Will Hockey’s 2014 budget fall at the hurdle of a hostile Senate?

My Australian Political Institutions blog of 21 May 2014 explained the significance of ideology to the Abbott government’s approach to its 2014 budget, including extracts from the Treasurer’s budget speech which reflected those principles.  Liberal Party ideology is discussed on page 348 of the text book.

The ideology and ideas that informed the framework for policies included in the 2014 budget are also to be found in earlier speeches by the Treasurer Joe Hockey and Finance Minister Mathias Cormann.

In his first speech to the Senate on 15 August 2007 (Senate Debates pp. 111-112) Cormann outlined his philosophy on the role of government: ‘I support the principles of free enterprise, individual freedom, personal responsibility, reward for effort, low taxation, less regulation and incentives for people to stretch themselves and to reach their full potential…good government based on those values and principles will see people and communities flourish and prosper’.

Hockey expressed his views in an address to the Institution of Economic Affairs in London on 12 April 2012 (‘The End of the Age of Entitlement’, http://www.joe.hockey.com/media/speeches/details.aspx?s=90). He said: ‘ultimately the fiscal impact of popular programs must be brought to account no matter what the political values of the government are or how popular a spending program may be…government spending on a range of social programs including education, health, housing, subsidized transport, social safety nets and retirement benefits has reached extraordinary levels as a percentage of GDP…the social contract between government and its citizens needs to be urgently and significantly redefined…as a community we need to redefine the responsibility of government and its citizens to provide for themselves, both during their working lives and into retirement…Equality of opportunity rather than equality of outcome is my preferred model for contemporary society’ (pp 2-3).  He also said: ‘The problem arises however when there is a belief that one person has a right to a good or service that someone else will pay for (bold in original text).  It is this sense of entitlement that afflicts not only individuals but also entire societies’ (p.4).  He suggested people should work ‘longer before they access retirement benefits…(and a need for) clear thinking about which services should be provided by governments and whether government funded services should be entirely free or have some affordable co payment’ (p. 13).

Elements of the 2014 budget strategy were also flagged by prime minister Tony Abbott in 2009 in his book Battlelines (Melbourne University Press, Carlton, Vic): ‘after a month on benefit, people should participate in job-search training, and after three months they should begin regular Work for the Dole … it’s important to keep people connected to the labour market and in structured activity on days they’re not looking for work’ (p.89).  He also proposed a paid maternity scheme funded by business (p. 101-102), and ‘to raise further and more quickly the age of pension eligibility (p. 106).

To deal or not to deal with the Senate cross bench

The majority of the Abbott government’s 2014 budget has passed the Senate.  However, some elements are looking more problematic, including repeal of the Schoolkids’ Bonus and Low Incomes Super Contribution measures associated with the repeal of the mining tax, an increase in the fuel excise, deregulation of university fees, changes to HECs repayments and cuts to university funding, the government’s Direct Action climate change initiative, an increase to the pharmaceutical benefit scheme co-payment, indexation of pensions to inflation rather than wage increases, changes to the dole, disability payments and the family tax benefit, a $7 co-payment for visits to the doctor and the paid parental leave scheme promoted by Tony Abbott (Sydney Morning Herald, 23-24 August 2014, p. 9).  Strong adverse community reaction to these measures has created disquiet among some on the government’s backbench.

If the Labor opposition votes against these bills in the Senate, the government must obtain 6 votes from the 18 member Senate cross bench to pass its legislation, namely 10 Australian Greens, 3 Palmer United Party, 1 Family First Party, 1 Liberal Democratic Party, 1 Motoring Enthusiast Party, 1 Democratic Labour Party and 1 independent senator (Xenophon). So what options are available to the government?

Persuasion

The government has been endeavouring to persuade cross bench Senators to support this legislation.  Treasurer, Joe Hockey, for example, held personal discussions with cross bench Senators during the August Senate sitting break but without success.

Negotiated compromise with the Senate cross bench

Negotiated compromises by governments with the Senate cross bench to secure their legislation through the parliament are nothing new as you will see from the case study on pp 176-178 of the text book.  For example, independent Senator Brian Harradine when he held the balance of power voted for the partial privatisation of Telstra after securing benefits for his state of Tasmania.  Greens WA Senators Christabel Chamarette and Dee Margetts held up the passage of the 1993 budget for 64 days because they  considered it included socially inequitable measures.  They eventually agreed to support the government’s wholesale sales tax increases in return for a number of budgetary trade-offs (Reid, R. 1993, ‘Greens deal clears path for Budget’, The West Australian, 20 October).  Australian Democrats leader Meg Lees negotiated a deal with prime minister Howard for exemptions from the GST including fresh food, in exchange for supporting the passage of the legislation through the Senate.

The Abbott government could try to negotiate compromises with the cross bench over the contested 2014 budget measures, even though this might require watering down the government’s policies, thus weakening the ideological foundations that underpin them.

Abbott and pragmatism

The political reality of governments having to compromise to achieve their policies was acknowledged by prime minister Tony Abbott in his book Battlelines (p.x).  He said that ‘to win elections, a political party needs an agenda that appeals to voters’ values and addresses voters’ problems but is also faithful to the party’s positions and principles’ but he also wrote: ‘If the Liberal Party looks ideological it will inevitably fail regardless of whether it is more “liberal” or more “conservative”.  The party has mostly resisted this temptation, otherwise it and its predecessors would not have held national office for more than two-thirds of Australia’s existence as a nation (p. xi-xii)…an ideological commitment to  minimal government, come what may, would be of limited electoral appeal’ (p. 61).

