Friday, May 03, 2013

Burn the boats and ditch the life raft

Tony Abbott and Joe Hockey must burn the boats.  The Coalition must promise to not increase taxes and not impose any new taxes if elected.  That means no increase in the GST, no new levies like the one Julia Gillard wants to impose to pay for part of the National Disability Insurance Scheme (NDIS), and no changes to the tax deductions taxpayers can claim.

The only way Abbott and Hockey should return the federal budget to surplus is by cutting government spending.

The story goes that when Alexander the Great landed in Persia he burned the boats his army arrived in.  Retreat was thus ruled out.  There was no Plan B.  Either Alexander and his troops succeeded or they died.  Alexander succeeded.

While they're ruling out tax increases, the Coalition should take the opportunity to dump its paid parental leave scheme.  The scheme is unnecessary, it's too generous, and it's too expensive.  It will be difficult for the Coalition to argue against raising taxes to pay for the NDIS, when the Coalition wants to raise taxes itself to pay for a policy that many people think is far less of a priority than the NDIS.

Burning the boats doesn't just motivate your own side.  It signals to the other side you're serious — and that you're not going to give up.

Burning the boats is a strategy not without risk.  But politics, business, and life all entail risk.  If Tony Abbott does become prime minister after the September election, Coalition MPs will have to ask themselves what is the point of being in power, if they simply use that power to raise taxes like Labor did.

Certainly there will be some Coalition MPs who will argue that they will raise taxes in a more caring and sharing way than Labor.  Their tax increases will be more moderate and they will impose them more carefully.  But to taxpayers none of this makes much difference.  Whether Labor or the Coalition raises taxes — the result is the same.  The only difference is emotional.  When Labor raises taxes it does so gleefully.  When the Coalition raises taxes it does so sullenly.

Conservatives in Australia have for too long prided themselves on their self-image as the side that gets into government and then cleans up Labor's mess.  But there's little nobility in washing the dishes after the chef has cooked the feast.  A more accurate description of what state and federal Coalition governments do after Labor governments is that conservatives find the way to pay for the promises of their political opponents.  In the 70 years of the Liberal Party there's not too many spending programs of Labor governments that Liberals have undone once they got into power.

A promise of no tax increases and no new taxes will do a few things.  For a start it will prove the Coalition is serious about reducing the size of government.  It will also impose discipline on ministers and their departments.  Abbott points out that 16 of his current front bench were ministers in the Howard government.  That's a mixed blessing.  The last experience those 16 had of ministerial office was in 2007 at the height of the mining boom and before the financial crisis, when money was no object.

It's meaningless to claim, as some have done in recent weeks, that the Coalition should fix the budget deficit through a mixture of spending cuts and tax increases.  As yet no one has identified what that mix should be, and anyway deciding the share of spending cuts relative to tax increases is ultimately an arbitrary choice made according to one's political philosophy.

Abbott burning the boats on taxes is not as completely radical as it sounds.  He's done so once before.  In 2009 after he became opposition leader he ruled out tax increases:  ''There will not be any new taxes as part of the Coalition's policies.''

The federal government's budget is worse now than in 2009.  And the economy is a lot closer to the end of the mining boom than it was in 2009.  There's never a good time to increase taxes, but now is an especially bad time to be doing so.

Which is precisely the reason why Tony Abbott and the Coalition must burn their boats.

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