Ex-Treasury boss Ken Henry says ‘mind boggles’ over axing of carbon tax, calls for tougher environmental reform

A former Treasury boss says the axing of a controversial tax “still boggles the mind” amid calls for stronger action to protect the environment.

Former Treasury boss Ken Henry has renewed calls for a carbon tax, lashing former governments for dropping the tax.

He said “it still boggles the mind that we had the world’s best carbon policy” and questioned: “Why the hell did we ever drop it?”

The carbon pricing scheme was introduced by Labor in 2012 and placed on about 500 of Australia’s largest polluters.

Under the policy, companies had to purchase credits to offset the amount of carbon produced, with the funds generated form the levy returned through tax cuts and increases to welfare payments.

The measure was later repealed by the Abbott government in July 2014 and replaced with an offset scheme to incentivise companies to avoid emitting CO2 by earning carbon credits.

Speaking at the National Press Club on Wednesday, Mr Henry, who was the Treasury secretary from 2001 to 2011, criticised the scrapping of the tax.

“It still boggles the mind that we had the world’s best carbon policy and then, for

purely political reasons, decided that we can afford to do without it,” he said, speaking as the chair of not-for-profit Australian Climate and Biodiversity Foundation.

Former Treasury boss Ken Henry said ‘why the hell did we ever drop it? when asked about the carbon tax. Picture: NewsWire/ Martin Ollman

“A country that’s capable of creating the best and then decides that it doesn’t need anything at all – well, my God, of course we need a carbon tax.”

Mr Henry urged the government to not “give up” and fix Australia’s “broken” environmental laws, taking aim at the “not fit for purpose” and outdated Environment Protection and Biodiversity Conservation Act 1999 (EPBC).

“Report after report tells the same story. The environment is not being protected. Biodiversity is not being conserved. Nature is in systemic decline,” he said.

“Of particular concern, they are incapable of supporting an economy in transition to net zero, and they are undermining productivity.”

He noted that the government’s pledge to erect 1.2 million homes by 2030 would require more land and transport, meaning more interaction with EPBC assessments.

In strong criticism, he said there was “no point in building a faster highway to hell”, and while approvals needed to be granted faster, the environment needed to be protected.

“These projects, be they wind farms, solar farms, transmission lines, new housing developments, land-based carbon sequestration projects, new and enhanced transport corridors or critical minerals extraction and processing plants, must be delivered quickly and efficiently,” he said.

Speaking more broadly about government spending, Dr Henry, who authored the Henry Tax Review in 2010 to guide tax reforms over the next 10 to 20 years, said there needed to be more “spending discipline”.

“If the budget is to meet these growing spending pressures, then we’ve got two options. We either increase taxes, as a share of GDP, or we grow the economy faster,” he said, noting productivity growth had slumped from an average of 2.31 per cent in the ’90s to 0.98 per cent in the last 25 years.

“That’s a pretty fundamental difference.

“If we continue on that trajectory, as we said in 2002, we will have no option but to raise taxes, and quite significantly, by several percentage points of GDP … or cut spending.”