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Senator defends decision to support environmental legislation; GST on books; amendments to GST on hot and cold foods.

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PETER THOMPSON: The Democrats' stocks with key environment groups have taken another huge tumble as their relationship with the federal government took another giant leap forwards. The minor party agreed to pass the government's re-write of major environmental legislation, incurring the wrath of groups like Greenpeace, the ACF and the Wilderness Society. As we have just heard, they have also signed off on the final list of tax amendments, yesterday, too, including the vital list of what foods are GST-free and which aren't. Amid all this activity, the opposition has opened up a new line of attack on Warren Entsch. The Democrats leader, Meg Lees, will join us shortly, but Fran Kelly is back with us now sorting through some of these issues.


Fran, I guess it's right to say the joint's jumping in Canberra.


FRAN KELLY: The joint is jumping so much so, Peter, that there's a high level of confusion at times. For instance, during Monday night's telecommunications debate the guillotine was so fierce that the government's 1-900 phone sex lines amendments, dubbed the Harradine amendment, went through even though it might have been defeated if a division had been called. Everything was happening so fast the amendment came and went and was carried on voices with neither Labor, the Greens, the Democrats and now, it seems, Mal Colston, being quick enough to call for a division to test the numbers. If Mal Colston was going to vote against it, that amendment would have been defeated. And I understand the Democrats are now investigating ways to have that matter revisited. But it just seems everything is going the government's way this week, Peter, with the exception of the Warren Entsch affair, which the opposition did manage to raise again, taking some of the shine and the headlines off John Howard's almost perfect week.


Labor dubbed Warren Entsch the Bob Jelly of the Commonwealth, yesterday, a reference to the Seachange property developer whose mission is to get a bridge built to connect his land to the major population source. Last year, Warren Entsch bought a large parcel of beachfront across the inlet from Cairns, for $26,000. If a planned development on land nearby goes ahead a bridge will be built and the value of his land should go up. And Labor produced examples yesterday, of public comments from the frontbencher, that seemed to be talking up the arguments in favour of that major development going ahead. There's more to come on this, and while John Howard is standing by his man now, he must be watching very carefully.


Yesterday, we talked about the Democrats preparing to do a deal with the government on their environment legislation. The deal is now done and the environment movement is split on the outcome. Major green groups and some indigenous groups have panned the outcome saying it still gives too much power to the states. The Democrats say it's made the whole process more transparent and leaves the ultimate power in the hands of the Senate to disallow any state approvals that the Senate mightn't like.


The real issue here seems to be the process. Groups say they were kept in the dark about the deal. They want more time to consult before the legislation is passed and they are not going to get that because a guillotine will be moved this morning to make sure this bill is voted on today, an outcome that will just intensify the tensions already there between the Democrats and the green movement.


To discuss this and, of course, to discuss the new tax amendments we're joined now by Meg Lees.


Meg, good morning.


MEG LEES: Good morning.


FRAN KELLY: Meg Lees, the Treasurer used to say the nightmare in some European countries was caused by the GST being applied on hot foods and not cold, with shops getting around this by selling cold foods GST-free and having microwaves by the door, then the governments would put tax inspectors on to make sure that this wasn't happening - it was part of his 'nightmare on Main Street' scenario. Aren't you setting yourself up for that very situation with the cold-chook/hot-chook breakdown?


MEG LEES:   Well, we have accepted the government's amendment. It was they who recommended that we actually go back to that. And on balance, not for any other reason really than jobs, we have decided to do that. It was proven to us, not just by the fast food companies interested but by independent people, that jobs would be lost and they wouldn't be picked between the supermarkets and the takeaway outlets. In other words, the supermarkets would probably benefit significantly.


FRAN KELLY: You could see though that, I suppose, an enterprising shopkeeper, takeaway outlet, could get around this by having a microwave at the door?


MEG LEES:   Oh, look, there are going to be people who try the system, without a doubt. There are people that, under the current tax system, that are trying everything they can to find loopholes and get away with it. So, yes, we obviously will have to watch, rather the government will have to watch carefully, but it was, on balance, the best answer that we could come up with.


FRAN KELLY: Now, I am sure you're going to be sick of questions like this by the end of the day but, for instance, if someone was sitting in KFC, eating a cold chicken piece, they would pay the GST; if they took that same piece of cold chicken away they wouldn't pay it. Is that what we have got?


MEG LEES:   If you are a fast food outlet everything you sell will be GST'd. You are looking at takeaway foods, and whether it's mixed with a meal - hot chicken now, cold chicken in those takeaway baskets. What we are actually looking at I think is a system where now we are protecting jobs in that industry. Because the temptation was going to be, once we actually took the hot chicken out and taxed … in other words, tax-freed that particular chicken, you would have supermarkets, in particular, competing more actively. And the evidence presented to us was quite interesting, and that is there's not a lot of movement of jobs away from that fast food industry. They employ a lot more people, particularly young people, than do the supermarkets. So if the supermarkets take more market share … they're not going to put on extra people, we'll just wait longer at the checkout in longer queues.


FRAN KELLY: Jobs couldn't have been the issue in all of the anomalies, though, an increase….




FRAN KELLY: For instance, a GST on carbonated bottled mineral water but not on still water. How does that make sense?


MEG LEES:   Well, we had to draw the line … water initially in some….


FRAN KELLY: Bubbles take a GST.


