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A Tax and Welfare Package As Much As An Environmental Plan

After labouring for months, the Multi-Party Climate Change Committee has brought forth a tax and welfare package as much as an environmental policy.

The DrumWith significant implications for the welfare sector, and tax cuts for everyone earning up to $80,000 a year, in the short term the carbon tax may not be the most important effect of the government’s plan.

The government says around 60% of taxpayers will get a tax cut of at least $300 from July next year, and no one will pay more tax. In 2015-16, further tax cuts come into effect.

The tax free threshold will be raised to $18,200. Treasurer Wayne Swan says up to a million extra Australians will be freed from having to lodge a tax return from next financial year. Many low-income earners who have to deal with the Taxation Office and Centrelink will find they only have to deal with Centrelink. Like the general tax cuts, the tax free threshold will increase again to $19,400 in 2015 when the fixed price on carbon is replaced by the emissions trading scheme.

For all the frenzied commentary today, most of the plan was leaked over the past week. The $23 per tonne carbon price has been known for some days. The Greens were permitted to announce the formation of the Australian Renewable Energy Agency (ARENA). The broad outlines of the compensation package have been public for some days.

What we know now is that the carbon price starts low and remains relatively low throughout the fixed price period. It will rise to $24.15/tonne in 2013 and to $25.40/tonne in 2014. A floating price comes into effect in 2015 when the emissions trading scheme kicks in.

The significance of this is the government’s victory over Green calls for a higher starting price. Oh, to have been a fly on the wall when Messrs Windsor and Oakeshott weighed in on those questions with the ALP and Greens in the Multi Party Committee.

In the compensation area, the government claims 6 million households will be assisted and 4 million of these will be better off. Nearly $15 billion will be allocated to household relief.

An initial look suggests that pensioners and retirees will benefit from the plan. The government claims compensation to pensioners is equivalent to a 1.7 per cent increase in the maximum rate of the pension, around $338/year for singles and $255/year for each eligible member of a couple.

Self-funded retirees with a Health Card will receive a supplement of the same amount as pensioners.

Taken together, the tax and compensation arrangements seem to amount to a carefully designed package which should help with Labor’s electoral base.

Politically, as Tony Abbott was quick to point out this afternoon, the government may suffer the “death of a thousand cameos” as individual case studies come to light. The Sunday morning newspapers were full of charts and figures equating carbon tax price increases to Tim Tams and Weet-Bix. Expect the same treatment for the compensation arrangements. Experience teaches us to make no assumptions about where this kind of coverage will end up.

Abbott was ready with his standard lines at his press conference. “This is a bad tax,” he said. “It can’t be fixed, it has to be fought.” He reiterated his determination to oppose all of the government’s legislation to implement the carbon pricing plan. He again called for an election on the issue, saying it was “a package of economic pain for no environmental gain”. In a wonderful throwback to the rhetoric of the Cold War, the Opposition Leader said, “this is socialism masquerading as environmentalism”.

As for Abbott’s opposite number, Julia Gillard always sounds good when she has something to announce. We’ve seen it many times in the past year. Give her a new policy, a new way forward, a new set of soundbites, and she sounds positively prime ministerial. So it was today with the press conference to announce details of the government’s carbon pricing plan.

Gillard argued the science was in and now is the time to act. She claimed the carbon pricing plan would cut emissions by 160 million tonnes by 2020. This was, she claimed somewhat triumphantly, equivalent to taking 45 million cars off the roads. Whether this kind of rhetoric survives the hurly-burly of the nationwide roadshow she embarks upon tomorrow remains to be seen.

The most pertinent question of the day was the one which asked Gillard what she had to say to those who might think the deal they’re being offered is too good to be true. If the carbon tax is to be more than matched by compensation, some voters may need convincing that it’s necessary in the first place.

The government’s dilemma was thus on show for all to see. Damned for doing nothing, it may still be damned whatever it does. As every front bar galah now says, the government has shown little ability to prosecute its case in favour of climate change action.

But at least the government has left behind the never-never political world of the past four months. It has a plan. The detail is out there. Its backbenchers have something specific to fly with in their electorates.

And the government’s midday press conference brought to an end a morning of mindless gibbering and video montages on the political talk shows. Sky News even named the day “Carbon Sunday”.

The breathless commentary, the dramatic pronouncements and the instant judgements in this age of politics as entertainment may yet be the biggest problem the government faces in the coming months.

Unless something catastrophic occurs, the carbon tax legislation will pass through both houses of parliament in the next few months. There is today no prospect of an election. In eleven months the carbon tax will come into effect with an election around fifteen months after that.

So the debate will go on the road for a while. As one commentator pointed out today, Gillard has a hard sell on Abbott’s turf.

This article first appeared on The Drum.

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Malcolm Farnsworth
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