Interview on PVO NewsHour About Why the GST will hurt households

03 February 2016

PETER VAN ONSELEN:It's time for our political panel. Im joined now by Labor frontbencher Stephen Jones, appreciate your time.


As well we have Matt Birney live from Perth, former Liberal leader from the West. Thanks for your company.Stephen Jones if I could start with you, the Labor party is opposed unquestionably at the federal level to increasing the GST. Help me understand this though; those Nordic nations, they all have consumption taxes and they all have the highest spending on social services in the world. What's going on? What's the difference?

SHADOW ASSISTANT MINISTER FOR HEALTH, STEPHEN JONES: I don't think you can look at one tax in isolation. You've got to look the whole raft of taxes state, federal and local before you can make those comparisons between one country and another. The reason that Labor is opposed to the GST increase is that we understand that it is going to increase the cost of everything from household groceries to going to the Doctor, medicines, absolutely everything. At a time when Australians are already struggling with cost of living pressures, this is not a tax we need. It has got questionable economic benefits and we have an alternative set of propositions which will fund the programs that we want to introduce.

PVO: But Stephen Jones when you say that Labor is opposed, you really have to say federal Labor don't you? Jay Weatherill, he is up for it.

JONES: Well, let's be quite upfront. Jay has got an interest to protect, in terms of his state. I welcome the fact that Jay has engaged in the tax debate. But I think if you talk to Jay or in fact any of the other premiers what they want is a revenue stream because they are absolutely suffering under the $80 billion worth of Budget cuts to health and education. They want that hole filled, they are desperately looking for a revenue stream and they are calling on the Commonwealth to help them fix it.

PVO: I will come back to you on that in a moment. But Matt Birney let me bring you in; you are a former state politician and leader of the Liberal party no less. Help us understand what is going on here in terms of the tensions that can happen between the state and federal wing of a political party. Because Jay Weatherill is doing something that inevitably behind closed doors would annoy the bejesus out of Bill Shorten and no doubt Stephen Jones as well.

FORMER WA LIBERAL LEADER, MATT BIRNEY: Well, of course the GST goes to the states so it is not that surprising that a state premier would want a rise in the GST. Because all of the GST goes to the states to fund health, education etc. But can I preface my remarks Peter with this comment; the GST is probably the only tax in this country that applies to pretty much every single Australian. Company tax doesn't, even income tax doesn't because some people don't work. But the GST applies to every single Australian. The poll that came out either this morning or yesterday that showed 54 per cent of people against a change in the GST and 37 per cent in favour I think was a remarkable poll. But not for the reasons that the anti-increase-in-GST-brigade would have you believe. I think it is remarkable that 37 per cent of people - when asked if they are prepared to pay more for every single thing they buy in their daily lives said yes.

PVO:I mean that is a fair point that Matt Birney makes, how can it be that over a third of people say that they are okay with it and only 54 per cent say that they are opposed? That is a bit surprising I would have thought.

JONES: I am not surprised at all by those numbers; it is a poll coming off the back of the Australian Open, the cricket season and the Santa Claus season so

PVO: None of which helped Bill Shorten's numbers though Stephen Jones!

JONES: People will start to focus on the issues and I think Matt has hit the nail in the head - the GST does apply to everyone, it applies to everyone equally. So I as a relatively well paid Australian pay as much GSTon my groceries as my Mum does and she is a pensioner. I pay the same as other people who are on very modest or low incomes. That is the criticism that Labor has of this tax, it is regressive and it hits the lowest paid hardest. But there is another point that I want to make here Peter and it goes to the nub of the false debate that we are having at the moment. We have got a debate about tax but we don't have a discussion about the purpose. You've got Scott Morrison out there saying that he wants to tax low income Australians through their grocery bills so that he can provide a tax cut to corporate Australia. We've got the states running around saying - we dont' care where the revenue comes from, we just need something to pay for our hospitals and schools. We've got the former Treasurer saying that the purpose of an increase in the GST will be to pay for an income tax cut. What we don't have is consensus on what the purpose of changing the tax mix is. So I think that they have got the cart before the horse. We are very clear about it, we think that we need additional revenue to pay for additional demand on our health and education systems that all Australians expect and we have got a plan to do it.

