Thursday, July 22, 2010

Balancing the books on education refund promises

THE Coalition's plan yesterday to extend the education tax refund to school fees got both sides hot and excited.

Education Minister Simon Crean accused the Coalition of opening a fiscal "black hole". Coalition finance spokesman Andrew Robb accused Labor of planning to cut access to family tax benefits.

Let's ignore all that to look at the key issues.

OK, start with the real question: which is the better policy?

Sure. Team A offers parents a tax break on the cost of buying iPads, other IT equipment and school uniforms. Team B would extend the tax break to cover school fees and extra-curricular costs, even sporting equipment. Which plan makes more sense?

To me, the Coalition's plan is clearly better, even if both go too far. School fees and tutoring bills at least are genuine education expenses, unlike iPads or sports gear. If you think parents deserve more support, surely this is a better way to give it.

Won't it go disproportionately to parents with children at non-government schools?

Yes, it will, and it's curious that the Coalition's six-page policy paper makes no reference to extending the tax break to include voluntary contributions by parents at government schools.

Perhaps none of them send their kids to government schools. But the two-thirds of Australian parents who do, deserve more than an offhand assurance by Tony Abbott that of course we'll include those payments.

Tony, it's not in your policy. How about giving parents a very clear commitment to that in print? Do it now.

That said, bear in mind that only families eligible for Family Tax Benefit A will qualify anyway, which excludes a lot of AB families — and, I'm sorry to say, a lot of Age readers. It's not welfare for the rich.

And the big question: is the Coalition's proposal fully costed?

Probably not. But there's probably only one person in Australia who knows, and (s)he is keeping quiet. It's really messy. Labor had estimated the plan would provide a bit over $1 billion a year in benefits. But by June, only $606 million had been claimed for year one, a takeup rate of 60 per cent.

Why? First, claims were lodged for only 1.7 million of the 2.1 million students now deemed eligible. Second, only 32 per cent claimed the full amount: $375 for primary students, and $750 for secondary.

So in May, the government quietly cut its estimate of the future cost to about $750 million a year (or $3.1 billion over four years).

Then Julia Gillard extended it to school uniforms, at a cost of $340 million over the four years. That estimate assumed 10 per cent more claims in all, and roughly half the existing claimants getting much bigger rebates.

It looks like the Coalition might have been working off earlier, smaller estimates of the takeup in arriving at its cost estimate.

To me, its costing looks too low. But even if it is, it won't bankrupt us.