Dutton is kind of right: we can abolish the Education dept, but for different reasons

There is a very good case to be made for the federal government to totally withdraw from the funding and administration of Australia's primary and secondary schools and leave it to the states. It should just keep responsibility for universities and pre-schools.

Since it began in the 1960s, federal intervention in schools has become increasingly wasteful, ineffective, and unfair.

The federal Department of Education employs only 1624 people, so abolishing it will not go very far towards Dutton's aim to get rid of 41,000 public servants. Rather the waste, unfairness and ineffectiveness arise from the way they spend the money allocated to them.

The 1624 employees are extremely efficient at doing what legislation tells them to do: they allocate an average of $20 million each. It's just that they spend the money the wrong way and the states would do a better job.

Let me explain. The federal government dishes out $31 billion a year to Australian schools: $12 billion to public schools; $10 billion to Catholic schools, and $9 billion to independent schools.

But when you look at enrolments you see that the federal government is grossly over-funding private schools. And these are the schools that already have high educational standards and do not need the money to teach reading, writing and 'rithmetic, which they are required to spend it on.

So, they shuffle their spending around so that, in effect, the federal funds for education are wasted on chapels, swimming pools, and sports fields, which contribute next to nothing towards Australia's educational standards.

Indeed, by removing a slice of the education funding cake from actual education, there is a solid argument that federal intervention has been responsible for Australia's falling results in international testing.

The feds give 28 per cent of their funds to the 17 per cent of students in private schools and just 38 per cent of their funds to the 64 per cent of students in public schools.

While we are at it, Australia should follow Britain's lead and impose the GST (VAT in Britain) on school fees.

So, yes, let's remove the federal role in schools. But let's not kid ourselves, it will not prune many public service positions.

It's the same in health. It has about 6000 employees, many in frontline services. They administer Medicare very efficiently - between 2 and 5 per cent of the cost, depending on how you measure it. Private health insurers spend between 14 and 17 per cent on administration.

The reason we have long queues for increasingly expensive medical treatment is not because of a Duttonesque myth of bloated, duplicated bureaucracies. It is because the legislated funding model for health and health insurance is hopelessly inefficient in the way it allocates resources - far too many public resources are going to the private sector.

Bad policy is coming home to roost in the private sector. Doctors charge patients directly - the gap. Private hospital costs (and charges) are going up higher than revenue.

Insurers' revenue was about 9 per cent higher than costs in 2017-18. It is now less than 1.5 per cent.

Insurers cannot keep up. This is despite $7 billion a year of government money going to subsidise private health insurance.

The response from private hospitals has been to restrict the services they offer - concentrating on the higher-profit, easier elective procedures. All the nasty, complicated, less-profitable procedures are left to the public sector - emergencies and difficult heart and cancer cases.

The private hospitals are commodifying medicine. They are putting profit before care and the ability to pay before medical needs.

In these circumstances the health-insurance rebate is unjustified. Rather than freezing Medicare, the private rebate should be frozen to a set amount (not a percentage) and slowly let inflation kill it off.

The money needs to be directed to the public sector where the need is greater. Sure, everyone has a right to buy private services, but not at the expense of the broad public need.

With a properly funded public system, patients would not turn to the private sector. Since the pandemic, there has been a pick-up in private insurance, but the way private hospitals are going, many private patients will be sadly disappointed at the range and quality of services they get.

MORE CRISPIN HULL:

An idea I have floated before has become more pertinent in the face of aggressive American economic action against Australia and other countries.

Contrary to President Donald Trump's assertion that the US has been pillaged by other countries, the reverse is true. The big US credit card companies have been pillaging every other country for decades.

The market value of Mastercard, Visa, and American Express totals $1200 billion. Together, they have revenues of about $80 billion a year. Quite a lot of their revenue comes from Australia.

Australians pay about $5 billion a year in credit and debit card surcharges and put about $430 billion on cards each year. It is about a quarter of what Australia produces each year, and the Americans cream off more than 1 per cent of it.

Time for it to stop. The Reserve Bank (with a balance sheet of $600 million) should underwrite an Australian credit card through Australian banks, with lower costs than their US equivalents and similar rewards systems.

It would stop up to $5 billion going to the US - about equivalent to the 10 per cent tariff the US has imposed on Australia's exports.