A senior Coalition MP has called for the GST to apply to fresh food as rattled colleagues questioned the government's pre-budget political strategy and admitted they have been hit by a wave of voter anger over broken promises, new taxes and cuts in Joe Hockey's first budget.
Queensland senator Ian Macdonald has broken the federal wall of silence on the GST by arguing the consumption tax should be broadened to include items such as fresh food that were excluded under a compromise deal hammered out by John Howard and the Democrats in 1999.
Senator Ian Macdonald wants the GST to be applied to fresh food, as was originally proposed prior to the 1998 election. Photo: Andrew Meares
''I will never support an increase in the GST but I think we should extend it to what we originally proposed prior to the 1998 election,'' he said. ''I could also support states having a smidgen of income tax; if we want them to run schools and education that seems fair.''
On Tuesday, Senator Macdonald expanded on his comments, saying that he was ''somewhat interested'' in Queensland Premier Campbell Newman's call for states to get a share of income tax.
''(But) if that's not possible then we need to look at the GST,'' he told ABC radio.
A former minister who lost his frontbench spot after the election, Senator Macdonald's public comments reflect the private views of many in the Coalition party room and will create another political headache for Prime Minister Tony Abbott, who said on Sunday his government had no plans to change the GST.
Mr Abbott on Tuesday again refused to speculate on whether he would increase the GST if asked by the states.
''You're asking me a hypothetical question,'' he told Fairfax Radio. ''What I want is taxes that are lower, simpler and fairer. What the states do is their business.''
Mr Abbott pointed to the proposed white paper on federation, saying he wanted states to be ''more sovereign in their own spheres''.
''My opinion is that we pay more than enough tax already and we have got to over time get taxes down,'' he said.
The Grattan Institute estimated last year that broadening the base of the GST to include fresh food, health and education would raise an extra $15 billion for the states, although such a change would be politically unpopular.
Mr Howard, former prime minister Malcolm Fraser and former Victorian premier Jeff Kennett have recently backed broadening the GST base, and Treasury secretary Martin Parkinson has also flagged the need for it to be broadened. Angry state premiers, however, have lashed the federal government's decision to rip $80 billion out of health and education over a decade and accused Canberra of trying to force them to make the case for a GST rise.
And a second Liberal MP, Angus Taylor, said raising the GST was the "obvious" decision to cover a shortfall in education and health funding, though he said states had to make the case for it.
"If the states want an extra $80 billion and they want an increase in the GST to fund that, they’re going to have to come to us and tell us that. It’s going to require a significant increase in the GST to deliver that – maybe three, four, five per cent," he said.
They were joined by former Victorian premier John Brumby who urged state and territory leaders to make a ''courageous'' push to raise the tax.
Mr Brumby, who chairs the soon-to-be-abolished COAG Reform Council, said GST reform was inevitable and ''looks more and more like the best option that we've got''.
''The real debate is about the nature of the increase,'' he said in a speech at Melbourne University on Monday night. ''Is it base? Is it rate? Is it both?''
ACT Chief Minister Katy Gallagher said the GST had to be examined as part of the government’s taxation review.
''And if you are having a look at the GST you have to be mindful of the impacts on particularly lower income people,'' she told ABC radio on Tuesday.
But Agriculture Minister Barnaby Joyce said on Tuesday that discussions about GST were hypothetical and premature.
''It’s so far off it's just not worth hypothesising about,'' he told ABC radio.
Once state and territory leaders were on the same page, GST changes could be considered, he said.
''If they want to have a discussion about changing income streams, then I'm sure that they're very capable people and they'll have that discussion with us,'' he said.
The comments come a day after a Fairfax-Nielsen poll showed the Coalition slumped to trail Labor in the two-party preferred vote by 56 per cent to 44 per cent and as Mr Abbott and his senior colleagues criss-crossed the country to sell the budget.
Opposition Leader Bill Shorten hammered the Coalition for breaking promises not to introduce or increase taxes, cut education or health funding, change pensions or touch family benefits.
Government MPs were sent text messages by the secretive Coalition Advisory Service on Monday instructing them to argue that Australia ''simply could not go on paying the mortgage on the credit card. No one said it would be easy to fix Labor's debt and deficit''.
Mr Abbott conceded on Monday some taxes would rise, breaking his pre-election commitment, but he argued that every government that handed down a tough budget suffered a poll hit.
''If you go back to 1996 - the last tough budget - the Howard government, of which I was then a pretty junior member, suffered a massive hit in the polls but it was right and necessary for our country,'' he said.
In fact, the Howard government enjoyed a three percentage point rise in its primary vote, to 50 per cent, in the first Newspoll after the 1996 budget. The Abbott government suffered a 5 per fall to 35 per cent in the Fairfax-Nielsen poll.
One angry backbencher told Fairfax Media he had warned Mr Abbott about breaking his pledge of no new taxes, arguing the electorate had been ''primed'' to look for broken promises by the Abbott opposition.
''We saw what that did to Gillard. They are living in a fool's paradise. He hopes the electorate will forget the broken promises but they won't and I think this puts our election prospects in doubt,'' the MP said.
''My view is we needed a tough budget but we have broken our tax promise. We should have copped a bigger deficit. And where does the paid parental leave scheme fit into the narrative about a tough budget?
''I have had a lot of negative feedback from constituents, including long-time Liberals, who are not at all happy. I haven't spoken to anyone who likes it.''
Senator Macdonald said he welcomed angry constituents calling him to complain about what had to be a tough budget, but said he ''had been concerned about our pre-budget message''.
Queensland MP Warren Entsch criticised the government's pre-budget political strategy for ''scaring the bejesus out of everyone, including my mum'', but welcomed the tough decisions.
Victorian MP Sharman Stone said it would be difficult to get past the broken promises contained in the budget but that ''we just have to hope for the sake of the country to get past that chorus and look seriously at what the country needs''.
With Heath Aston and AAP