Wednesday, July 06, 2011

Hockey. Woolly on tax and costings

Here's the shadow treasurer at a press conference Monday for which he did not issue the usual transcript.

"If you look at payments as a percentage of GDP then the goal you would like to have is to get back to the last year of the Howard government, and the same with revenue."

As a goal this would mean cutting government payments as proportion of GDP from 24.5% to 23.2% and increasing government revenue as a proportion of GDP from 23.2% to 25%.

Here's the table, from Budget Paper 1:

Bookmark it for reference.

Another point he made at Monday's press conference was close to meaningless:

He said:

"The government is very fond of throwing Treasury's pre-budget analysis at us. The number the Treasury did look at was the amount of money we allocated to direct action [on climate change]. They didn't dispute that, there was no hole in that number."

Tim Colebatch takes up the challenge:

PRIME Minister Julia Gillard says never mind the carbon tax: if you get the Coalition's direct action plan for tackling climate change, you'll end up paying $720 a year per household to finance it.

Rubbish, says shadow treasurer Joe Hockey: Treasury has costed our policy and endorsed its estimates of both the cost and the planned outcome to cut Australia's emissions by 2020 to 5 per cent below 2000 levels.

Who is right? Neither. In fact, the Coalition never submitted its direct action plan for costing by Treasury. It was one of the hundreds of policies it refused to have costed, arguing it could not trust Treasury because it works for the government.

In the immediate aftermath of the campaign, at the request of the three independents, Treasury costed the policies of both sides (the famous costing that estimated the Coalition had overstated its savings by $10 billion over four years). But that costing did not even mention the direct action plan.

There was no need to. It's pretty obvious that a plan to spend $3.2 billion over four years would cost $3.2 billion over four years. Treasury did not endorse the Coalition's claim that this would be enough to cut Australia's per capita emissions in 2020 by a third from their present trajectory which the 5 per cent target implies.

Quite the reverse. An undated Treasury note released in April under freedom of information laws warned that the Coalition plan as proposed presents a "significant budget risk relative to a carbon price". For the Coalition to achieve its target of cutting emissions to 5 per cent below 2000 levels, the note maker wrote, it would need to be "scaled up . . . [and would be] likely to have major fiscal costs".

But how much? When Labor talks of $720 per household, it is making it up. Like the Coalition, it makes assumptions that suit it about how much these projects would cost, how much carbon abatement they would deliver, and how much the Coalition would then have to spend to buy international permits to meet the target.

The reality is that it's impossible to say how much the Coalition's scheme would cost. Few observers believe it will deliver anything like a cut of 33 per cent in per capita emissions by 2020. They say Tony Abbott would then have to choose between spending far more than planned or scrapping the target.

If you think he would choose to honour the target, then you can make your own guess as to what he might make you pay. But I think he would scrap the target.


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