On the QT: All mothers are sacred – especially rich ones

Today’s Question Time was dominated by Tony Abbott’s announcement yesterday introducing a policy (of sorts) to introduce a maternity leave scheme to be funded by a 1.7% tax on businesses earning over $5 million a year.

It’s one of those policies which that part of me which used to be a callow unthinking young lefty who thought all big business was evil would have rather liked. Unfortunately the part of me that grew up, went to uni, did an economics degree, learned that the government doesn’t grow a big money tree out the back of Parliament House, and who likes well thought out public policy thinks the Abbott maternity leave scheme is complete bollocks.

Before getting to it, let’s a have quick squiz at the media reception. Had Mark Latham brought out such a policy the chorus from the press would have been unanimous that this was an extravagant, dumb and, in parts, economically-dangerous policy. And to the media’s great credit, they’re pretty much saying that now. Take The Australian – easily the most Liberal Party friendly media organisation:

Making big business fund all parental leave is risky …

The Howard government's penchant for buying off various interest groups left the nation with an unfortunate legacy of middle class welfare and inefficient tax churn that Labor, so far, has done little to remedy. Such inefficiency needs to be dismantled, not further entrenched.

That’s about as close as you get to an anti-Liberal Party editorial in The Oz, but its online editor, Samantha Maiden, didn’t split hairs:

Abbott was in agony in yesterday's speech, explaining his multiple policy positions as due to his having "changed his mind rather than his values". But what's happened in the interim? For starters, Abbott has watched friends and colleagues struggle with work and family. His intelligent wife and daughters may have boxed some sense into him. Whatever. But let's not saddle the women of the nation with a policy that's just too dumb to fly.

Ouch.

Over at Fairfax things were no better:

BIG business has universally condemned a plan by Tony Abbott to hit the top 3200 companies with a $2.7 billion tax rise to fund a national system of six months' paid parental leave.

and

Australian Industry Group chief executive Heather Ridout said the plan would hurt investment and jobs, distort the tax system and harm Australia's competitiveness.

The Business Council said any scheme should share the burden between government and employers. ''Big business is already doing the heavy lifting,'' spokesman Scott Thompson said. Most large employers already had paid parental leave.

Australian Chamber of Commerce and Industry chief executive Peter Anderson rejected the idea of taxing business to pay for this social policy. ''Major social policy like this ought to be funded by the government on behalf of the whole community,'' he said.

and

Tony Abbott, who desperately needs to build up ''cred'' with business, has done himself harm with his left-field proposal for an extra tax on bigger companies to pay for his parental leave plan. Abbott is driven by wanting to trump Labor in an area that is a hot button for those electorally important ''working families'' and younger women.

But in attempting to do so he is acting counter-intuitively for a Liberal leader - arguing the case for more tax.

and

Let's start with the good points about Tony Abbott's policy on maternity leave, because there are only two and it won't take long to cover them.

First, Australia now has a bipartisan consensus that all women should be entitled to paid maternity leave. Hallelujah. Second, Abbott has stopped announcing multibillion-dollar unfunded promises. Hooray.

But look beneath these two important principles, and you find that they're sitting on top of a pile of policy rubbish. Abbott proposes to pay for this plan by putting a new tax on company profits of more than $5 million a year. This surtax would be levied at 1.7 per cent a year to raise a total $2.7 billion. What's wrong with that? Let us count the ways.

Wow!

Tony Abbott hasn’t been helping himself either in defending the scheme. It is obvious he pretty well came up with the plan himself and didn’t develop it with either of his economic spokespersons, Joe Hockey or Barnaby Joyce. Here he is on AM this morning:

LYNDAL CURTIS: Did you consult your economic spokesman, Joe Hockey and Barnaby Joyce before you announced this?

TONY ABBOTT: I am not going to go into exactly who was consulted and exactly when they were consulted but I have been talking about this for a long time, Lyndal. It was in my book, for God's sake …

LYNDAL CURTIS: But those two are an important part of your economic team though, aren't they?

