Savings rebate: a bigger swindle than first appears
@box text intro = The Howard government has been badly embarrassed by the fiasco of its tax rebate for savings plan, announced in the budget on May 13. For somewhat different reasons, the ALP and ACTU should be similarly embarrassed.
Like nearly everything this government does, the rebate scheme heavily favours the wealthy. Those with large investments, or private superannuation, will be able to claim the full rebate of $450. Moreover, it appears that family trusts will enable the very wealthy to claim $450 for each member of the family.
On the other hand, ordinary working people, who are able to save little and who keep their savings in low-interest bank accounts, will get almost nothing. For example, someone with $2000 in a bank at 4% interest (and try to find a rate that good!) would receive an annual rebate of just $12.
John Howard gave the game away in parliament on May 14, revealing that he understood how inequitable the scheme is when he was shamed into saying that he, personally, would not claim the rebate.
But that is only the beginning of the story. Even more directly than usual, this handout for the wealthy comes directly from the pockets of workers — thanks to the ALP and ACTU. The funds for the scheme come from money that workers have been waiting for for five years.
In his 1992 "One Nation" statement, Paul Keating promised two stages of income tax cuts for "middle" incomes. A year before the 1993 election, the cuts were aimed at workers earning $20,000 and up. In effect, they were the reward for years of "wage restraint" under the Accord, and the promise was used to buy "industrial peace" so as not to disturb the ALP re-election campaign.
The tax cuts were to come in two stages, from July 1, 1994, and January 1, 1996. However, in July 1993, the election safely past, Keating used the excuse of changed economic circumstances to alter the plan. The first stage of cuts was brought forward to January 1, 1994, but the other half was put off until 1998.
Then, in the 1995 budget, the Labor government cancelled the promised 1998 tax cut, announcing that the money would instead go into superannuation; from the beginning of 1997, the government would match workers' contributions to their individual super.
Through all these changes, the ACTU quietly went along with whatever scheme the Labor government announced for how it would use money that properly belonged to workers. But when the glorious day of the promised pay-out finally arrived, Labor was no longer in government. And the Coalition government, violating still another election promise, has decided to cancel the superannuation contribution.
Half of the money supposedly set aside for the super plan has simply been confiscated by the government in order to reduce its deficit. The other half is being used to fund the savings rebate — i.e., it is being handed over to rich people, including most federal parliamentarians aside from John Howard.
Billions of dollars are involved: the budget projects savings to the government of $1 billion in 1998-99, $2.5 billion the next year and $4 billion the following year. And those sums will be roughly matched by the rebate handouts.
The overall result is that workers gave up wage rises in exchange for promises that, with one exception, were never kept. It's a lesson that should be kept in mind the next time (and it will happen) that someone proposes trading wage rises for some promised government benefit. Even if the promise is kept initially, it can always be taken back later.
And there's one other lesson from this dirty three-shell game. Unlike most such cons, in this one the shells have names: Coalition, ALP, ACTU.