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Wednesday, 21 September 1983
Page: 1117

Mr ALDRED(6.35) —This Government that so often claims to support consensus and openness is now perpetrating the biggest confidence trick this nation has witnessed. It involves the complicity of the Prime Minister (Mr Hawke ) and his Minister for Defence (Mr Scholes). It is a complicity that has been doubly condemned by at least one advisory committee to the Government. I refer to this Government's shameful actions against the Australian reserve defence forces. I also refer to this Government's ineptness and incompetence in the whole area of defence. The importance that this Government places on defence is well illustrated by the 59 words devoted to defence by the Treasurer (Mr Keating ) in his Budget Speech.

The importance of defence to this Government is shown by its sleight of hand use of statistics in a vain attempt to gain respectability for its defence spending. This Government says that defence spending is up by 4 per cent, but it fails to tell us that that calculation is based on the absurd base that inflation would be around 6 per cent. Yet, on the very night of the Budget, the Treasurer said on the Channel 9 television network that he expected inflation to be 'in double digits'. If the Treasurer believes that inflation will be over 10 per cent, why does he base defence calculations on a fairy floss dreamland figure of 6 per cent?

But if that sleight of hand, that pea-and-thimble trick, is puzzling, the prize for the biggest confidence trick must go to the Prime Minister and his Minister for Defence. While these two men were putting the final touches to the defence budget in early August-in between attending to the Ivanov-Combe affair-the Prime Minister sent a telegram to the President of the Citizen Military Forces Association, Major-General Maitland. Let me quote the telegram, dated 4 August:

Dear Major-General Maitland,

On the occasion of your Association's Annual General Meeting and National Conference I would like to reaffirm the Government's support for the Australian Army Reserve as a most important element in the country's defence effort. No defence effort can be truly successful without the broad support of the citizenry. Your Association renders a vital contribution as a source of experience and knowledge in matters pertaining to the defence force reserves and as a contribution to the broader national discussion of defence issues.

What a classic piece of Hawkespeak that is. While the Prime Minister is reaffirming the Government's support for the Army Reserve, he is plotting to undermine and emasculate the reserves. Just two weeks later in the Budget it was announced that the tax exemption of reserve forces allowances and pay would be phased out. But again we have a pea-and-thimble trick. 'Phased out', says the Government; but since non-continuous pay is made up quarterly the effect is to catch all earnings after 1 October 1983. At this stage no doubt the minions from the National Media Liaison Service-the multi-million dollar propaganda division established by the Government-advised the Government to legitimise the decision. So a Committee of Reference for Defence Force Pay was established to review pay and allowances to Reserve Forces by 30 June 1984. But in a sleight of hand once more, the Government allows the taxing proposal to become operative before the report is made, or considered by the Government, or before any remedial action can be taken or implemented.

The Treasurer tells this House that this action is estimated to recover $5m for 1983-84 and $20m in a full year. He gives no details to support this. He fails to tell that the $20m will go into Consolidated Revenue and not the defence allocation. In fact, the Treasurer is again playing with fairy floss dreamland figures. If the newly established review committee adjusts pay and allowances, there will be a higher gross payout. The costs of administration and recovery of tax will be higher. In fact, the computer programs now handling Reserve pay will need to be totally rewritten rather than just amended. At what cost? Also, if reserve forces are to be maintained at current levels further funds will be needed for recruitment to replace members leaving and, as I will outline later, the numbers leaving can be expected to be much greater than normal wastage and turnover.

In giving the dreamland figures the Treasurer has given no consideration to the increased costs which may result in having to beef up the regular component should the Army Reserve component disintegrate under financial pressure. In reality the $20m tax saving is as illusory as his expectations of 6 per cent inflation. If the consequences of the Government's acting against the reservists ' pay was limited only to a miscalculation of government revenue the matter would be serious enough. But the consequences are much more grave than that. The decision to tax reservists' pay and allowances will remove what little incentive there is for a member to continue to serve by giving the time of himself and family over his normal employment for little reward.

The whole issue of incentive and tax exemption has been closely studied by a previous Committee of Reference for Defence Force Pay. In a report from that Committee presented to the Minister for Defence on 21 March 1975 the Committee's attitude to tax is clearly spelled out. In chapter 1, which is headed ' Effectiveness of Taxation Exemption as an Incentive', the report states:

Talking to reservists the removal of tax exemption would remove incentive and therefore Reserve pay should remain tax exempt.