TONY ABBOTT: Indeed they did and I think both of them read the book with great enthusiasm and I discussed this widely inside the Coalition. I discussed it with, I think, some quite significant and influential people prior to putting the proposal forward yesterday.

Yep – it was in my book, they’ve read the book, so therefore I discussed it with them. Geez. Here he was last night on Lateline:

TONY ABBOTT: On some important issues regarding paid parental leave. You might also remember, Leigh, that this was something that I put in my book, which was published last year.

I wonder when Abbott will end his book tour and start learning something about economics, because his policy, and his explanation of it have displayed no grasp of how to manage a nation's budget. For example, in the Matter of Public Importance on the issue after Question Time today, he said the reason the “levy” (remember tax is a bad, bad word) had to be put on business and not taken out of consolidated revenue was because the ALP had blown the surplus and they need to pay off the debt first. But the problem is this is an ongoing cost - $2.7b each year, every year (plus inflation). It has no bearing on whether a Government  goes back into surplus or not except if you don’t offset the payment somewhere else – you know cut spending. Also the budget went into deficit because of cuts to revenue and one off expenditures (the stimulus). The Government did not go into deficit by cutting taxes, so either the ongoing money is there or it is not. And if the way to fund anything is this way, then why not raise taxes to pay for health costs? Why not raise taxes to pay for environmental costs?

Abbott would have you believe that if the Budget were in surplus you could fund $2.7b each year, every year, and there would be no need to offset the costs at all – because you see when you’re in a surplus apparently you can spend what you like!

I also have severe worries about how Abbott intends to keep the budget in surplus. Here he was on AM:

TONY ABBOTT: … Now, if the Government hadn't run up these massive deficits we might be able to do this differently and certainly over time, once we have repaid Labor's debt, once we have been able to give people personal tax cuts then I would like to hope that we could start reducing other taxes. That would mean that this increase, thanks to the levy, is a temporary increase.

So we get back into surplus, then Abbott cuts income tax, cuts company tax, cuts every other tax, cuts this “levy” and yet still remains in surplus?? OK Tony, let me lay this out for you: a government gets “revenue” through taxes and levies, it then gives back money – that’s called “expenditure”. If the “revenue” is more than the “expenditure” the Budget is in surplus. If you reduce the “revenue” that means you have to reduce the “expenditure” if you want to stay in surplus. Given this policy I see absolutely no evidence that Abbott would cut any expenditure – especially the middle class welfare.

Which brings me to my main hatred of this policy. I am all for maternity leave – in fact I think the Government's plan is a good start, but only a start (it should definitely be longer). The Government's scheme would give women 18 weeks pay at the minimum wage; Abbott’s scheme would give women 6 months pay at their current salary – up to $150k. So you get more because you earn more.

I’m sorry but I have no truck with any Government policy that gives more money to someone purely because they are richer.

Abbott’s policy basically gives wealthier women more money for no other reason than they will most likely have a bigger mortgage, and they are used to living with a certain level of income.

But the costs of raising a child are not more because you earn more – unless you want to outfit your kids in Baby Esprit.

Ask yourself this – who is more able to save for the costs of raising a child – a woman on $40k a year, or a woman on $15ok? Who do you think is more likely to be able to use that maternity leave pay to afford a baby sitter, or a nanny, or a house cleaner? Let me tell you it ain’t the woman on $40k. And yet Abbott thinks tax payers should provide for that person on $150k  to ensure they keep living in the comfort they are so used to.

This policy makes me want to vomit.

Here’s what the Productivity Commission said about the level of maternity leave when it did its report last year:

While the Commission considered several, more complex, variants, a flat-rate
payment:
• is easier to implement
• ensures that low-income female employees are better off under a paid parental leave scheme than they would be on welfare payments, providing stronger incentives for labour supply by mothers with weaker attachment to the labour force.

Our approach also takes into account the balance between the needs of parents and the burdens on taxpayers — especially those who would not receive any direct benefits, such as those without children. Some European countries offer full replacement wages (and for longer periods than contemplated in our model). The budgetary effects of a long-duration, full replacement wage scheme would be large (section 2.9). It would also entail support for high-earning women, who already have strong attachment to the labour force, often receive privately negotiated paid maternity leave, and usually have better access to resources to self-finance leave.

