Levy and parental leave scheme make bad politics

The temporary deficit tax has seemingly now joined the gold-plated paid parental leave scheme as a policy millstone around the neck of the Prime Minister. These policies are linked by a common, chiefly political, purpose, and both have manifest flaws.

This scheme will crowd out existing private sector schemes with a massive new government entitlement. Universal, government-funded parental leave functions identically to an income support payment, yet is badged as a workplace entitlement. It lacks the rigorous means testing found in other support payments like Newstart, its cohort is broader, and the bulk of expenditure goes to the middle class.

While paid parental leave is supposed to significantly increase female workforce participation, it leaves the bigger impediment of access to affordable childcare untouched. This is a key reason why the commission of audit has recommended redirecting resources from increasing government-funded paid parental leave towards improving and broadening childcare options.

As for the deficit tax, aside from the general inefficiencies common to all taxation, its chief flaw is that it’s a short-term tax. It will be utterly useless in addressing Australia’s key budgetary problem: the sustainability of government spending in the medium and long term.

The deficit levy also increases income tax, a particularly inefficient tax that Australia is far too reliant on already, and targets those currently bearing the brunt of the tax burden. Yet for all its pain, the deficit tax will not make a meaningful difference to either our current deficit or future interest payments.

Neither policy has attracted significant support from the broader public. The latest Essential Media poll shows that only one in three people support the deficit tax, and that support comes largely from Liberal party voters (traditionally anti-tax), while twice as many Greens voters oppose the tax as support it.

The message on parental leave is even clearer. Essential Media also shows less than one in five people favour the new paid leave scheme and nearly twice as many people would prefer no scheme at all to the one the government took to the election.

For a first-term government delivering its crucial first budget, these policies should be a much lower priority than they are. Proper implementation of the national disability insurance scheme, and prising unions and crony capitalists off the government teat, should be the focus.

Why then has the government clung doggedly to both in the face of widespread opposition? And if the merits of these policies are largely political, as supporters claim, why are paid parental leave and the deficit tax proving so toxic to government support? Part of the answer lies in the beneficiaries of those policies. Both the deficit tax and paid parental leave are designed to appeal to progressively aligned voters outside the Liberal party base. Paid parental leave is aimed at attracting female voters (especially young women and feminists), while the deficit tax is aimed at those who feel the rich don’t “pay their share”. Put more simply, the government is playing identity politics in the hope of widening its appeal, or at least blunting its critics. Given how fractured and fractious our current political climate is, these attempts are doomed to fail.

Identity politics has increasingly become as much about being against someone or something as it is about being part of some group. Many of the louder voices in public debate identify themselves as being against reducing government generally and some leading ministers personally, as evidenced by Monday’sQ&A. While the government no doubt hoped to get some qualified support from progressive commentators and interest groups, everyone from the Australian Council of Social Services to the Greens has opposed the parental leave scheme; voices of support on the progressive side for the deficit tax are few and far between.

This lack of support should hardly be surprising, and without it, the government’s case for reform is unconvincing. Allowing unjustified exceptions to your key messages of lower tax and ending the age of entitlement, such as a gold-plated parental leave scheme or an increase in taxes, is never going to be. Nor will it mute criticism by vested interests, making it all pain for no gain, bad politics as well as bad policy.

This does not mean that the government should abandon governing in the interests of people opposed to its political position. It does mean they should abandon appeals to tribalism and identity politics and instead implement policies based on sound evidence.

Simon Cowan is a research fellow at The Centre for Independent Studies.