MEG LEES:   Well, once you start adding to it, it isn't plain water and you are then moving into the area of soft drinks and all the carbonated drinks.


FRAN KELLY: It does seem as though you lost the battle to have the detailed list, the very detailed list of goods, that would be GST-free, in the bill that you wanted. It will now be a few examples under various headings. You also have given up the need for the bread recipe in the bill.


MEG LEES:   Yes. Because we were convinced, on evidence, that the best way to go was simply to list a range of breads that would definitely be included, and that will, by its very nature, include other breads as well. In other words … part of our trouble was that as we went through the committee process we were not taken seriously, our answers weren't worried about. I mean, indeed, in many cases we didn't really get answers particularly when we asked for costings. Now, as the government became interested in what we were doing, we did get more advice and more information. And it wouldn't have been responsible of us just to sit still and think, oh, look, the easiest thing to do is to stay still. We had to consider the new evidence that was put before us. And if we could simplify what we are asking for - we were convinced by legal advice it would work; people couldn't find their way around it; the things that we wanted GST-free wouldn't drop off the list and suddenly be taxed - then that was the best way to go.


FRAN KELLY: Why won't, though, if we only have a legislation that has a few examples in it, why won't that leave itself open to challenge, legal challenge, on a whole range of goods as people think them up, dream them up?


MEG LEES:   All I can say is that the legal advice is that this is a secure way of doing it, of getting what we want. In bread, we didn't want just white sliced. Right from the start we tried to design a recipe that would make sure we would have a variety of breads….


FRAN KELLY: The chameleon bread.


MEG LEES:   Well, the variety is so extensive that listing them, whether it's rye bread or focaccia or whatever, was far better the way to go.


FRAN KELLY: Okay, what about - getting away from the GST list - books? The booksellers still say they want you to oppose a GST on books and that imposing it will only, ultimately, once you take out the compensation package and a few other things, will only reap the government $26 million a year but will cost the industry many jobs and cost the nation some literacy development. Will you still allow a GST on books?


MEG LEES:   Well, it was one of those issues where the government was simply immovable. And as they say, it's $26 million. We've honed it right back down to having little impact in financial terms. The package that we will be designing….


FRAN KELLY: That's not what the book industry says. They say it will still be a major impact.


MEG LEES:   Well, that is their opinion. The advice we're having is that it won't be a huge financial burden on them in terms of the books that will be fully taxed. Our aim is particularly text books, whether it's for primary, secondary or tertiary students. How we achieve, basically, getting the GST off them, is up to negotiation and we are still talking with both the industry and government.


FRAN KELLY: Another issue - not to do with tax you might be happy to know. Yesterday was the environment agreement with the government.


MEG LEES:   Yes.


FRAN KELLY: The ACF, Greenpeace, the Wilderness Society and others, think it's a bad deal. They have asked you to delay the debate. They have asked you that repeatedly. Why didn't you use your sway with the government to delay this bill until after July when you've got the balance of power and there'd be no rush?


MEG LEES:   We have used our sway with government to get 444-50 amendments on what was a disastrous bill. We have actually improved the ground from where we are now. We have a Rolls Royce model and we want to go ahead with it. I originally chaired this committee before I became leader. This has been going on for over two years. Every environment group in the country who wanted to be involved has been involved. Those three environment groups you name are the same three that came out against us in the tax debate. We have all….


FRAN KELLY: But they are hardly traditional enemies of the Democrats.


MEG LEES:   No, they are not, and this is our problem. Trying to involve them in what were highly sensitive, highly confidential discussions that we've been having with government - and I made this judgment - was too risky after getting our fingers burnt with them when they would not look at what we had achieved in the tax package. I made…


FRAN KELLY: But what is the rush? I mean, it's been guillotined today. It's a massive re-write of environmental law.


MEG LEES:   Exactly.


FRAN KELLY: Why not wait four weeks, why not wait till August, which is what they are asking for?


MEG LEES:   What's the difference?


FRAN KELLY: Well, it would make these groups and the indigenous groups concerned feel a little more relaxed.


MEG LEES:   Most of the indigenous groups we have worked with, including ATSIC … Gatjil Djerrkura has come out supporting what we have done. He's been involved in the discussions.


FRAN KELLY: The Kakadu Board of Management wrote to you last week saying they have been treated like Jacky Jacky sitting on the sidelines.


MEG LEES:   Can I say to you that the green movement itself, on this piece of legislation, once they actually go through the detail, will be very happy with it. Now, the Labor Party and the Australian Greens have put pressure on a number of groups to pull away from what we are doing, to criticise us, to come out openly, before they see the detail and just get stuck into us. Now, that has happened. We understand that but we must hang on to what we've got. And looking at what is now an excellent re-write of environment legislation, giving more power to the Commonwealth, more power to the minister, greater balances, greater checks on what is actually being done to remnant vegetation, to endangered species, we need to protect what we have negotiated. And why wait any longer? We've got as good a deal as we're going to ring out of this government.


FRAN KELLY: Well, just very briefly, of course. These major groups we talked about say it gives less power to the Commonwealth and more to the states - that seems to be the issue here.


MEG LEES:   That's simply not true. If we do not like what the states are doing, we have a range of procedures to basically stop it, including coming back through the Senate.


FRAN KELLY: Meg Lees, thanks for your time.


MEG LEES:   Thank you.


PETER THOMPSON:   The Democrats leader, Meg Lees, there with Fran Kelly.