Absolutely right – a woman who took a job at $100k plus with no maternity leave sure as heck should not be looking to the Government to help her out (at least not to cover her entire income).

Imagine the uproar if the Baby Bonus was given out like this – for those who earn under $50k you get $2,000; for those who earn $50-$100k you get $3,000; for those who earn $100k+ you get $4,000. There would be blood on the streets! And that’s what this maternity leave is – it is a Baby Bonus spread over 6 months, with Abbott giving more to those who earn more.

It’s a dog of a policy that looks to have been worked out all in Abbott’s head. For example the $5 million threshold. Why $5m? And is it $5m turnover, or $5m tax paid? – Because the Liberals have been a bit confused on the details. And do you think companies will be doing all they legally can to avoid paying that levy – like for example splitting a $9m company into two? Hockey said he would introduce regulations to stop companies trying to avoid paying the levy – so is he suggesting it would be legal to reduce your company's taxable income so long as you didn’t reduce it below $5 million?? Madness.

And do you think that businesses will not bother to pass on the costs of that extra “levy”? Of course they will. So in effect all consumers will pay extra so that women employed in the private sector, who most likely already have maternity leave, can now get their $150k a year salary paid by taxpayers. Madness and stupidity.

Which brings us to Question Time.

Question Time was all a bit dopey today – we had the Liberal Party attacking the ALP for being pro-big business, and even had Julie Bishop quoting Unions NSW! The Liberal Party’s first 6 or 7 odd questions were all about how people wouldn’t get paid as much under the Government's maternity scheme as they would under the Liberal’s. I actually think Rudd was rather poor in his attack on the policy. His basic argument was that the ALP proposed something before you did and we are paying more than you did in your time in Government, so there!

It took a while for Rudd to get stuck into Abbott over the obvious lack of consultation in developing the policy – especially over the Liberal's indecision over whether or not the levy was actually a tax. It really took Lindsay Tanner and Wayne Swan to start ripping the policy to shreds. Tanner did well – except for a slip of the tongue when he said “max to the tax” instead of “tax to the max”.

Rudd really only got going when Bishop asked him about the issue and he cited Joe Hockey saying the tax was a “windfall gain for companies” Rudd marvelled at the Lib’s suggesting that a tax on big-business would be welcomed by them, and so welcomed did they expect it to be that they decided not to tell anyone in big-business about it!

Joe Hockey got very shouty and agro when asking Swan about the Henry Tax Review – no doubt because he knows his attack of “great big tax” has now been destroyed by the Libs proposing an even bigger tax. He was no bout shouty as well because part of the reason Turnbull got dumped was because he apparently didn’t consult with the party, and now Abbott is doing the same thing (but coming out with a much dumber policy).

Peter Dutton stepped up to ask about the Government's health policy – citing a quote by some bloke suggesting the GST would have to be increased, and then asking Swan if any taxes would be increased to pay for it. Seriously, does the Liberal Party understand you can’t criticise the Government for increasing taxes to pay for Health costs, if your own big policy is to create a new tax to pay for maternity leave.

Oh for some logic!!!

The Government's Dorothy Dixers were split between bashing the maternity leave scheme and questions on the new health policy. Nicola Roxon must feel like her Christmases have come at once, because she is having great fun hitting Abbott over the head and talking up her shiny new policy. Today she firstly quoted Independent Member Robert Oakeshott praising the policy, and then quoted at length someone saying the method of funding proposed was the right way to do it. She then revealed that the author of those words was Tony Abbott in 2007. It was nicely done and reveals I think a major plan of the Government this year – to use Abbott’s words against him.

The last question for Rudd was from Abbott on the Health scheme, and it was probably the best response by Rudd – most likely because he had been preparing a week for it. I don’t think Rudd was quite ready to frame his attack on Abbott’s maternity scheme just yet. My prediction is more Dorothy Dixers on it tomorrow and – if they are smart – more focus on it being what it really is – a big dumb, ill thought-out tax to provide welfare to those who don’t need it.