Fuel tax increase another regressive move

Following word that the Abbott Government is going ahead with plans to increase the fuel excise tax, I joined David Speers on Sky PM Agenda to explain why Labor can't support yet another regressive move which will hit to poorest hardest.







SUBJECT/S: fuel excise tax slug; Tony Abbott’s plans to raise the GST; Rupert Murdoch’s comments on inequality

DAVID SPEERS: Well the main political story here in Canberra today has been the Government's surprise announcement that it's going to go ahead with an increase in fuel excise even though it's been unable to get this through Parliament. How's it doing it? Well it's changing the tariff. It then has 12 months in which it needs to legislate that. So for 12 months it can collect the higher tax – it will go up from 38.1 to 38.6 cents, half a cent a litre. It will cost, the Government says, the typical family using about 50 litres of fuel a week only 40 cents a week in additional cost. Over time, of course, that will go up. Labor is still opposed to the increase in the fuel excise, however it's done. Joining me now is the Shadow Assistant Treasurer, Andrew Leigh. Thank you for your time.


SPEERS: Why is this such a bad idea, to put up fuel excise by a tiny amount?

LEIGH: Well it's another measure that hits the poor the most, David. We've had a big rise in inequality over the last generation, the most regressive budget we've ever seen brought down, which smashes the poor while including giveaways to the most affluent. And now another measure which we know will hit those on the lowest incomes the hardest, because in fact Joe Hockey is wrong when he says the poor don't drive. If you look at fuel as a share of income, it's six per cent of disposable income for the poorest fifth, and just two per cent for the top fifth. So an increase in fuel taxes is a regressive tax and that deeply concerns us.

SPEERS: Well if that's the argument, that it's unfair on the poor, why have any fuel excise at all?

LEIGH: We think it's appropriate to have some level of fuel excise, but we don't think it's appropriate to increase it at this stage. 

SPEERS: But leaving it at 38.1 cents a litre and never increasing it again, means that in real terms it's just getting lower and lower and lower. 

LEIGH: David, you've got to look at all these things in context though. We're talking about this in the context of a budget in which family supports are being taken away from the most vulnerable households, and in which...

SPEERS: But you've blocked those.

LEIGH: There's a range of measures the Government is fighting to get through...

SPEERS: No, but you blocked that one so why are you not allowing this one?

LEIGH: Are you saying that if we succeed in one fight for fairness, we should give up on others? Surely not.

SPEERS: Surely you should approach this as a package, as you say: fight things that are unfair and back things which are fair.

LEIGH: Well this isn't a fair tax, David. Joe Hockey brought out dollar figures early on in this debate in some sort of ham-fisted attempt to say 'oh, it's alright – the poor don't drive'. And he was quickly smashed by every independent commentator on this, who pointed out that poorer households spend more on fuel.

SPEERS: But is 40 cents a week – when it is going to help repair the budget bottom line by $2.2 billion over four years – is that really too much of an impost? 

LEIGH: As the Government has made very clear, this is an amount which will grow and grow, and over time it will have an impact. These things add up, David. So the hits to vulnerable Australians being able to go to university, the GP co-payment which the Government is putting in place, the hits to income support – if Joe Hockey had got his whole budget through then the poorest single parents would have lost one dollar in ten. 

SPEERS: But he hasn't been able to get the whole budget through and that's my point. Surely to show some semblance of fiscal responsibility, you should back some, at least, of what's being proposed to repair the budget bottom line?

LEIGH: Well we certainly have. We voted through the high income levy, but we've also talked about other measures which would make a difference to the budget bottom line. So there's $1.1 billion of tax breaks the Government has given back to multinationals – we think that's the wrong decision at a time in which they're slugging the most vulnerable. The Government has also given billions back to high-income superannuants – people with more than $2 million in their super accounts. The 16,000 Australians with the most in their super, the Government has given them a tax break as well. We think that's the wrong decision.

SPEERS: So preferable, from Labor's position, is to raise billions of dollars through superannuation tax rather than this fuel excise?

