The global warming subsidy: the truth about Australian corporate welfare

The Conversation

The demise of manufacturing in this country has captured the news headlines for weeks now. It is about jobs, about sentimentality toward companies that have long been part of Australian life, and about the future of Australian productivity.

Caterpillar, SPC Ardmona, Electrolux, the car manufacturers: each have seen the withdrawal or denial of subsidies that has gone directly to job losses.

The Abbott government has supposedly declared an end to corporate welfare, consistent with a neoliberal, even Darwinian, outlook that companies and individuals must solely bear responsibility for their decisions, circumstances and activities.

But is this really true? Has such welfare ended? We have been told that the taxpayer cannot afford these subsidies to companies that are not profitable, in some cases suggesting that they should change their industrial relations agreements to turn around such profitability.

But as the headlines become captivated by these stories that understandably look at the tangible threat to real jobs, with narratives about communities and individuals who can be interviewed, we are not getting to the cruel irony at the heart of their suffering. The government is involved in gargantuan subsidies to the mining and pastoral sectors and these subsidies are about to get a whole lot bigger.

These are subsidies that are getting no scrutiny at all in these headlines.

The largest of these subsidies that has been operating since the Howard years – and continued during Labor’s two terms – is the fuel tax credit scheme to the mining industry. In 2011, for example, the mining industry accounted for A$2 billion of the $5.2 billion total claimed from this scheme.

An analysis by Environment Victoria suggests that in 2012-16, the claims will average approximately $2.3 billion per year. In short, the mining industry receives and takes advantage of a huge discount on its fuel use which has encouraged it to become a highly intensive liquid fuel user.

Ever wondered why mining companies consider ‘fly-in-fly-out’ labour sourcing such an affordable option? Taxpayers are paying for this practice and big mining is happy to take the money. Mining is a carbon-intensive industry in the production process, even where it is not drilling or digging up fossil fuels – in which case its footprint is pretty much peaked to the max.

So, why does mining get such preferential treatment, hidden in plain sight, and left alone by the mainstream media?

One way to understand this is to explain the historical alliance that the major parties in Australia have had with the different business sectors. Here, it is worth focusing on mining, pastoral and manufacturing capital.

Very few analyses are conducted on this neglected minority in Australian political life – the capitalist class – but mining and pastoral capital have long been aligned more closely with the Liberal-National Party, and the Labor Party aligned with manufacturing capital. Political party donations from the mining sector for 2011-12 show that the LNP is a spectacular beneficiary. The ALP received only 3% of the donations handed out from mining companies during this time, with the Queensland LNP and the then-federal opposition Liberal and National parties receiving 97%.

However, it is not as easily divided as that. As manufacturing in Australia steadily declined from the 1990s onwards, Labor began to support mining capital by default to pick up the shortfalls in productivity. But the Labor power base is with the manufacturing sector where Australian unions have their most influence, and where ‘looking after workers’ conforms to a more traditional industrial relations framework, based on workforces that aren’t transient like jet-about miners are.

Where there is a clear line of division between the parties is that while Labor will always try and support manufacturing capital, the LNP has had an uneasy relationship with that sector and is more prepared to see a company fail unless it is based in a marginal seat (for example) or is related to basic infrastructure.

Then there is the behaviour of mining capital itself. As far back as 1967 when mining capital first became centrally represented by the formation of the Australian Mining Industry Council, the mining lobby has attacked industrial capital. In those days, mining was led by Hugh Morgan and Ray Evans at Western Mining and Charles Copeman of Consolidated GoldFields.

The mining lobby is very powerful today. Treasury minutes reveal meetings have been held with the Association of Mining and Explorations Companies over the importance of retaining the fuel tax credit scheme.

It is a bit rich for the government to say it cannot afford $25 million for SPC Ardmona when it is committed to handing over $2.3 billion to mining companies that goes to their direct bottom line and the personal wealth of some of the richest people in Australia. Corporate welfare indeed.

The Abbott government is no friend of manufacturing capital. And in a political climate where a return to a ballot-toxic Workchoices path to controlling such capital and its unions is looking unlikely, it seems that Abbott has decided that it’s easier just to turn its back on the sector altogether.

The twist of the knife here is that having suffered the carpet of subsidy protection being pulled from underneath, these manufacturing workers – if they ever find another job – will be paying subsidies to the mining sector. This is a sector that is also going to add to the potential suffering of future generations.

Source: The Conversation. Reproduced with permission.