In that same report in chapter 8 headed 'Tax Rates for Members of ARES' it is stated:

Appropriate rates of remuneration having been agreed appropriate to work performed a problem could occur if tax exemption is withdrawn. In such a case a retention and attraction allowance is recommended but this too would in all probability be taxable.

If the tax exemption is retained the proposed rates will therefore contain an intrinsic retention and attraction incentive. It is only in the event that the exemption is withdrawn that the question arises as to the nature of the incentive which should be recommended as a substitute.

No alteration to tax exemption is the better course.

I repeat that recommendation:

No alteration to tax exemption is the better course.

That is borne out by two simple examples. A Reserve member with civilian earnings in excess of $19,500, earning $6,000 Reserve pay, will keep only $3,240 . A Reserve member with civilian earnings in excess of $35,788, earning $6,000 Reserve pay, will keep only $2,400. How mean can this Government get? This Government is prepared to penalise those young men and women who are self- employed but are concerned about Australia's defence. This mean Government-I repeat-this mean Government-will compel the self-employed who are paying provisional tax to pay initially double tax. If the Reserve pay pushes them into the top tax rate a member of the reserve forces would pay $1.20 for each dollar earned, a net loss of 20c for each $1. This mean Government, led by a mean Prime Minister who irresponsibly promised tax cuts and twice broke that promise, is taking out its meanness on recipients of the tertiary education assistance scheme and the unemployed. Students currently serving in the reserves and who are dependent on TEAS will no longer be able to remain in the reserves. If they do they will lose their TEAS allowance. This mean Government, in its ineptness, now plans to destroy the university regiments, to snatch a few dollars from the pockets of students.

If this Government has any self-respect the appropriate Minister should immediately inform this House and the country that he has ordered the Department of Education and Youth Affairs to review the regulations relating to TEAS. The Minister should make that statement immediately to minimise the damage already done to the university regiments. In fact I would have expected the Minister for Defence to play his legitimate role as the honourable member for Corio by defending the university regiments. As in my electorate of Bruce, the honourable member for Corio has a university regiment in his electorate. What has he done? He has done nothing. In fact, I would expect the Minister also to be supporting the case for the Reserve Army members who are unemployed. Perhaps the Minister for Defence is not aware that in his electorate of Corio he also has a second Army Reserve unit known as the 10th Medium Regiment. Perhaps the Minister for Defence is not aware that about one-sixth of the reserve forces in the electorate of Corio are unemployed. The Army Reserve helps these young persons to recover their self-respect, helps them to learn new skills and allows them to contribute in a worthwhile way to the community. Now, because of the inept and ill thought out Budget action, the unemployed will not be able to afford to continue to be members of the Reserve, as the Reserve pay will disqualify them and their families from social security benefits.

I have described this Government as a mean government. How else can anyone describe it when a government thwarts every effort by young people to ease their dependence on social assistance by enlisting for Reserve service while out of work? What will happen to the serving reservist who loses his job, even temporarily? He will have to apply for a discharge. What has the Minister for Defence done? Has he taken up the battle for his men? The Minister has passed the buck. Visiting reservists at a unit in Western Australia soon after the Budget, the Minister stated that he could do nothing and that it was 'Treasury's fault'. I would recommend that the Minister for Defence ask his Government's propaganda division, the National Media Liaison Service, to provide him with a transcript of what the Treasurer said on 30 August on radio station 3LO.

In that interview the Treasurer told the interviewer, Mr Terry Lane, that the Labor Government has regarded the non-taxing of reservists pay and allowances as 'a glaring anomaly for some time'.

Mr Howard —He thinks it is a rort.

Mr ALDRED —He does, but it is not the true picture. The current Minister for Defence was the previous Opposition's spokesman in the defence area, yet he now pleads ignorance about the Government's attitude and blames Treasury. The same Minister for Defence, when in Opposition, made much of being well informed on defence matters. Now this Minister supports the creation of a distinction within the Services between members, something which is inherently contrary to the spirit of military service. Because of this Budget decision members of the Reserve now doing exactly the same job will receive different remuneration depending on their civilian employment and due to differing individual tax scales. It was the now Prime Minister who supported and participated in the Liberal Government's recruiting campaign for the reserve forces. This Prime Minister, who is now responsible for undermining the reserve forces, was the man who made a television commercial and urged employers to support the reserve forces.