He is reported to have said in a party room debate in 2011 that if the choice was between ‘policy purity and pragmatic political pragmatism, I’ll take pragmatism every time’ (Massola, J. 2014, ‘From pugilist to pragmatist, Abbott’s about-turn’, Sydney Morning Herald, 9-10 August, p. 30). His willingness to be pragmatic is evident from his decision to abandon his government’s policy to repeal section 18C of the Racial Discrimination Act in the face of a ‘backlash’ from the community and some members of the government backbench (Massola, ibid).

In relation to the 2014 budget Abbott has commented with ‘an adjustment here, perhaps with an adjustment there, the vast majority of our budget measures will get through’, but he stressed he would stick to the budget’s ‘fundamentals’ (Griffiths, E. 29014, ABC News, 18 August , http://www.abc.net.au/news/2014-08-18/abbott-challenges-senators-for-budget-alternatives/5677301).  The political option of a negotiated compromise has been supported by Deputy Liberal leader Julie Bishop and senior Liberal Party backbenchers (Massola, J., Knott, M. & Ireland, J. 2014, ‘Bishop urges Libs to give ground on budget’, Sydney Morning Herald, 18 August, p. 7).  Liberal Party federal director Brian Loughnane and Nationals’ federal director Scott Mitchell reportedly advised the cabinet to proceed with ‘no more distractions’, ‘no more ideology’, to ‘stick to the middle’ and ‘slow things down’ (Coorey, P. 26 August 2014, http://www.afr.com/p/national/no_more_ideology_abbott_cabinet_Ctvy72uzUgqwzFrxvpeE2L).

No compromise – what next?

At the time of writing this blog the government had failed to persuade or reach any compromise with senators on the cross bench.  Family First Senator Bob Day has said he will not support the government’s budget measure to make young people wait six months before they are eligible for the dole, nor will he negotiate a compromise.  The Greens are also reported to be opposed to this policy (Karvelas, P. 12 August 2014, http://www.theaustralian.com.au/national-affairs/industrial-relations/key-senator-bob-day-vows-to-kill-off-joe-hockeys-nodole-plan/story-fn59noo3-1227021019855).  Obtaining the support of the Labor party opposition would by-pass the cross bench but is unlikely.

The government appears to be hardening its determination to maintain the integrity of its budget policies.  Abbott has commented that he would not ‘sell out the fundamentals’ of the budget’s fiscal reforms (cited above, see Griffiths, ibid).  A cabinet minister is reported as saying ‘we are not for turning’ and on the eve of parliament returning on 26 August Education Minister Christopher Pyne refused to rule out cuts to university research funding if the government’s higher education reforms did not pass the Senate and Finance Minister Mathias Cormann raised the prospect of tax increases to make up the deficit (Massola, J. 25 August 2014, http://www.smh.com.au/federal-politics/political-news/government-digs-in-over-budget-20140824-107tvr.html). Cross bench senators said they would not be ‘bullied’ by the threats of a tax increase (Coorey, P. 2014, ibid). The governments’ determination to proceed with its budget policies on its own terms is evident from the introduction of its Higher Education and Research Reform Amendment Bill 2014 into the House of Representatives on 28 August 2014 (House of Representatives, Debates, 28 August 2014, p. 1).

So what options are available to the government if the legislation fails to pass the Senate?

Double dissolution – Section 57 of the Australian Constitution

If a bill passed by the House of Representatives is rejected by the Senate and after three months is passed  by the House of Representatives and again rejected by the Senate, Section 57 of the Australian Constitution provides for the Governor-General to dissolve both the House of Representatives and the Senate.  The result would be a simultaneous election for both houses.  This provision of the Constitution can be found on page 463 of the text book.

Governments are very reluctant to take this step because there is no guarantee that they would win the ensuing election.  It would be particularly risky for the Abbott government to pursue the double dissolution option on the basis of what has proved to be a very unpopular budget.

Abandon the legislation

The other alternative is for the Abbott government to abandon its legislation if it does not pass the Senate.  If it chose this option, it would have to reconsider what other measures could be taken to reduce the budget deficit which might be more acceptable to the electorate and the Senate cross bench.

Earlier this month Abbott when asked by a primary school student ‘what happens when people don’t agree with your point of view’, said ‘there are two things you can do if people don’t agree.  You can try very hard to persuade them and sometimes you succeed and sometimes you fail.  If enough people don’t agree, and if the hope of persuading them is remote, sometimes you have to accept that you just can’t do whatever it is you wanted to do…if they can’t be persuaded, how important is it? Is it worth trying to push it through in the face of disagreement, or is it one of those times when you just have to say, well, majority rules, these things just can’t happen right now’ (ABC, Insiders, transcript, 10 August 2014, http://www.abc.net.au/insiders/content/2014/s4064416.htm).

We will just have to wait and see how the political realities play out for the Abbott government’s 2014 budget dilemma.

Update: 2 September 2014 Compromise reached with Palmer United Party and Motoring Enthusiast Party senator to pass repeal of the mining tax.

The Palmer United Party and Motoring Enthusiast senator Ricky Muir will vote in the Senate for the repeal of the mining tax in return for the government agreeing to keep the schoolkids bonus and superannuation measures which were to have been dropped because they were funded from the proceeds of the mining tax.  The amendments to be made to the legislation by the government to satisfy the Palmer United Party demands include:

Increases to the superannuation rate to be delayed until 2021; retention of the low income superannuation contribution contribution until 31 June 2017; retention of the income support bonus until 31 December 2016 and retention of the schoolkids bonus until 31 December 2016 and means testing it to give it to families on an annual household income of $100,000′ (abc.net.au/news/2014/09/02/government-strikes-mining-tax-deal-with-palmer-united-party/5713116, 2 September 2014).

 

Dr Gwynneth Singleton

29 August 2014

 

 

 

 

 

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