coalition unrest over parental leave

Coalition unrest over parental leave.


Tony Abbott faces a post-election revolt over his paid parental leave scheme, with one Liberal state refusing to help fund it and federal Nationals MPs threatening to either vote against it or use it as leverage to win extra funding for the bush.

Labor has also exploited the Coalition’s refusal to release costings for the $5.5 billion-a-year scheme until the last week of the campaign, by ramping up its claims that Mr Abbott will initiate severe budget cuts to help fund it.

This was again rejected by the Opposition Leader on Monday as he defended the scheme which, from July 1, 2015, will pay mothers their full wage, capped at $150,000, for six months, plus superannuation.

It will be at least half-funded by a 1.5 percentage point company tax levy on all taxable company income above $5 million, raising more than $4 billion a year.

The Australian Financial Review has been told the 1.5 percentage point levy will not be entitled to a franking credit.

This will impose an extra administrative burden for companies, but will save about $1.7 billion a year in income tax receipts that otherwise would have been lost as a result of shareholders being entitled to ­additional franking credits.

To try to contain the cost of the ­controversial scheme, state and local government employees, already eligible for taxpayer-funded parental leave, could opt into the more generous Commonwealth scheme. But they could only do it if their employers – state and local governments – gave the Commonwealth the money they otherwise would have spent on that employee.

This will be worth $660 million in 2015-16 but Western Australian Liberal Premier Colin Barnett said he would not be handing any money over to ­Canberra.

“I think in many respects it probably is too generous,” he said of Mr Abbott’s scheme.

ABBOTT PLAYS DOWN ANY FIGHT WITH STATES
“If Tony Abbott becomes prime ­minister and that scheme is introduced, we will co-operate in terms of the administration but we will not be contributing money to the scheme.”

This stance would punch a $100 million hole in the scheme in its first two years. A spokesman for NSW Premier Barry O’Farrell said any decision about NSW contributing would have to be made by the cabinet.

Mr Abbott played down the prospect of a protracted fight with the states but pointed out they would have to contribute if their employees wanted to opt in.

“Sensible adult governments are normally able to get agreement and obviously the state premiers understand that if we are relieving them of some hundreds of millions of dollars of obligations that they’ve got, there ought to be a fair trade-off,” he said.

“The state premiers understand that, and we’ve got some 18 months or so between an election, should we win, and the beginning of the policy and that is more than enough time for sensible adult governments to sit down and negotiate what are sensible win-win arrangements.”

Since Mr Abbott announced the scheme in early 2010, without first ­consulting his party, it has been deeply unpopular with both Liberals and Nationals.

The Liberals believe they should not be taxing big business and redistributing the wealth while the Nationals feel it is too generous and discriminates against rural women, many of whom are either stay-at-home mothers or earn low incomes.

Mr Abbott’s announcement on ­Sunday did nothing to dampen internal hostility, with one MP saying it was “the worst bit of public policy since the ­carbon tax”.

One federal MP told the Financial Review that the Nationals could increase their Lower House numbers at the election from 12 to 14, and possibly even 15.

The MP said that, at a minimum, they would use this “balance of power” in the Lower House as “a bargaining chip” for policies.

These would include a regional growth fund, similar to the royalties for regions fund negotiated by the WA Nationals, and an overhaul of the youth allowance scheme for students from regional Australia.

TRUSS URGES MPS TO FOCUS ON BENEFITS
“If we have to suck it up, and it looks like we do, then we’ll get something out of it,” the MP said.

Another expected some colleagues to cross the floor to try to block the ­policy rather than use it as leverage.

“A lot of people don’t like it, full stop,” the MP said.

He agreed with economists that a big-spending policy was the worst thing to promise with a debt and deficit-laden budget in structural decline.

“The day after the election, they will say “it’s your debt now .?.?. You won’t fix it by spending more money.”

Nationals leader Warren Truss conceded “some” in his ranks had “reservations” about the policy but urged them to focus on the benefits the policy will deliver to low-income earners in the bush, saying they would still get more than under Labor’s scheme.

Mr Truss said there had been too much emphasis on people with high incomes and “it was time we focused on those on low incomes”.

Farmers’ wives, who were part of the business and drew a wage, would, for example, be eligible for six months’ wage replacement if they had a baby, he said. At a minimum, a mother would receive six months of minimum wage plus superannuation, compared with 18 weeks with no super under Labor. “That will be good for the people we represent in regional Australia,” he said. “There have been some in our party who have expressed reservations about elements of it, but it is Coalition policy and we support it.”

The Coalition says it will pay for the policy with the company tax levy, the states’ contribution, the $1.8 billion annual saving from abolishing Labor’s scheme, and income tax collected on the leave payments.

Prime Minister Kevin Rudd said there would have to be budget cuts as well that would reduce services to all families, not just those getting the new payment.

http://www.afr.com/p/national/coalition_unrest_over_parental_leave_hdrZEdTkAEcCiCJ5LWKR1L