A veteran Liberal MP says the government has made no coherent argument for increasing the GST as the cabinet struggles to reconcile the economics of the move with the inevitable political backlash, and considers abandoning the policy option.
The questioning comes as Liberal MPs react angrily to the description – in numerous anonymous quotes – of those concerned about the political reaction to a GST hike as “bedwetters”.
Russell Broadbent, who lost his marginal Victorian seat in both elections in which the Liberals campaigned for a GST – 1993 and 1998 – told Guardian Australia the government “had yet to identify to the Australian people why we are doing this in the first place”.
“I am yet to hear a coherent argument as to why we are doing this, an argument I could use to convince the people of my electorate,” said Broadbent, a staunch backer of Malcolm Turnbull.
Behind closed doors the government is struggling with the same question and sources said the prime minister himself was yet to be convinced that a GST increase should be included in the final tax package.
The government’s stated argument for tax reform is to boost economic growth, but the modelling and analysis it is receiving from Treasury and other sources points to company tax cuts delivering a higher growth dividend, despite the political desirability of weighting the overall package towards personal income tax cuts.
Sources said personal income tax cuts could deliver economic benefits if they were structured to encourage the “second worker” in a couple to return to work or work more hours, and treasurer Scott Morrison this week said personal income tax cuts could also help unincorporated small businesses.
Morrison is believed to be more enthusiastic about a package including a GST rise and several Coalition sources pointed to the fact that he has previously used the phrase “political bedwetting” in the context of the Liberal leadership tensions.
Broadbent said he did not know who had used the term in relation to backbench GST concerns but branded it “a disgrace”.
“I think it’s a disgrace. I think people that are actually prepared to consider policy options, whether they be a backbencher, whether they be a minister or anybody else, when they start to denigrate their colleagues in that way, it is an absolute disgrace,” he said.
Frustration is growing in government ranks that the government is yet to clarify tax reform options, or even whether a GST increase is definitely in prospect. No decision has yet been taken about whether to release a series of options or a preferred option, or when this might happen.
Turnbull has consistently said he wants a full debate on tax changes, with all options “on the table”, and that no decision has been taken in favour of increasing the GST.
But backbenchers have become increasingly nervous about the prospect of a GST increase, and angry that the debate has been allowed to run for so long without any clarity about the government’s intentions.
Senior sources concede that decisions need to be taken soon and that enthusiasm for the two main options involving a GST increase – which are being explained to backbenchers by the tax unit attached to treasurer Scott Morrison’s office – is waning.
As the internal deliberations continue backbenchers are publicly expressing their concerns.
“I don’t think it raises that much money anyway and the compensation you would have to pay sort of ameliorates all the benefits you would gain,” Broadbent said.
Natasha Griggs, who holds the marginal Northern Territory seat of Solomon, said the government needed to convince people they would not be worse off.
“Territorians are concerned because we already have a high cost of living so we want to make sure that any change that occurs in the whole tax system is not detrimental to Territorians,” she said.
Conservative South Australian senator Cory Bernardi said he had always argued that increasing taxes was a bad idea.
“Wherever I go, no one is saying yes, we should be putting taxes up — that’s the simple thing,” he said.
“They all say we’re paying too much tax, we need to shrink the size of government. We believe in smaller government ... but to paraphrase Malcolm Turnbull’s words, there’s never been a better time to be a backbencher because we can make a contribution to the policy debate.
“I think it would be folly for the government to do it because electorally it would be unpopular and because it does increase the size of government ... and in the long term we would all be paying more tax.”
John Hewson lost what had been regarded as an “unloseable” election against Paul Keating in 1993 while arguing for a 15% GST. John Howard suffered a 5% swing and only narrowly won the 1998 election, fought primarily around his policy of introducing the current 10% GST.
