View from The Hill

View from The Hill

Talk of levy takes budget debate into a bad place for the government

Prime Minister Tony Abbott is weathering a backbench revolt over his paid parental leave scheme. AAP/Julian Smith

A fortnight out from budget day Tony Abbott looks to need Houdini’s skills to get out of the prison of his own promises.

Those prolific pledges he made so confidently before the election. Negative commitments and positive undertakings.

He wouldn’t change pensions, nor raise taxes. He would give women parental leave to dream of. Above all, whatever he promised, he’d honour. Cross his heart and hope to die.

Abbott was (or seemed to be) obsessed with keeping promises - he had demolished Julia Gillard in large part because he had been able to exploit her breaking the “no carbon tax under the government I lead” pledge. Like some of his promises, that was made late in the piece, when election day was all that mattered.

Gillard was skewered by one promise in particular; Abbott is grappling with how to deal with many.

In his Sydney Institute speech on Monday the prime minister tried to square off on the pension pledge. Age pensions would not be touched for this term, he said. But in three years, they would be harder to get and increase more slowly.

If you shut one eye and squint, perhaps this is not exactly a totally broken promise, but it is certainly a stretched one. A bit like John Howard’s handling of his “never, ever” GST pledge. He took the GST to an election. If voters don’t like the prospect of future changes to the age pension, they can vote against them in 2016.

The tax levy that is being considered is harder to bring into any line with what Abbott said before. “We are absolutely committed to avoiding … extra taxes on individuals, we think that the people and families of Australia pay quite enough tax already,” he declared last August.

Abbott is now trying to quarantine the notion of a temporary levy from a tax rise. “If there was a permanent increase in taxation that would certainly be inconsistent with the sort of things said before the election,” he argues. The distinction he is trying to make is a nonsense. Long term or short term, a tax rise is just that.

The story that a “deficit reduction levy” was on the table broke in News Corp papers on Sunday, with a follow-up about detail on Tuesday ($800 extra tax for earners on $80,000). These were assumed to be authorised leaks, because the government regularly uses these papers as bulletin boards. But government sources say they weren’t and that the second story’s figures are incorrect.

The leaks about the levy have been extraordinarily damaging; the government now has to manage a backlash, including from some of its own backbench and especially from the business community. From what Labor and Greens are saying the legislation would be struck down in the Senate.

Meanwhile, Abbott is weathering a very overt backbench revolt over another promise – this time one he so far refuses to breach. His commitment to an expensive paid parental leave scheme has concerned many colleagues for a long while, but he continues to argue he has seen the light on the issue and they should too.

Business is chiming in once again against the scheme, and it will get another going over when the Commission of Audit report is released on Thursday. The Greens, who have supported a less generous version and whose votes would be vital to pass it in the Senate, will come under increasing pressure to back away.

At this point, the government has almost lost control of a pre-budget debate that it had been so carefully trying to frame.