time and time again in the way in which this government operates.

Last month there was an article in the Sydney Morning Herald indicating that this government had approved a six per cent rise in private health insurance premiums in the past year whilst only allocating a 2.1 per cent increase to the public health system. The same article went on to point out that private patients received benefits worth an extra $500 million from the federal government compared with its contribution to public hospitals. That was according to the former federal health chief Dr Stephen Duckett. So I think it is quite clear and on the record that this government supports the private health sector and we do not see anywhere near the level of support that should be there, in the view of the Greens, for the public health system. The Greens position is also clear: we want to see the federal government taking on its responsibility in investing in public services in this country, and in this instance we are talking about the public healthcare system.

The challenge is there for the opposition and what they choose to do with this over $3 billion of public funds each year—we are not talking a one-off; we are talking each year. This whole sale of Medibank Private is worth $2 billion—that is the figure people are bandying about. That is not what I am talking about. I am talking about the over $3 billion every year that this government—and the current position of the opposition is the same—puts into the pockets of the insurers, the wealthier Australians in Liberal held electorates who take out private health insurance, and that is subsidised through the contributions of taxpayers across the board.

So I have moved these two amendments together. What these amendments do is inject some social justice into the system. We do not want to see a redistribution of wealth from all Australians to the wealthier Australians who choose to take out private health insurance; we want to see a good public health system. It is that simple. If we were looking to fund the public health system further, and of course we all are—well, on this side of the chamber we are—then, looking around, the elephant in the room is that over $3 billion. It is health money. It is being collected by the government and it is not being spent on health services. And it is not being spent on health services in the sector that delivers them most efficiently and to all Australians—that is, our public health system, a public health system that we should be supporting and where we want to see quality services.

One would anticipate that a party with a new leader talking about the values of social justice would see this as a fundamental social justice issue: do we want to invest in public health care or not? Here is the opportunity for the opposition to say: ‘Yes, we do. Let’s take this money that the public pay to the government for investing in public services and put it into public health care.’ That is the option today and I call on all senators to support it.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

Over many years, I have consistently supported means testing of the private health rebate. I recall that the Democrats have, at least a couple of times, moved amendments to implement means testing—and I am relying on memory—at about the level of $100,000 income. I do not believe the wealthy should get this tax concession, but neither do I believe that the entire private health rebate scheme should be withdrawn, because I believe it is a useful additional support for lower and middle-income Australians. I should mention that, for as long as Medicare does not cover off areas like dental health, private health insurance has an enormous role to play. I do agree that it should not apply to the wealthy. However, I cannot support the Greens amendments.

Jan McLucas (Queensland, Australian Labor Party, Shadow Minister for Aged Care, Disabilities and Carers) Share this | Link to this | Hansard source

Labor also will not be supporting the Greens amendments which would abolish the private health insurance rebate. We have been consistently of that view and have repeatedly voted the same way when the Greens have moved those amendments. You have to remember that Australia’s health system historically has been a mix of the public and private sectors. Basically, since our health system began, in whatever form that was, it has always been a mix of the public and private sectors.

There is a role for private health insurance, private hospitals and private practitioners, along with the very important role of the public system of delivery of health in Australia. Therefore, there are good policy reasons that we need to make sure that each of those important parts of our health system are maintained in a robust way.

I would like to refer Dr John Deeble’s comments when he talked about what he believed Medicare to be. He said:

I have always believed that Medicare is a national system of health care financing which includes the private sector and its insurers, not just a Commonwealth scheme of benefits for medical care and public hospital treatment. The two parts are complementary in ways which go beyond the market place, although there are vested interests with a reason to argue otherwise.

Dr Deeble was making a comment there about why you need to have public involvement in the private health insurance sector. I do not believe I am misquoting Dr Deeble on that point, but I think his explanation of Australia’s health system adds to our understanding of the mix of public and private interest in the way we deliver health in this country.

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

The government strongly opposes these amendments but we welcome the fact that the Greens have again placed on the public record their clear policy to abolish the private health insurance rebate. They are reaffirming that it is Greens policy, essentially, to make private health insurance unaffordable for ordinary Australians. Their policy is to make sure that ordinary Australian families can no longer afford health insurance.

In the lead-up to the next federal election, we intend to make sure that all Australians understand with great clarity what the Greens policy is on this issue. It is a completely unacceptable policy. I welcome the Democrats opposition to the amendments. I welcome the Labor Party’s latterly found opposition to these amendments. We are not quite sure that the Australian people should trust the Labor Party on this issue, given their hostility in the past to the 30 per cent rebate, but I am happy to accept on face value what Senator McLucas says in the context of this debate.

It is extraordinary that the Greens continue to adopt the view that only the wealthy should be able to afford private health insurance and it is extraordinary that they seem ignorant of the clear fact, now recognised by other parties, that to effectively demolish private health insurance in this country would put a completely unsustainable load on the public health system.

