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Tuesday, 4 October 1983
Page: 1266

Mr SCHOLES (Minister for Defence)(4.47) —A number of matters have been raised during the discussion of these estimates. Clearly, as the time for discussion of this appropriation has already expired I will not be able to answer all of those matters. However, there are one or two matters which require an answer because to leave them on the record unanswered would be to leave on the record misleading and, in some cases, ill-informed comment. I first deal with the comments made by the honourable member for Bradfield (Mr Connolly) relating to the size of the defence vote and inflation. I am rather surprised that a senior member of the Opposition is not aware that the consequences of price increases during the current year are not taken into account in framing the year's Budget but are in fact taken into account during Supplementary Estimates later in the year. His argument does not conform to either existing or past practices. I should point out also that, whilst the honourable member talked about the effects of inflation on the defence budget, the actual growth factor, after inflation, in the last Budget presented by his Government was half a per cent greater than the inflation rate for that year.

There has been a great deal of comment on the size and structure of the Army Reserve. A continuing theme in the Opposition's argument has been a reduction in the size of the Army Reserve. The size of the Army Reserve, as set out in the Budget Papers and as approved for this year, is exactly the same size as the Army Reserve which was approved by the previous Government at the time of the 1982-83 Budget, that is, 30,000 people, which was the figure the previous Government agreed to, following the Afghanistan crisis in 1980. It is true that the additional 2 1/4 training days allocated at that time has now been removed. If we are to believe the then Minister for Defence the right honourable member for New England (Mr Sinclair) it was allocated in order to enable reserve units to cater for the rapid influx of additional recruits in order to meet the target of increasing the reserves to 30,000 over a very short period. Obviously, duties well in excess of those covered by normal training would have been and were required in order to cater for that increase.

I think it is also important to point out that at 30 June this year the strength of the reserves was some 1,600 above the authorised strength. The strength of the regular forces was also about 400 above the authorised level. This year the authorised strength of the permanent forces is some 300 below that which was authorised the previous year but not achieved under the former Minister. The former Minister, the right honourable member for New England, in his remarks criticised the lack of reductions in the civilian work force of the Department of Defence as compared with reductions made in the numbers of defence force personnel. I suggest that he look at the Budget Papers, see the number of civilian positions which it is proposed to do away with this year, and compare that with the defence budget which he presented the year before when the total number of civilian positions to be declared redundant was 15. That is hardly a significant reduction in anyone's language.

There have been a number of comments about changes in tax structures. I reiterate what I said before. Changes in tax structures are not changes in the Government's specific programs. Such changes affect all citizens in the same manner unless particular provisions are made for exemptions or in other ways to cover the tax considerations involved. With regard to the proposal to increase the tax on lump sum payments made under the Defence Force retirement and death benefits scheme, the question of exemptions or other arrangements is still under active consideration. I do not believe that members of the defence forces will be significantly disadvantaged by the decision which the Government will make. A number of proposals have been put forward, one of which has come from the right honourable member for New England, while another, which suggested that the DFRDB lump sum payment be treated as compensation for services rendered, appeared in an editorial in the Canberra Times. Neither the honourable member nor the editorialist is aware that that type of payment is taxable in the year of receipt at the full income level. I suggest that they stop advocating that solution because it will cost members of the defence forces their socks. It is also irresponsible.

Mr Sinclair —It is not when treated the way we would have treated it.

Mr SCHOLES —The law is as the right honourable member passed it, implemented it and carried it out. He also provided for long service leave and annual leave to be taxed in the current year of receipt; so I suggest that he mind his ps and qs .

Another matter raised at some length was the tax on the pay of members of the reserves and the effect that this tax might have. The honourable member for Bradfield, in making his case, suggested that the tax free pay was the only reason-that is what he implied-that people joined the reserves. He also made the point that senior members of the reserves served up to 100 days a year. I point out to the Committee that a substantial proportion of senior officers in the reserves are in fact retired service personnel who are in receipt of a government pension. If they are working 100 days at a tax free rate and if they have other income, they are probably receiving take home pay which is higher than that of a person in a similar position in the regular Army.

Half of the Government's decision was ignored in the remarks made, including those of the honourable member for Denison (Mr Hodgman). The Governments decision was that the tax free status of reserve pay should be phased out and, concurrently, the salaries of members of the reserves be adjusted to reflect their true worth in monetary terms. The present system favours those who have the highest private incomes and severely penalises those who have the lower private incomes. If the comments of Mr Justice Coldham on an earlier occasion are to be taken into account, those people in the reserves who are on the lowest incomes-those who do not pay tax because of their low incomes-are currently receiving salaries which are some 40 per cent below those which they would have received had they been paid at the appropriate rate on a normal salary basis. They are the people who are suffering most by the existing system and they will benefit most because they will receive a full reward for their contributions.

Mr Sinclair —Is the change going back to the date of the introduction of the tax in the Budget?

Mr SCHOLES —I also point out to the Committee as it is obvious that the right honourable member does not understand-I think from reading his remarks that he does not want to understand-that on 24 August, the day after the Budget, a reference was made to Mr Justice Coldham's Committee of Reference for Defence Force Pay asking him to review the remuneration of members of the reserves to take into account the Government's decision. The recommendations from Mr Justice Coldham will include the appropriate scales of remuneration and the times at which these new scales will take effect. I expect that he will recommend that they take effect at the same time as the Government's removal of the tax concession, but I do not pre-empt Mr Justice Coldham's report; that is for him to make. Unlike the former Government, this Government will accept the recommendations of an independent tribunal. It will not say that it will not accept the recommendations because people in the armed services are getting paid too much. That is what people on the other side of the chamber have to live with . In November last year they refused to make a reference to the Committee of Reference for Defence Force Pay because they thought that members of the armed services of this country were being paid too much. That is on the public record.

Mr Sinclair —Because of the pay pause; that is all it was.

Mr SCHOLES —The pay pause started in December. The recommendation to the Minister was made in August. It was to apply from November, a month before the pay pause was even introduced. The Minister refused the reference. He knows it and has to live with it.

Mr Sinclair —It was because of the pay pause; be honest.

Mr SCHOLES —In opposition the right honourable member says he is a lion. In government he was a tame cat. A number of references have been made to the Fleet Air Arm. I recommend to members that they read the speech made by the honourable member for Kennedy (Mr Katter) who faced up to the issue in a realistic manner and in the interests of defence generally. He did not say one thing in opposition and another thing in government which is the case with most members on the other side who have spoken.

Proposed expenditures agreed to.

Department of Trade

Proposed expenditure, $301,577,000.

Department of Resources and Energy

Proposed expenditure, $101,878,000.