‘Uneasy’ John Howard breaks ranks with Liberal Party on super, tax

John Howard has broken ranks with the government to express concern over changes to super and the tax system.

Former prime minister John Howard.

John Howard has broken ranks with the Turnbull government to express concern over changes to the superannuation and taxation system designed to improve housing affordability, the third key budget measure the former prime minister has failed to fully ­endorse.

In an exclusive interview with The Weekend Australian, Mr Howard reiterated his “unease” with the government’s $6.2 billion levy on banks and reserved judgment on the $18.6bn school reforms because of claims it could strip almost 200 Catholic schools of future funding.

Mr Howard, prime minister from 1996 to 2007, also encouraged Malcolm Turnbull to talk more about the values of the Liberal Party to sharpen the ideological divide with Labor and fend off threats from the right-wing fringe of politics.

The government’s First-Home Save Scheme facilitates tax savings through superannuation by allowing $30,000 to be salary sacrificed as voluntary contributions that later can be withdrawn before retirement for a house deposit. Contributions and earnings are taxed at concessional rates.

“I don’t think changes to the tax system are going to make a dramatic difference, if any, either way, and I’m not in favour of that,” Mr Howard said.

“It’s a supply and demand thing. I personally don’t agree with disturbing superannuation. I don’t agree with giving people ­access to their superannuation.”

The government also announced the scaling back of deductions related to investment properties, a $5000 levy on ­foreign-owned dwellings left vacant and $300,000 from the sale of homes to be allocated tax-free into superannuation to encourage downsizing.

“The marginal change in the budget of allowing a slightly freer approach for older people who are downsizing, that makes some sense,” Mr Howard said. “It will help some people but won’t have a dramatic impact. It is a gesture towards a concern and it is a gesture that is consistent with a Liberal philosophy. (But) people are living longer, healthier lives, and a lot of them don’t want to downsize.”

Mr Howard is troubled by claims from the Catholic schools sector that it will suffer funding cuts and is seeking more information. “There’s not a lot of understanding about how the Catholic school system is funded,” he said. “You pay the money in a block grant to the diocese. And then they allocate it according to their assessment of need. Well, I actually think that is a good system because they have got a better understanding of the need than other people.”

Mr Howard recognised that the introduction of the $6.2bn levy on major banks was to help reduce the budget deficit and lashed the Senate, and the Labor Party, for failing to support key savings measures. “This government has had to deal with the deck of cards that was there when it was elected and it did try to do a lot of things about that and it’s been blocked systematically in the Senate.

“One of the things has to be said about the bank tax, which I have expressed unease about, and I don’t retreat from that, is that it’s very much a plan-B measure in order to improve the country’s fiscal position.”

This week marks the 75th anniversary of Robert Menzies’ “forgotten people” broadcast.

He said Menzies identified the “natural base” of the Liberal Party as middle-class, small-business operators, home owners and family-centric, and it was important for the party to articulate how its values applied to policies.

“The more that Turnbull talks about the philosophy and values of the Liberal Party the better,” Mr Howard said. “People like to be reminded of what you believe in. Winning the battle of values and ideas is absolutely fundamental. You’ve got to have a road map otherwise you’ll get lost.”