Scott Morrison willing to sacrifice $3bn in family benefit cuts if senators agree

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Government offers to forego half the $6bn savings from its stalled family tax benefit cuts in order to get legislation through the Senate

Student finger painting in class<br> class
The Turnbull government needs $3.5bn in savings to pay for its childcare shake-up. Photograph: Alamy Stock Photo
The Turnbull government needs $3.5bn in savings to pay for its childcare shake-up. Photograph: Alamy Stock Photo
Political editor

Last modified on Tue 13 Mar 2018 13.03 EDT

The Turnbull government is offering to sacrifice about half the $6bn in budget savings from its stalled family tax benefit cuts in order to get an amended policy through the Senate before the end of the year.

The treasurer, Scott Morrison, has retained responsibility for the long-running negotiation, which he began as social services minister, and has floated new compromise options with crossbench senators in recent weeks.

The government needs $3.5bn in total savings to come from the $6bn in family tax benefit cuts that were announced in the 2014 budget, but remain blocked in the Senate, because it has hypothecated these savings as a way to “pay” for a $3.5bn childcare shake-up that was the centrepiece of this year’s budget. Some of the savings could also come from $1bn in proposed cuts to paid parental leave.

While the childcare changes are not scheduled to start until 2017, they would be harder to spruik in the 2016 election year if the government had failed to secure its self-identified funding stream.

In the talks, the treasurer and his advisers have offered to ditch the plan to freeze the indexation of family tax benefit part A payments (received by families earning up to $100,000), which is booked in the budget to save $2.6bn over four years.

Instead of stopping family tax benefit part B (paid to sole parent and single income families) when the youngest child turns six (the current cut off is 18) they have floated a compromise cut off when the youngest child turns 12 – a move that would significantly erode the estimated $1.8bn in savings from that change.

Annual end-of-year “supplements” paid to family tax benefit recipients would over time be rolled into the fortnightly amounts that families receive, with proposed cuts part of the phase in.

And the negotiations have also included the promise to pay an additional $1,000 a year to stay-at-home parents with a child under one, which was also promised as part of new prime minister Malcolm Turnbull’s coalition agreement with the National party.

It is unclear whether the watered-down changes can pass the Senate, but they are are unlikely to win the backing of the Australian Council of Social Services, which is pleading with the government to rethink its policy and focus on the original intention of family tax benefit payments, rather than a search for a specific quantum of savings.

Acoss has backed the idea of removing family tax benefit B for single income couple families when their youngest turns 12, but is strongly opposed to any cuts to payments to sole parent families. And it is proposing the government restore more generous indexation to family payments, saying lower indexation rates and freezes imposed by successive governments have significantly eroded the real value of the payments.

“Family payments were intended to ensure that households with children had an adequate income ... the minimum wage is set at a level adequate for a single person, the family payments system was supposed to make it adequate for a family,” said the Acoss chief executive, Cassandra Goldie, one of the leaders who attended last week’s summit with Turnbull.

“We want the government to defend the core purpose of the family payment system ... we need to make sure we aren’t cutting spending to exacerbate poverty for children. We think there is a real risk that bad policy could come out of this process.”

But the crossbench senators have varied priorities, with Family First senator Bob Day saying his backing for a compromise plan would depend on the government at least promising to look at “income splitting”, which allows single income families to reduce their tax.

Others are considering the new options, and Motoring Enthusiast senator Ricky Muir will meet Morrison next week.

The 2015 budget cuts to paid parental leave are also languishing in the Senate, having been condemned by employers and unions, who said they would not work in practice.

Under the changes, the government will no longer fund paid parental leave those whose employer already paid as much, or more, than the taxpayer-funded scheme – about 34,000 mothers each year.

The taxpayer-funded scheme, available to women earning up to $150,000 a year, is worth $11,500 to each mother, or 18 weeks at the minimum wage. The government says the $11,500 is a “safety net” for those who don’t receive at least that amount from their employer – and that those who have been accessing both schemes are “double dippers”.

But employers, including the chief executive of the Australian Chamber of Commerce and Industry, Kate Carnell, told Australia the move was unlikely to achieve savings in the private sector because employers would switch generous parental leave payments to other employee benefits and unions had similar concerns.

New social services minister Christian Porter told the West Australian newspaper his brief was to tackle middle class welfare and “payments that end up directed at recipients on more substantial incomes”.

Senators said they assumed the government would continue to seek additional savings if this revised set of changes passed the upper house.

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