Drinks levy to lay bare Lib divisions

WHEN the Liberal partyroom debates whether to pass or block the alcopops tax, Malcolm Turnbull and Peter Costello will once again be pitted against each other.

Costello supporters strongly believe the alcopops tax issue is one where the Coalition should stand on principle, similar to its decision to reject the means-testing of the private health rebate.

"If we fall away on this issue, what's next?" a Liberal MP told The Australian late yesterday.

If the Opposition blocks the tax it may give the Government a double dissolution trigger, opening the way for an early election. Turnbull supporters are fearful an early election would let the Rudd Government off the hook for its high-deficit budget by sending voters to the polls before feeling the full effects of the recession and rising unemployment.

"You can't change the world from Opposition, and it is political suicide to try," one frontbencher said.

It is believed that while most of the shadow cabinet continue to hold the view that the tax is poor policy, a majority believe it is too much of an electoral risk to oppose it for a second time.

Opposition health spokesman Peter Dutton has proposed taxing alcohol across the board as a way of making up any lost revenue from rejecting the alcopops tax, but it is unlikely the Coalition would stand on this alternative if the Government rejected it.

It is therefore likely the Coalition will decide to reverse its alcopops tax policy and allow the legislation to pass when the Senate sits next month.

The division inside the Liberal Party on this issue should not be underestimated. It comes down to a strong difference of opinion about what matters in politics: standing on policy principles or short-term political tactics.

The reality is that the alcopops tax has been exposed as poor policy, embarrassing the Government and Health Minister Nicola Roxon.

We were told the tax would reduce binge drinking. But young drinkers are turning to other alcoholic drinks such as beer or simply mixing drinks.

We were told the tax would raise $3 billion in revenue, but in this year's budget papers projections have been reduced to $1.6 billion with further reductions likely.

But an early election trigger is a massive concern for many Liberals. It could lead to Coalition numbers in the Senate collapsing and up-and-coming frontbenchers such as Dutton and the workplace relations spokesman Michael Keenan losing their seats.

The Liberal Party is again stuck between a rock and a hard place, with Turnbull and Costello on opposite sides of the divide.