LEIGH: Certainly we think that if you're going to make changes on superannuation taxes, you shouldn't do what the Government has done and have giveaways at the top but then take from the bottom. People on less than $37,000 a year are going to pay higher super taxes as a result of this Government. So this Government, pretty much anywhere you look, is making decisions that help billionaires and hurt battlers. That's exactly the wrong call to be making at the moment.

SPEERS: The way the Government has done this today, it will collect the tax and then if Parliament doesn't support the measure within 12 months, that money will then have to be refunded. You've seen what the minister has said today: that money will actually go back to the fuel companies, not to the motorists. So are you willing to actually vote against something when it would see the money go back to the fuel companies and not the motorists? 

LEIGH: The fact that the Government is taking a ham-fisted approach to getting this through the Parliament doesn't mean that we ought to then be complicit in slugging low income households with more taxes. The Government said very clearly before the election that they would not do this. It's a clear breech of promise and if Mr Abbott was being straight up with the Australian people, then he'd stick to what he said before the election. Many times he said there would be no new taxes, and this is clearly a new tax. In fact, he told Barack Obama it was a carbon tax.

SPEERS: I'm not sure he used quite those words. But let me turn to the GST: why did Labor model various options for increasing the rate of the GST?

LEIGH: It was pretty clear to us in the lead-up to the election that the Coalition was looking at increases to the GST. You just need to know a bit of Australian political history to know that it was the Coalition that introduced the GST and so we ought to always be looking at the risk of the Coalition increasing the GST.

SPEERS: So the prospect that they might one day increase the GST, you had the public service model various options here?

LEIGH: We're always concerned about the impact on low income households of things that the Coalition might do. It's a constant fear that I have. With so many of the decisions in the latest budget, I talk to families on street corners and they tell me that they're finding it harder and harder to make ends meet under an Abbott Government. They'd been promised before the election that there wouldn't be these swingeing cuts to social supports and to the pension. But they feel like they've been lied to and they feel as though they're copping it in the neck from a Government that doesn't want them to get ahead, that doesn't want their kids to go to university, that doesn't want them to be see a GP.

SPEERS: Surely we can have a debate about these things? About whether the way the GST works at the moment is the best way, with all the exemptions that are there, for the fresh food, for the health services and all the rest of it – do you really think that's the best model for a GST?

LEIGH: Certainly I think that if Mr Abbott had wanted to have this debate, then before the election, rather than saying 33 times '’I won't increase the GST', he could have said: 'well, I'm considering increasing the GST, vote for me and we'll have a debate about raising the GST'.

SPEERS: Sure, but no-one is saying he's going to raise it this term, right? So surely we can, at some point, have a debate about the way the GST is structured and whether it's the best structure. Do you think it is?

LEIGH: I think that parties ought to stick to their commitments.

SPEERS: But a debate for the future, I'm talking about here. Yes, commitments were made but do you think the GST, as it is structured, is the best structure?

LEIGH: I don't think we would benefit from increasing the base or the rate of the GST. It's pretty clear, for example, that families which have signed up to send their kids to a non-government school signed up for a low fee schedule, and they've committed to 12 years of fees. They're now looking at the prospect of the Government increasing their kids' school fees by 10 per cent. That's got to be a worrying prospect for a lot of households. In that case, they've made a long-term commitment to the school and they would rightfully be concerned that Mr Abbott might raise their school fees 10 per cent.

SPEERS: Final question: what did you make of Rupert Murdoch's speech that he gave to G20 Finance Ministers some weeks ago now? It's now been made public that he was critical of the global response to the GFC and suggested that it had increased inequality in the world, between rich and poor.

LEIGH: It's pretty exciting to me, as somebody who has written on inequality, to see Rupert Murdoch jumping on the bandwagon. I'm not sure about his solutions – I think, frankly, many of his solutions would actually widen the gap between rich and poor. But the Thomas Piketty wave seems to have reached the shores of News Limited and I'm excited by that. I think it reflects the fact that a rising gap between rich and poor isn't just bad for the poor, it's bad for the whole social compact. It's good for all of us to live in an Australia in which we pull together rather than being torn apart. 

SPEERS: Dr Andrew Leigh, thank you very much for joining us. 

LEIGH: Thanks David.     



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Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | [email protected] | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.