PVO: Let me bring you in Matt Birney with a particular question. I had Craig Kelly, the Liberal Member for Hughes, a little earlier and he posited the idea that it wouldn't be a bad thing to index income taxes in the wake of putting the GST up. I've had similar things suggested by Zed Seselja, a Liberal backbencher and Cory Bernardi, a Liberal backbencher. I can't for the life of me though believe that Scott Morrison, who is in charge of making the books add up, or indeed Mathias Cormann, his Finance Minister and your WA colleague, are going to be anywhere near being prepared to accept indexes in income taxes. What do you think?

BIRNEY: I think even from a purely political perspective that would be problematic. Because people would regularly see an increase in their income tax and I don't think that that would work well particularly. It's pretty hard to see the GST, when you walk into a corner deli or into a supermarket it's pretty hard to see the GST. So a once -off increase in the GST would be more politically palatable.

PVO: Let me just clarify, what he was talking about was indexing it so that your income tax doesn't change when inflation changes. So that in a sense bracket creep no longer applies. It wouldn't mean that your taxes go up, it would actually make the coffers of the government take ahit year in year out each time that they made that minor adjustment. The problem with that I reckon Matt Birney is that Scott Morrison is going to look at that and say - well hang on we need bracket creep to help right the books if we get the GST in.

BIRNEY: Look bracket creep applies when people get a natural pay rise; you creep into the next bracket. I'm not sure how you would do away with bracket creep. I think the number floated out there is to increase the GST from 10 per cent up to 15 per cent. For my money I think we should stop short of 15 per cent, perhaps around the 12 and a half per cent market. We should look at giving back personal tax cuts. Particularly in the top income tax rate as well because when you think about small businesses - and I've raised this issue with you before - a lot of small businesses have a corporate, company structure. If they want to get money out of that company to pay for a house or a car as the case may be they are paying the difference between the corporate tax rate and the top tax rate and that is huge. So I think if there is some ability there to reduce income tax rates and corporate tax and I think that is a good thing. But there needs to be some money left over to help with the Budget repair task, which we all know is a herculean task at the moment.

PVO: Stephen Jones you said earlier that you can understand - even though you don't agree with what they are doing - you can understand why a state premier like Jay Weatherill would be looking for more money because of the $80 billion in cuts to health and education. You've now announced a $35 odd billion dollar education package, which will cover some of that $80 billion worth of cuts to education and to health. Does that mean in your portfolio area of health we are going to see a massive portfolio announcement of somewhere around $45 billion in extra funding from the Labor party over the next 10 years to come to the overall $80 billion?

JONES: Of course we have already made some announcements in the health portfolio and they go to retaining the integrity of Medicare. So refusing the co-payment legislation and in addition the changes that were proposed around the PBS. So we already have if you like Peter made some important announcements in the health portfolio. The important part of this is that we actually understand if you are going to make significant announcements in the areas of health and education you've got to have a credible revenue story to deal with it. That's why when we've talked about our revenue measures, whether that be cracking down on multinational tax avoidance or increasing the excise on tobacco and like measures, we've said that we are doing this because we have a purpose. The purpose is to be able to fund our initiatives in health and education. The problem I have with the false debate we are having at the moment - which has added to the confusion now - is we are having it without a purpose. On the one hand you are saying that the real purpose of this tax debate is to deal with Budget issues, on the other hand we're saying that it is to offset tax cuts we want to give in other areas. Some people are arguing for income tax cuts and -

PVO: But it can do a little bit of everything, can't it?

JONES: Well, if it is does a little bit of everything than you've got to ask yourself, what good is it doing in the overall? If the big problem we are having is with the revenue, we'd invite Malcolm Turnbull and Scott Morrison to take up the $70 billion worth of revenue savings and additional revenue that we have put into place with our revenue package. That is the sort of place that we should be looking at. I also want to take up the point that Brian Owler made late last week, where he forcefully made the point- why on earth are we talking about tax cuts when we can't fund our hospitals? A point that I think every state premier would approve.

PVO: I want to get back to you in a moment to find out when we are going get the rest of the details. But first up Matt Birney, what did you make of the policy announcement that Labor party put forward last week in school education. That was $35 billion over ten years, reintroducing the $4.5 billion in Gonski in years five and six which were taken out in that first Abbott Budget. What did you make of that?

