View from The Hill

View from The Hill

Day 17: Labor joins the dots between Coalition PPL and threat to retirees’ money

Abbott was on the field with the Broncos for the TV cameras, as debate raged about his parental leave scheme. AAP/Alan Porritt

The challenge for the government is this: how does it turn Tony Abbott’s highly generous and potentially popular paid parental scheme into a negative for the Coalition without knocking motherhood?

Labor’s answer, in part, is to portray the plan for mums as a threat to the grandparents’ nest eggs.

“It is going to hit superannuation big time,” Kevin Rudd declared today.

The argument runs like this. The plan, costing a gross $5.5 billion annually, is part funded by a 1.5% levy on about 3000 big companies, which would be offset by the Coalition’s promise of a 1.5% reduction in the company tax rate. The levy does not attract franking credits (offsets to prevent double taxation of dividends) which means some penalty for shareholders, including super funds. It has been estimated this amounts to about $1.7 billion annually, which would help pay for the scheme.

This enables Labor to join the dots between the PPL scheme and retirees, which it has been doing all day.

Apart from Rudd, Treasurer Chris Bowen and Finance Minister Penny Wong were pumping the line out.

“The decision by the Liberal party not to provide franking credits for the levy paid by Australia’s businesses … means that the levy will be paid by every single shareholder in Australia,” Bowen said.

“In these days of modern superannuation every single worker is a shareholder through their superannuation scheme…. This is Tony Abbott’s giant raid on Australia’s investors.”

Not only is the scheme a big hit on investors, Labor claims, but it breaks an Abbott promise. The opposition made much of its policy “that there will be no adverse unexpected changes to people’s superannuation under a Liberal government”, the Treasurer said. “Guess what? This is adverse and it is unexpected.”

The line that the PPL scheme is an attack on superannuation fits in with Labor’s general theme that Abbott would “cut, cut, cut”.

On Twitter Malcolm Fraser chimed into the debate: “Investors take $1.7bn hit for parental leave. Bad for retired people especially, inconceivably bad policy.”

The PPL plan, Abbott’s signature policy in this election and a highlight from his last one too, is a remarkably friendless initiative.

Big business doesn’t like it, for obvious reasons. Liberal dries and rightwing groups such as the Institute of Public Affairs are critics. So are some in the Nationals, who believe their constituents wouldn’t much benefit.

On the other hand, in a case of strange bedfellows, the Greens were quite attracted to the scheme, although they believe it too generous.

Labor research is showing the PPL plan is vulnerable on the ground of unfairness. At the maximum, it would give someone who’s been earning $150,000 annual income $75,000 for six months parental leave. The research is also finding people talking about the potential for rorting.

Abbott has invited and made easier the Labor attack by not releasing detailed costings for the plan. The Coalition can’t even justify this by the argument it uses for not putting out its total costings – that it needs to wait until it releases all its policies. There is no reason why the costings for this policy could not be issued at once. They should have come out with the scheme, on Sunday.

Manager of opposition business Christopher Pyne said today: “We’re releasing [costings] as we release spending announcements”, which has not been the case with PPL.

On the general question of costings Saul Eslake of Bank of America Merrill Lynch estimates today that the Coalition has so far promised revenue measures costing about $28.5 billion over four years to 2016-17, and new spending of about $14.75 billion. But it has so far announced savings only of almost $13.5 billion.

Eslake says this means it needs to find another $30 billion “credibly to claim that it will produce a ‘bottom line’ no worse than that most recently forecast by the Government”.

Abbott said today the PPL plan would be funded from three sources: the levy, discontinuing Labor’s scheme and “consequential adjustments, such as ending double dipping for public servants”.

“It’s fully costed and it’s fully funded,” he said – which leaves no legitimate excuse for not telling us the breakdown ASAP.

Abbott and Hockey brushed off the Labor attacks, with Abbott saying that levies never attract franking credits (but what other levies have there been on company tax?).

Hockey said the argument about franking had been around since 2010. Shareholders would be better off under the coalition because it would reduce the overall tax burden, and self-funded retirees “will always and have always been better off under the Coalition than under Labor”.

The battle over PPL is a major test of a scare campaign, of which we have seen many over the years, most notably and successfully against Abbott’s old boss John Hewson’s Fightback! in 1993.

We can assume there will be a lot of Liberal focus group testing to judge whether the attack is having an impact on support for this policy, which for Abbott has become so much part of the political persona he wants to project.

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