Senator Brian Harradine, the Tasmanian independent senator, has apparently made a final decision on the GST. He will not support it. The tone of his speech yesterday indicated that it was no longer a question of quantum of compensation for poorer families, but about the fundamental fairness of a such a tax. He said also that the Government could not guarantee that any compensation measures would be locked in. That is a silly view. Parliament can always override itself later.
The Government says it will continue negotiating with Senator Harradine, but it should realise that it is a wasted cause. Either he will not support a GST no matter what, or the price will be so high that it will not be worth it. Already the Government has foolishly agreed to legislation on internet pornography largely as an attempt to sweeten Senator Harradine. That legislation will put unnecessary fetters on internet commerce and will not achieve its objective. On the GST, it seems that Senator Harradine would require such fundamental changes that the Government’s tax package will be just brown paper and string with no content.
In any event, Senator Harradine’s use-by date is July 1, so time has run out. The Government should give up on Senator Harradine, but not give up on tax reform. The Government must now turn to the Democrats. It must now seriously consider dropping food from the GST. The Senate inquiries, largely the instigation of the Democrats, revealed that the Government’s package was flawed. The Government said no group would be disadvantaged by its package. Probably true. But that is a different from a package that delivers equity of advantage. The Government’s package does not. The Government did not work hard enough on this.
Exempting food is not ideal, but better a GST exempting food than no GST at all. Australia cries out for tax reform. We should broaden the tax base so government can fund important programs. We should tax services to make the wealthy (who use more services) pay more. We should swing taxes towards consumption and away from exports.
And incidentally, if exports can be exempted without squeals from business about administrative complexity, surely food can too.
When it does, it will be weakened by the fact it failed with Senator Harradine. The Democrats might now feel they can drive a harder bargain. The Government should have negotiated with the Democrats from the start. They were going to have to deal with them after July 1 on many issues, so why not the GST as well.
This will require a certain amount of flexibility on the part of the Government and would require some admissions that it was wrong. But that is the price of earlier obstinacy. Prime Minister John Howard’s noted characteristic of doggedness can sometimes look like obstinacy an inflexibility. It has happened with the GST. Mr Howard has failed to understand the power of the Senate, like Gough Whitlam before him. And he now stands with his Government’s Budget and economic policy critically undermined.
Mr Howard was right to say that if a Government goes to the people on a clear mandate it should get those things through on re-election. But, unfortunately, that is not the constitutional set-up.
The real lesson here is that the Senate is too powerful, not only on the question of Supply but also on ordinary legislation. It should be able to review and delay but not block indefinitely. And the double dissolution is far too cumbersome as a weapon to get legislation through.
Now Australia faces a destabilising showdown between the Democrats and the Government. The Democrats stand to lose a lot of seats and power in a double dissolution. So does the Government. Who will blink first?