BIRNEY: I've got a few comments to make on that. But first I should pick up on the comment that was just made on funding on certain policy initiatives by increasing the excise on cigarettes. That is just so unimaginative. It's borne out of this theory that gets around in politics - people who smoke and drink are fair game and we will just keep slugging them with more and more excise. I mean I haven't smoked for about 30 years now but I am frequently shocked at the price of a packet of cigarettes. So that it is just a very unimaginative way to fund policy and -

JONES: The most effective way of cutting smoking rates, the most effective way of smoking rates is price. Every health economist will tell you that.

BIRNEY: Very unimaginative -

PVO: Well, Birney let me just ask you quickly on that. I think that it is unimaginative, but I also accept that "sin taxes" have a role in modern society. Do you have any issue with sin taxes more generally?

BIRNEY: With what, sorry?

PVO: So-called sin taxes, you know, more taxes on fatty foods, cigarettes, alcohol you name it. Anything that is supposedly not good for us.

BIRNEY: It is just unimaginative. But the point I would make is that cigarettes are already totally unaffordable and when they are consumed by people who can't afford [inaudible] because they are addicted. You are not going to cure their addiction because you have put excise up; you are just going to make their lives a whole lot harder. But just on the issues of the Labor party's education policy I think that there are a couple of things worth mentioning in regard to that. Firstly, we should remember that in government the Laborparty promised to fund six years of Gonski but they didn't budget for it. So it remains to be seen whether they will be able to budget for it. Secondly, the policy as I understand it is about increases in education funding. It is pretty hard to say that we don't want any increases in education funding but once again I say it is an unimaginative policy because people on the streets, parents, teachers, students want to know what this money will be spent on. Are they going to increase teacher development? Are they going to build new bricks and mortars schools? Are they going to reduce class sizes?

JONES: Yes to all of the above.

BIRNEY: When I was leading the Liberal party I was working on a policy that would see disruptive students removed from classrooms. That came from talking to a myriad of school teachers who said that that the single biggest single issue that they have that prevents good students from listening and learning are the three or four or five super-disruptive students in their class. The policy that I was working on would have seen another classroom formed or another two classrooms formed depending on the size of the school. The tougher teachers would then be paid more to teach those classes and the mainstream classes could get on with -

PVO: Just a very quick aside on that. That policy that you were working on when you were Liberal leader, why hasn't Colin Barnett introduced that? He has been premier for almost two full terms.

BIRNEY: Well, he is obviously introduced a lot of education policies and these policies come and go at the whim of the leader. It's not to say that Colin hasn't done anything in education. The point I was trying to make, is that it is all well and good to beat your chest about another $4.5 billion going into education but parents, teachers and students want to know what it is going into, what are the specific initiatives and then they will be able to make a decision on it.

PVO: Let me get a quick right of reply to that from Stephen Jones.

JONES: Well, Matt rattled off a list of three things and I would say yes to all of them. We need to improve teacher quality, part of the program announced by Bill Shorten was teacher quality. We need to look at school sizes and we need to look at the facilities, which are so uneven even in the public school system let alone compared to the public and private school system. You know sometimes you -

BIRNEY: So does that mean your funding for these policies will be linked to those things?

JONES: It is about needs-based school funding; a system set in place and conceived of by a bipartisan businessmen-led initiative by David Gonski which all state premiers were getting behind -

PVO: Gentleman we are almost out of time. Just quickly, Stephen Jones when are we going to see the full health policy released for the Labor party for this election year?

JONES: Well, it won't surprise you to know Peter that I won't be announcing it today with the junior of the two shadow health ministers on your program.

PVO: Sure, sure. But just when I guess?

JONES: Well before the election but it is unrealistic to say that we are going to do this when we know we have a Budget coming up in May. We don't know what the shape of the forward estimates will be, we've had significant changes between the mid-year financial outlook and the previous Budget. We expect big swings again between MYEFO and this Budget. So we will be rolling out more policies out, those big-ticket items - you wouldn't expect us to be doing them before we get an update in the financials.

PVO: We are out of time, a very quick one Stephen Jones. There is a betting market on who is going to get kicked out of Parliament first for the new 2016 election year. You are at $34, you are obviously too polite there in the Parliament. You might be able to rig it by being very outspoken. It seems that Anthony Albanese is the favourite, who would you put your money on?

JONES: I think the short money would have to be between the triangle of Anthony Albanese, Terri Butler from Brisbane and Nick Champion, he would unbackable over there from Wakefield.

PVO: I was going to say Nick Champion, he would be my favourite. All right we are out of time, Stephen Jones and Matt Birney appreciate your time thank you.