I do not want a long debate tonight; I do not think anybody wants a long debate tonight about this issue. I welcome the fact that other parties oppose this amendment, but we note with great interest the policy that the Greens have adopted on this matter.

Kerry Nettle (NSW, Australian Greens) Share this | Link to this | Hansard source

I am very proud to be the health spokesperson for the Australian Greens. One of the things that makes me most proud of the responsibility that I carry out is the way in which the Greens inject social and economic justice—one of our four founding principles—into this area. This issue—almost unlike any other in the health arena—about whether the public should spend its funds on subsidising insurance companies or whether it should spend them on delivering public health services, addresses that very question. Right now the social justice that needs to be injected into the system is just not there. Right now the system takes funds from Australians across the board and delivers them to those people who have been scared by the government into taking out private health insurance.

That is why we have seen people take out private health insurance. It is not because of the rebate, and Senator Minchin knows that. The reason why so many Australians have been scared by this government into taking it out is that this government, as I indicated before, has used its taxation system to financially penalise people who have not taken out the services of this particular private industry. This is a subsidy that the private health insurance industry enjoys—like no other industry.

On top of the other subsidies, this government uses its taxation system to penalise people who do not take out the services of this industry. That is why Australians have signed up—not because of this rebate or the $3 billion that the government pours down the drain in this way each year that could be spent on public health services. No! Time and time again we look at this issue. Many Australians have been scared by this government, which chooses to invest its money not in ensuring there is a quality public health care system for all Australians to access but in subsidising its own constituents in wealthy electorates who choose to take out private health insurance.

The Greens have done the analysis on this work and we understand. The figures are there and the research has been done time and time again. Health economists around this country tell us that, when you analyse private health insurance membership, you find that Australians in less affluent, predominantly Labor-held electorates—and, indeed, National Party-held electorates—subsidise the private health insurance of the wealthier Australians that we find in Liberal-held electorates like, for example, the health minister’s electorate. The highest rate of private health insurance ownership is in the health minister’s electorate. I think around 86 per cent of people in his electorate of Warringah have private health insurance. They all get access to this over $3 billion of public funding, but—

Eric Abetz (Tasmania, Liberal Party, Minister for Fisheries, Forestry and Conservation) Share this | Link to this | Hansard source

Yes, and it takes the pressure off the public system!

Kerry Nettle (NSW, Australian Greens) Share this | Link to this | Hansard source

We will get to that issue, Senator Abetz, but let us look at Lawler electorate. In Lawler, 36.3 per cent of residents have access to this over $3 billion of funds that we are waiting for here. That is the choice that the opposition makes on this issue: their constituents should subsidise the private health insurance of the people in Mr Abbott’s electorate in the northern beaches of Sydney.

I go to the issue that has been raised by Senator Minchin and Senator Abetz: this folly that the government puts forwards that somehow or other the private health insurance rebate has reduced pressure on public hospitals. Where are the facts? Where are the figures? Where are the numbers? Where is the reduction in work being done in public hospitals?

Eric Abetz (Tasmania, Liberal Party, Minister for Fisheries, Forestry and Conservation) Share this | Link to this | Hansard source

What?

Kerry Nettle (NSW, Australian Greens) Share this | Link to this | Hansard source

You cannot point to it, Senator Abetz, because it is not there.

Eric Abetz (Tasmania, Liberal Party, Minister for Fisheries, Forestry and Conservation) Share this | Link to this | Hansard source

What?

Kerry Nettle (NSW, Australian Greens) Share this | Link to this | Hansard source

We have not seen any reduction in the pressure that exists in public hospitals around this country. Senator Abetz can say ‘What?’ as many times as he likes. He has not looked at the figures. I have. For 4½ years I have been speaking in this chamber about how your private health insurance rebate has not reduced the pressure on public hospitals. But if we invested this over $3 billion of public funds each year into our public hospital system that would do it. That would do it, Senator Abetz: that would ensure that we had a quality public health system that all Australians could access regardless of their capacity to pay. But that is not the choice that this government takes.

This government have decided that they want to run down our public health system. They want to take the taxpayers’ funds that it is their responsibility to invest in public services and funnel that to their mates who take out the private health insurance that they have scared people into taking—and they penalise people through the taxation system if they do not take it out. That is the way the system works.

I am proud to say that the Greens believe that this over $3 billion of public funds should be invested in our public health system. The money is there and needs to be invested. We hold the view that it is the responsibility of government to look after all Australians through our public health care system to ensure that they can get access to quality health services. I am proud to stand here representing the Australian Greens and saying, ‘We want to invest in our public health system.’ That is the position of the Australian Greens. That continues to be the position of the Australian Greens. I think this is the fourth time that I have sought to say to the parliament: ‘Let’s take that money that taxpayers have contributed to ensure that they can access quality public health services and let’s invest it in our public health care system.’ I want to make sure that Australians, regardless of their capacity to pay, can access good public health care—

Consideration interrupted and progress reported.