Thursday, 21 June 2012

Brutal Honesty is the Best Policy

A war of words erupted last week in response to an announcement that the federal government's carbon price will add 8.9 per cent to the average household electricity bill in NSW next year.

Greg Combet responded to the news with a certain degree of smug satisfaction, claiming that the finding vindicated his long-running critique of Tony Abbott as an overblown fear-monger.

"The facts are now coming in, demonstrating the dishonest claims of Mr Abbott," Mr Combet said.

"He should apologise to the people of NSW for this deceitful scare campaign."

As heartwarming as it is to witness such an enthusiastic defence of political honesty from a minister of the crown, perhaps it would be prudent to check the government's own facts.

Mr Combet was claiming that an 8.9 per cent rise in electricity prices would be "below the national average impact predicted by Treasury of a 10 per cent price increase".

He rather conveniently failed to mention that, according to Treasury's figures, the 10 per cent increase in prices would occur over the first five years of the scheme.

This means that according to Mr Combet's favoured source, almost all of the predicted rise in prices has been swallowed up with four years still to go.

It is going to be extremely difficult for the government to put a positive spin on the consequences of its new tax.  Mr Combet will undoubtedly be forced to stretch the truth on many more occasions over the coming months.

The minister is boxed in by his government's ongoing refusal to acknowledge that the carbon price will involve significant pain for ordinary Australians.  The consistent refrain has been that only the "big polluters" will pay, while everyone else will be compensated.

Such an idealised situation is simply unworkable, particularly in the long run.  If the tax is successful in driving down carbon emissions and boosting green power, the number of "big polluters" will inevitably dwindle.

That scenario would lead to a reduction in the revenue sourced from the tax.  Revenue which has been earmarked to fund permanent compensation for consumers.

So if the carbon price is proven to be effective, as Mr Combet claims it will be, it will either force the government to decrease its compensation payments or leave a glaring black hole in the budget.

If, on the other hand, the tax fails to reduce emissions, we will be stuck with a colossal money-go-round that serves no conceivable purpose.

Money will be removed from the private economy to line the pockets of government bureaucrats, before being redistributed to some low income families.  Power prices will rise as a result, along with the cost of all goods and services whose production requires power.

All of this for no environmental benefit.

Those families who have been deemed "too rich" to receive compensation would undoubtedly be very impressed.

The simple fact of the matter is that the carbon tax will cause significant financial pain for a lot of people.  By denying this reality, the government is only going to alienate itself further from its constituents, many of whom are already waiting for the next election with baseball bats in hand.

Mr Combet and his colleagues would earn more respect from voters by approaching the issue with a refreshingly up-front attitude.

Yes, this tax will raise the cost of living.  Yes, it will hurt the economy.  Yes, it will cause pain for ordinary Australians.

The government should acknowledge these facts, and then tell us why it is determined to pursue the policy anyway.  There could be any number of plausible reasons.

Perhaps climate change truly is the greatest moral challenge of our time.  Maybe Julia Gillard believes that the development of green energy is crucial to our future economic success.

Then again, it could be that Labor only agreed to go down this path in an effort to woo the Greens and retain power.

Whatever the reasons may be, the Australian people need to understand why they are being asked to bear the pain that comes with carbon pricing.  Perhaps they can be convinced that it is all worth doing, for the greater good.

But this government will never be able to explain itself satisfactorily while it refuses to even acknowledge the pain it is causing.

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