The hidden public cost of private schools blowing a hole in our budget

Australian debt has blown out, and the interest payments mean that there is less money to spend on health, education, and the like.

But the real issue is how do you define "government spending". Similarly, the Coalition and business lobbyists are dead against increased taxes. But, again, the issue is what do you define as "tax".

So, business and the Coalition would line up welfare payments, the arts, government environment projects and the like, and cut the lot. And they would say that any attempt to rein in tax concessions would be increasing taxes. They would say that any attempt to charge a reasonable price for the right to extract resources in the ground would be a "tax" or an "extra tax".

Last week, the Business Council of Australia put out a statement rejecting proposals "to increase the tax burden on the gas sector", saying it "would reduce investment and supply, and push up energy costs" and "undermine energy security".

In fact, charging companies a price for the right to extract the gas resources under the ground which are owned by the Australian people is not a tax at all, nor is it a "burden".

The exploitation of those resources should be managed by the government on behalf of the owners of those resources: the Australian people. Those resources should not be given away for peanuts to mainly foreign-owned companies who provide very little employment and who pay precious little tax on the profits they make.

The government should get the best price for the gas that it can. It's called the market. That's what people do when they sell a car. We don't call the price we charge for our car a "tax". We call it a "price".

If we charged a reasonable "price" (not a tax) for our resource, we would get as much as $20 billion a year. And the gas producers would still pay that fair price. Just as if you decided not to give away your car, but charge a reasonable price for it.

Voters should be saying to the government: "Stop giving our resources away for nothing. It is negligent and reprehensible."

On the spending side, when a government relieves some people from a tax that everyone else pays, it is in fact government spending. The government is spending taxpayers' money relieving a class of people from a tax burden.

So, when the opposition Coalition and business call for the reining in of government spending, these are the places where Treasurer Jim Chalmers should start.

Last week this column looked at health. The government spends about $10 billion a year in forgone revenue in subsidising private health. It is a terrible waste of money. We would get much better health outcomes spending it elsewhere and making those who want private health insurance pay the true price for it.

In education, it is worse. The federal and state governments together spend nearly $14,000 per student at private independent schools. The federal part of that is so lavish that the feds would be better off if a newly arriving student went to a state school rather than a private one.

The feds subsidise parents sending kids to private schools by about $10 billion a year.

It gets worse. About 1.5 million students attend private schools, half in high-fee independent schools and the other half in Catholic schools. Fees average about $15,000 a year. If the government charged GST on those fees, it would come to more than $2 billion a year.

If you want to talk about wasteful government spending, the $12 billion a year going to well-off people sending their kids to private schools would be a good start.

The $12 billion is not helping education. To the contrary, all international testing shows Australia's education outcomes are falling.

It is obvious why. Money is being wasted on schools that already have good educational outcomes (rich, private ones). That is at the cost of public schools with poor outcomes. If those schools got a bit more money it would improve educational outcomes greatly. Though, of course, money is not everything in education.

Indeed, the feds should get out of education altogether, swapping that with a federal takeover of the whole of health from the states.

The wasteful subsidies and gifts to the well-off in education, health, and gas come to $42 billion. As it happens, that equals the projected federal deficit for 2026.

We can do even better. Capital-gains concessions, negative gearing, superannuation concessions, GST exemptions on all the rubbishy so-called health products that fill pharmacy shelves, GST exemptions on fresh food bought disproportionately by the wealthy, fuel-tax exemptions for miners, and fringe benefits tax exemptions for electric vehicles are all examples of what is, in effective, government spending which could be reined in and better directed elsewhere.

It is at least another $60 billion.

Even if the government reined in only half of it, the deficit would be gone, and we could start repaying debt upon which we will pay $48 billion next financial year.

We could even give a tax cut to those on lower and middle incomes in the form of a flat deduction to wipe out nearly all work-related claims and obviate the need for several million people to do tax returns.

There is a lot of government "spending" to be reined in before targeting programs and direct payments which usually help the less well-off.

Sure, spending should not be wasteful. Too often opportunists milk the system, as we have seen with the National Disability Insurance Scheme. Those programs and direct payments should be well-targeted and efficiently delivered.

But let's not pretend they are the only places that the government can make savings.