Whatever possessed Prime Minister Malcolm Turnbull to announce a proposal for a major and controversial reshaping of federal tax arrangements on the eve of an election, he urgently needs someone to start co-ordinating how his government internally handles communications. At the moment, it’s so awful it could cost him an election.
After ongoing tensions over Scott Morrison running ahead of Turnbull on various tax reform options, and then the debacle of Morrison not finding out that the budget had been brought forward a week while more junior colleagues and public servants knew, you’d have expected that Turnbull’s state income tax proposal would have been carefully planned in advance.
The obvious question about a state income tax is whether it would merely be an allocation of existing revenue or genuinely be a state tax that governments could increase or decrease to suit their needs. Turnbull confirmed it would be the latter at his announcement on Wednesday, in the long term, but Morrison wasn’t across that and tried to downplay the idea in the hours afterward.
The failure to ensure he and Morrison had their lines consistent was unforgivable, particularly in light of recent events. Perhaps that was why the government appeared confused about how to answer the obvious question of how much states would lift income taxes. By Thursday morning, after a succession of stories on Wednesday afternoon about nine separate tax systems, Turnbull had decided to downplay the whole issue, saying “the differences would be very slight I imagine between one state and another, but you know that’s Federalism”. Last night, Morrison was offering a guarantee of no state increase “for the next term of Parliament and for the entire transition period over which this would apply.” This morning, Colin Barnett — the only first minister to give the proposal a tick — inconveniently stated that the states would inevitably lift tax rates.
The next obvious question is, if the idea is to provide the states with a funding source that enables them to fully fund education, what becomes of Commonwealth schools funding, which is heavily biased toward private schools? Labor zeroed in on school funding within hours of the announcement on Wednesday, from the angle of exacerbating, rather than closing, educational outcomes across the country, and Education Minister Simon Birmingham had already responded on Wednesday night. But no thought appeared to have been given to how it would look to have the Commonwealth proposing that it stop funding public schools when Turnbull wandered into the issue on Thursday, morning, saying “no Coalition federal government, I suspect no federal government, would retreat from funding and continuing to support the non-government school sector because there would be a concern that they would not get a fair go from state governments”.
Within hours Labor seized on the comments as demonstrating Turnbull was going to “abandon public schools”.
Birmingham offered a different rationale for the government’s stance this morning, saying “we’re taking what has been the historical case that the federal government has historically supported non-government schools with funding”. Birmingham also tried to downplay concerns that handing full responsibility for public schools to the states would lead to a reversal of the development of national curricula and standards, saying “just because we actually had clearer lines of funding that actually said that states and territories are 100 per cent responsible for making funding decisions for their schools, that doesn’t stop us from having national co-operation around areas of agreed interest, such as a national curriculum, teacher standards”.
True, minister, it doesn’t stop national co-operation, but it removes pretty much the only incentive the Commonwealth can use to drive harmonisation, particularly for anything that might require additional funding, like improving teacher standards. The story of COAG in recent years is that the only harmonisation that ever happens is one that gets paid for by Canberra.
Even if, as Turnbull says, he announced the proposal on Wednesday because it had been revealed in the media, the poor coordination and preparation of the government’s responses on the proposal’s political vulnerabilities is terrible internal management. For all the many flaws of the Gillard and Abbott governments, such rudimentary coordination would have been taken for granted under John McTernan, who ran Julia Gillard’s communications, or Peta Credlin.
And whatever the case, Turnbull is now stuck with the proposal. It wasn’t Scott Morrison who made the running on this, it was Turnbull himself. He owns state income tax and has to take it to an election. His party should hope his office gets its act together soon.