David Speers: Bill Shorten outplayed the government on NDIS funding

THE Treasurer’s backflip on funding the NDIS through Medicare makes Labor the party of higher taxes.

Treasurer Scott Morrison has said the economy has recovered to an extent that it can pay NDIS without increasing the Medicare levy.

AS he stood in Parliament delivering last year’s Budget, Scott Morrison ­referred to his brother-in-law Gary, who was sitting in the public gallery.

Gary has MS and was there to show the Treasurer’s personal connection to someone who needs the National Disability Insurance Scheme.

He was also there to support the tax hike Morrison announced to help pay for the NDIS.

Gary was apparently grateful the NDIS would finally have funding certainty. This was about “helping your mates”, we were told.

The public seemed to agree with Shorten — 54 per cent were happy to pay more to fund the NDIS and 36 per cent were not.

It was a clever move, linking a tax hike (in this case a Medicare levy ­increase) directly to a worthy cause.

The next day, Shadow Cabinet met to consider how to respond.

Many agreed it was a sensible move. In fact a majority of Labor’s frontbench wanted to back the government’s approach.

Bill Shorten disagreed. Backed by his deputy Tanya Plibersek, the Labor leader overruled the majority view of his colleagues. Labor would only support the tax increase for those earning more than $87,000.

It was a captain’s call. And boy, did the Opposition Leader cop it.

Malcolm Turnbull’s attack was personal. Shorten had “let down people with disabilities”, he thundered. He had shown “bogus compassion”.

This Medicare levy increase, we were told, was a “vital exercise in ­fairness”.

The public seemed to agree — 54 per cent were happy to pay more to fund the NDIS, only 36 per cent were not, according to Newspoll.

Had Labor backed it, this tax hike would have passed through Parliament as quickly as the new tax on the big banks.

Instead Shorten dug in. He ­ignored the polls, the taunts over his compassion and the widespread ­assumption in the media and among some colleagues that he’d made a grave error.

His argument was simple: why should battlers have to pay more tax when big companies get a tax cut?

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It was a populist position, to be sure, but it struck a chord.

Then, as the government started hinting at personal income tax cuts in this year’s Budget, its arguments began to sound utterly confusing.

Why hit workers with a tax ­increase and a tax cut at the same time? Talk about a money-go-round.

Now the government has found a way out. The Budget bottom line is suddenly looking much healthier. Company tax receipts are up. Welfare payments are down. The windfall is estimated to be worth more than $10 billion.

The government deserves credit for this. What it has decided to do with the extra money, though, is ­revealing.

Once again, Bill Shorten has forced the Turnbull government into a backflip.

It could have used the cash to lower the debt. It chose not to. It could have gone for even bigger personal income tax cuts. It chose not to.

Instead it’s decided to scrap the Medicare levy increase it once described as a “vital exercise in fairness”.

In doing so, the government has ­finally acknowledged something it’s spent 12 months denying: the NDIS can be funded without this special tax. It can be funded through prudent fiscal management.

This is a political decision. It’s about scraping away a barnacle two weeks out from the Budget. The Treasurer wants clear air when he ­announces his income tax cuts a week from Tuesday.

He doesn’t want voters calculating how much they’ll receive on one hand and how much they’ll lose on the other. This decision comes from a position of fiscal strength, but also points to a political weakness.

Once again Shorten has forced the government into a backflip.

Shorten has some of the sharpest political instincts in the Parliament. Some call it luck, but if that’s the case he’s had an awfully long run of it.

At times, Shorten simply jumps on a populist cause as it’s gathering ­momentum. For example, the banking royal commission, a federal anti-­corruption watchdog or a suspension of live sheep exports.

At other times, he’s prepared to chance his arm. Restricting negative gearing and scrapping cash refunds for franking credits are examples.

So was defying the government, his colleagues and public opinion on the Medicare levy increase.

He copped an initial bucketing for resisting this “vital” measure, but ultimately outplayed the government.

He won this one.

As is usually the case, though, backflips deliver short-term embarrassment for long-term gain.

No longer can the government be accused of wanting to slug workers with a tax hike.

The issue is neutralised.

Labor is now unequivocally the party of higher taxes. As of today, it still plans to increase the top marginal tax rate, keep the company tax at 30 per cent, halve the capital gains tax discount, and wind back negative gearing and franking credits.

Some of this may change once Labor sees the state of the Budget.

And it will almost certainly use these higher taxes on the “rich” to offer ­bigger personal income tax cuts for battlers.

One thing is certain: Shorten will be emboldened to back his political instincts again.

David Speers is political editor at Sky News.