Tax hikes, spending cuts loom after Nick Xenophon team nixes budget bill

Nick Xenophon. Photo: Scott Barbour/ Getty Images.

The federal government will look at raising taxes or slashing spending elsewhere after the Nick Xenophon team announced it would not be supporting the omnibus bill, punching a $4 billion hole in the budget

The bill, which contained 16 welfare cuts, many of which date back to the notorious 2014 budget, cannot pass the Senate without the three NXT Senators.

Social Services Minister Christian Porter said the government would now have to split the bill and negotiate measure by measure. But because it is unlikely that many of the measures will be accepted by the NXT, the government will have to make good on the threat issued on Monday that the revenue would have to be made up by raising taxes or finding cuts elsewhere.

In a last-ditch effort to get the Senate over the line, it announced on Monday the $4 billion in net savings would be quarantined to pay for the National Disability Insurance Scheme, which has a funding shortfall in 2019-20, its first full year of operation.

Senator Xenophon suggested on Tuesday that the government should instead increase the Medicare levy – which has already been raised to help fund the NDIS – or cut defence spending.

Defence Industry Minster Christopher Pyne labelled fellow South Australian Senator Xenophon a hypocrite for suggesting defence spending cuts. It was Senator Xenophon who led the call for the next fleet of submarines to be built in Adelaide, which – at about $50 billion – is the most expensive defence contract ever.

“Xenophon now wants to cut defence spending in favour of welfare,” Mr Pyne said.

“In 2016 he wanted 12 submarines, nine Frigates and 12 OPVs. Now he wants to cut them. This would be diabolical for SA.”

The decision by the NXT to block the omnibus bill also torpedoes the government’s long-stalled child care reforms, which were part of the bill. The bill would have delivered $5.5 billion in gross savings, of which $1.5 billion would have financed the boosted child care package.

The other $4 billion would have gone to the NDIS.

‘Too high a cost to families’

In a statement issued on Tuesday morning, the NXT said the child care reforms were important but “come at too high a cost to families by way of the scrapping of Family Tax Benefit (FTB) supplements (without adequate compensation) and cuts to Paid Parental Leave”.

“The Treasurer’s announcement that any savings from the Omnibus Bill will be tipped into the NDIS Savings Fund are considered by the Team to be ‘robbing Peter to pay Paul’ and viewed in the same way as holding child care reforms hostage to FTB cuts,” it said.

“As a negotiating tactic, this is as subtle as a sledgehammer. Pitting battling Australians against Australians needing disability support services is dumb policy and even dumber politics.”

Independent Senator Jacqui Lambie said she, too, would be voting against the bill.

Mr Porter said he was prepared to discuss with Senator Xenophon about finding other savings to save the child care package.

“The main issue here is finding a way to fund a very serious $1.6 billion investment in child care, which parents and families and mums are screaming out for,” Mr Porter said.

“We can’t do that from borrowing more money, we have to find savings to fund that expenditure.”

Mr Porter insisted “no one is threatening the NDIS” and the government was committed to financing the program even though it hadn’t been properly financed by Labor.

Labor’s families spokeswoman Jenny Macklin said it was time the government abandoned the welfare cuts, also knon as “zombie measures”, because they have been around so long and have little chance of ever being adopted.

“The Turnbull Government must now drop its unfair omnibus cuts to Family Tax Benefits, paid parental leave, Newstart and the Energy Supplement that it yesterday disgracefully linked to the future of the NDIS,” she said.

“Mr Turnbull, Mr Morrison and Mr Porter should take these unfair cuts out of the Parliament and out of the Budget, for good.”

The omnibus bill ends $4.7 billion in Family Tax Benefit end-of-year supplements and implements the childcare reforms that were to be paid for by ending these supplements.

It also contained billions more in welfare cuts that have been on the books since the 2014 budget and have nothing to do with paying for childcare.

These include removing payments for pensioners, making the unemployed wait longer for the dole and ending carbon tax compensation for future welfare recipients.

To woo the crossbench, the government increased the Family Tax Benefit – available to families earning up to $80,000 a year – by $20 a fortnight. This will cost $2.4 billion.

The taxpayer-funded paid parental leave scheme will be increased from 18 weeks to 20 weeks. If a mother has an employer scheme of fewer than 20 weeks, she will be entitled to a total of 20 weeks and the public scheme will act as a top-up. This will cost a further $700 million.

This article first appeared at the AFR.com. See the original article here. Follow the AFR on Facebook and Twitter.

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