THE AGE http://www.theage.com.au/daily/990531/news/news22.html Monday 31 May 1999 Outfoxing Meg Lees By TIM COLEBATCH John Howard was understandably chuffed on Friday night when he announced that the GST for which he had fought for so long had been won. The Australian Democrats had pledged to support a package that, he declared, delivered ``85 to 90 per cent'' of the plan the Government took to the voters. Howard was genuinely elated, relaxed, beaming from ear to ear. He recalled that it was almost 25 years since the Asprey report on tax reform had put a GST on Australia's agenda, ``just a year after I came into Parliament''. No issue had so preoccupied him as Treasurer, Opposition Leader, Opposition frontbencher, and finally as Prime Minister. The vast majority of business groups and economists were behind him. And at last he had triumphed. For Meg Lees, whom he had barely met until a week before, the PM's praise was unstinting. ``At all stages I have found her forthright, honest, candid, adopting a sensible, no-nonsense attitude to the discussions,'' he said. ``I do particularly want to record my appreciation for the very constructive attitude that she had adopted.'' For all his minders' phobia about letting him be questioned on the document - journalists were not allowed to see the agreement until the PM had gone - it proved the PM right. The Government had won the vast bulk of what it wanted from the negotiations. And that, despite the fact that it went into them with the odds against it. The Government desperately needed a deal on the GST; the Democrats did not. Yet after conceding there would be no GST on food, its other concessions were all ``no regrets'' measures: things it was going to do anyway, or did not mind doing. Apart from food, it sacrificed none of its core goals. Meg Lees followed Howard to the podium, and she too radiated the satisfaction of a winner, as she rattled off all the bits of Democrat policy that the Government had agreed to adopt, or consider. But when the agreement is scrutinised, her joy is harder to understand. After 20 years of campaigning for higher energy taxes, the Democrats had agreed to push through the biggest cut in energy taxes Australia has seen. After years of urging that the tax system be made more progressive, they had agreed to vote for it to be made far more regressive. Compare the platforms of the two parties at last year's elections, and it is obvious who has won. In September, the Democrats pledged to pursue 16 priorities in tax reform, including a broad attack on tax loopholes, payroll tax rebates, a retargeting of family assistance towards low income families, lowering the 70 per cent clawback of unemployment benefits when beneficiaries find work - a clawback so extreme that some end up worse off if they get a job - lowering the rate of HECS repayments, restoring the 150 per cent tax break for research and development and so on. Of the Democrats' 16 priorities, just one - exempting food - was fully achieved in Friday's agreement. Six were achieved only in part, and nine were not achieved at all. Why then did they embrace a package so obviously at odds with their own policies? A comment from Lees helps explain: ``We have achieved more in 13 hours of discussion with this Government than we did in 13 years of Labor.'' The Democrats have been on the outer for so long, ignored and derided by both major parties, that when they were finally invited into the tent, and offered some of the things they have spent years fighting for, they were quickly won over. Second, the Democrats had already made big concessions in April, when they unilaterally reduced their demands on the three key issues - exempting food from the GST, reducing the cuts to diesel taxes, and making the income tax cuts fairer - to prove to the Government they wanted to negotiate. That backdown left a much smaller distance for their backdown in May. Third, the Government played a weak hand shrewdly. For two-and-a-half years, its officials have been preparing a strategy to slash sulphur emissions from diesel fuel; the Government held it back until last week, then played it as a card to get the Democrats to endorse big cuts in diesel taxes. For years, Lees has personally crusaded for official recognition of alternative medicines such as acupuncture and naturopathy; last week the Government gave it, exempting them from the GST for three years while a proper accreditation system for them is established. A small concession was repaid with big appreciation. It backed down on taxing food and Panadols, but the polls show that won't hurt it. It preserved all its controversial income tax cuts, except for $1 billion of cream for higher income earners. And in return, the Democrats agreed to endorse tax cuts that will give people on $20,000 a year a 3 per cent rise in after-tax income (not 2.2 per cent, as I mistakenly wrote in Saturday's Age), dwarfed by the 8 per cent rise going to people on $60,000 a year. A breadwinner on $20,000 a year will get $540, a breadwinner on $60,000 gets $3222. Nothing could be further from the policy the Democrats took to the election. On the environment, the Democrats did persuade the Government to restrict its diesel fuel cuts to heavy road transport and country people. The $1.6 billion in diesel tax cuts has come down to $920million, and - more significantly - the Government pledged that after 2006 the tax credits will be paid only to trucks using ultra low sulphur fuel, which will reduce the sulphur content by 96 per cent from current levels. This is an important policy shift. Instead of Australia dragging its heels with emission controls 10 years behind those in Europe and the United States, Environment Minister Robert Hill has pledged that the Euro 4 emissions levels to be implemented in Europe in 2005 will be law in Australia in 2006. While the diesel vehicle fleet takes 20 years to turn over, the tax credits carrot may induce owners of older trucks to switch over to the clean fuel too. But a spokeswoman for the Australian Conservation Foundation, Anna Reynolds, asks why the Government will give incentives for use of ``dirty diesel'' between 2000 and 2006 when far cleaner fuel is already here. Last year, Britain's Blair Government brought in immediate tax cuts and credits to encourage a switch to cleaner fuel, she says, and it has had a significant effect. In phasing in cleaner fuel between 2002 and 2006, the Government and the Democrats merely followed the timetable proposed by the Road Transport Commission. Democrat sources say they tried as hard as they could to get a fairer and environmentally more progressive agreement, but the Government would not budge. Once again, the experienced player with a lousy hand outfoxed the new chum with the aces in her hand. Tim Colebatch is economics editor of The Age. email: [EMAIL PROTECTED] ************************************************************************* This posting is provided to the individual members of this group without permission from the copyright owner for purposes of criticism, comment, scholarship and research under the "fair use" provisions of the Federal copyright laws and it may not be distributed further without permission of the copyright owner, except for "fair use." -- Leftlink - Australia's Broad Left Mailing List mailto:[EMAIL PROTECTED] http://www.alexia.net.au/~www/mhutton/index.html Sponsored by Melbourne's New International Bookshop Subscribe: mailto:[EMAIL PROTECTED]?Body=subscribe%20leftlink Unsubscribe: mailto:[EMAIL PROTECTED]?Body=unsubscribe%20leftlink
