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Wednesday, 23 February 2011
Page: 1153


Mr FLETCHER (1:32 PM) —The debate in the House today about the Income Tax Rates Amendment (Temporary Flood Reconstruction Levy) Bill 2011 and the Tax Laws Amendment (Temporary Flood Reconstruction Levy) Bill 2011 is not about whether Australia, particularly Queensland, and the people of Australia, particularly the people of Queensland, have suffered a devastating impact from the floods of the 2010-11 summer. Of course the people of Australia and Queensland have suffered a devastating impact. The debate in the House today is not about whether infrastructure in Queensland and around Australia needs to be rebuilt. Of course it needs to be rebuilt. The debate in the House today is not about whether the Commonwealth should pay on behalf of the people of Australia a large part of the cost of that rebuilding. Of course it is appropriate that the Commonwealth government should allocate the people’s funds towards the reconstruction effort when you have, as we have here, a disaster of national significance. Nor is the debate about how much the Commonwealth government should be paying. We do not contest the conclusion that the government has reached. We say that the government, with all of its resources, is best placed to assess how much needs to be spent. So the quantum that needs to be spent is not part of what is contested in this debate.

This debate is about one thing and one thing only: how should the amount to be expended by the Commonwealth be funded? We are told by the government that it estimates that $5.6 billion needs to be spent. As I have indicated, we do not contest that estimate. We say that the government, with all of its resources, is best placed to develop that estimate. We are also told by this government that it will fund this amount in part from reallocating other expenditure and in substantial part by whacking on a new tax. Of course, since the government made the announcement of how it planned to deal with this expenditure and how, particularly, it planned to fund this expenditure, it has already thrown in the towel on some of the savings it said it would be obtaining in other areas. But that does not change the central issue of contention in this debate in the House of Representatives today: how ought this expenditure to be funded? More specifically, is there any justification for funding any of this expenditure through the imposition of a new tax?

I put to the House three simple points. Firstly, this money which is to be expended should be found through offsetting savings in other expenditure. Secondly, in a budget of over $350 billion it ought not to be beyond the managerial competence of a capable government to find the amount which needs to be spent, which we are told is $5.6 billion. Thirdly, to use this natural disaster as an excuse to whack on a new tax is bad policy and sets a very bad precedent.

Let me turn first to the proposition that the money should be found through offsetting savings. Let us think for a moment about the nature of constructing a budget. When you construct a budget, what you are doing is laying out your plans for the coming period—typically a period of 12 months. Of course, you cannot know the future with perfect foresight. Even as you are developing your budget you must take account of the possibility that the unexpected will come along. Inherent in the way you devise your budget must be the capacity to deal with variations in what you have planned for, because unexpected expenditure arises all the time.

In my years as a member of the senior leadership team of a large corporate, I participated in many discussions where we sat around the management table, we looked at the amount that we had budgeted to spend during the year and then we looked at the change in circumstances and said we needed to spend more on something we had not anticipated. As a corollary of that decision, we then needed to find areas where we would spend less; we then needed to find offsetting savings. That is good budgetary practice, that is good management practice and that is what this government ought to be doing if it were capable of managing its budget in a competent fashion.

The second proposition is that the magnitude of the task of finding offsetting savings is to be determined according to the scale of the offset which is required and the proportion which that comprises of the budgeted expenditure. The amount that the Commonwealth is budgeting to spend in 2010-11 is $354 billion. I could spend some time talking about the fact that that is more than $100 billion a year greater than the Commonwealth was spending only four years ago. I could spend some time discussing what a disturbing indication of profligate spending and lack of fiscal discipline that demonstrates, but I will not because I want to make another equally important point—that the $5.6 billion which needs to be found is around 2.5 per cent of the annual budgeted expenditure this year of $354 billion. It is a very modest percentage.

It is a test of basic managerial competence as to whether, in the face of unexpected expenditure which makes up a small percentage of the total amount you were previously planning to spend, you are able to find such offsetting savings. If the amount required to be found were 30 per cent, 20 per cent or even 10 per cent of the amount that the Commonwealth had previously budgeted to spend, then it may be the case that the proposition that alternative sources of funding would be required could be put in a plausible fashion. But when we are talking about a mere 2.5 per cent of the total budgeted expenditure of the Commonwealth for 2010-11 it is an indictment of the managerial incompetence of this government, its lack of capacity to manage its budget and its lack of basic fiscal discipline that it is unable to reallocate spending priorities so as to come up with offsetting savings.

It is even more of an indictment when you consider that the calculation I have just cited in fact flatters the government because it can spread the funding over more than one year. While the number required is roughly 2.5 per cent of the $354 billion budgeted to be spent, you could achieve it through smaller percentages by spreading it over one or more years. Indeed, I note that is precisely what the government is planning to do. It is spreading the savings that it is claiming over a number of years.

The third proposition is that it sets an exceptionally bad precedent to be whacking on a tax as the means of funding this amount of extra unanticipated expenditure. What is the principle we are to draw from what has occurred here? Is the principle that, every time you incur an unexpected expense which exceeds your budgeted expenditure by more than two per cent, that is somehow an excuse to whack on a new tax? I think in reality the principle we can draw from what has occurred is a very obvious one—Labor love to tax. They love nothing more than whacking on a new tax. It is in their DNA and they find any excuse to do so. They really enjoy the notion of taking an urgent short-term spending need and locking it into a longer-term framework for tax. That is precisely what has occurred here.

One of the extraordinary propositions from what is occurring here is that Labor have rushed to commit to this new tax even before we know with any precision what the actual final expenditure on reconstruction is going to be. You would search in vain through the material published by this government to understand with precision what that final expenditure is going to be. But the conclusion you can reach is that this lot love nothing more than whacking on a new tax. They are not troubled by the disincentive effects this might have on people making a voluntary contribution in the future. They are just keen to get a new tax out there.

There is no dispute that we need to rebuild. There is no dispute that the Commonwealth needs to spend several billion dollars on rebuilding. But there are alternative ways of coming up with the money. The way that this Labor government has chosen to proceed is ill disciplined, fiscally profligate and falls prey to the temptation, whenever it can do it, to whack on a new tax. We say that if this government had the most basic managerial competence it would have found the offsetting savings and it would not be imposing a new tax on the Australian people.

Debate interrupted.