Mr Howard —That is right.

Mr ALDRED —That is correct. This is the Prime Minister who sends a telegram reaffirming the Government's support for the reserve forces while he plots those forces' destruction. What is he going to tell those employers now? I can tell you, Mr Deputy Speaker, what the employers think of this Prime Minister's Government. On Tuesday, 6 September, the Victorian State Committee for Employer Support of Reserve Forces passed the following motion:

In view of the Federal Government's considerable efforts and expenditure incurred in encouraging employers to support the Reserve Forces this Committee views with growing concern the expressed intention to tax Reserve pay and adopting of other negative measures outlined in the Budget which will seriously weaken the Reserve Forces and cause loss of credibility with employers. Accordingly this Committee calls upon the Federal Government to immediately reverse its decisions.

That is what the employers think of this Government's actions. In the time remaining to me let me turn to the hypocrisy of the Treasurer. As I have already mentioned, the Treasurer was interviewed on Melbourne radio on 30 August when he told all that the Labor Government considered the non-taxing of reservists' pay as a glaring anomaly. He told the radio audience that his actions and those of the Government were well thought out. Again we have fairy floss, dreamland thinking. Will the tax be on a pay as you earn basis or by voluntary disclosure? Problems arise in both alternatives. If PAYE deductions are made now will the defence pay authorities know at what rate the deduction is to be made unless the member makes a disclosure of his civilian income and financial situation?

This Government, which wants to establish a record of personal freedoms-I will not refer to Mr Combe-now intends to compel reserve force personnel to disclose to Army clerks personal and confidential information not connected to the member 's service. This is not only an intrusion on privacy not previously encountered but is completely unwarranted. If the tax deductions are not to be made under the PAYE system members will face a lump sum assessment at the end of the financial year. This will cause recovery problems and undoubted hardships, particularly to members who have otherwise operated on a PAYE system. Again in its meanness, this Government now wants to force the ordinary individual to pay provisional tax. In many instances this will result in a negative cash flow.

Apart from financial considerations, a major factor is the overall effect on morale and the future of the reserve forces. The Government says currently that there are 30,000 plus reservists. I am sure the Minister will explain that figure when the computer shows that only some 23,000 to 24,000 persons are being paid. The Government's policy will result in the number being depleted. With the Regular Army's numbers now falling below division strength it is irresponsible to reduce further the reserves. The reduction of the reserves will not only see this country's strength fall well below divisional numbers but will also see important reserve units disintegrate. For example, the 10th Medium Regiment, which is in the electorate of Corio, is the only reservists' medium regiment of artillery in Australia outside the one Regular Army unit. This reserve unit is endangered for reasons I have already outlined.

The Government also plans to reduce training days for the reserve. The current 38.25 days per man per year are to be reduced to 36 days per man and in Victoria the reduction is expected to fall further, to around 32 to 33 days per man. These reductions will have grave consequences and the money saved is nominal. It is plain meanness. The Government is also restricting training locations and units have been told they must train near their home bases. Interstate training is to be prohibited, as is remote area training. While the Prime Minister reaffirms the Government's support for reserve forces by telegram, the Government plans to reduce the regular cadre staff. What this Prime Minister and his Government are doing is to pretend not to freeze recruiting but through its policies it is ensuring that Service numbers will run down through attrition and will not be replaced through recruiting.

In essence, this Government is out to emasculate our defence forces. It seeks respectability by saying that defence spending is up in the Budget, but the funds are really going on manpower, wages, and some equipment, and there is not an overall increase. This Government has no systematic approach to defence but concentrates on patchwork defence refurbishing.

To quote former diplomat and journalist Bruce Grant:

The first challenge is not whether the public purse can meet the burden at a time of economic stringency, but whether the Government can summon the courage to present to the people the unpalatable facts about the present limitations.

The people of Australia want a proper Defence Force. The latest Morgan gallup poll clearly showed that 74 per cent of Australians favour increased defence spending. It is time the Government took up this challenge-the challenge that was accepted by the previous Liberal Government-and formulated a national defence strategy. This Government must stop its meanness, overcome its ineptness and control its anti-defence socialist left wing. Unless that is done Australia' s Regular Army forces will follow the demise of our reserve forces.