Coalition told ‘sandwich and milkshake’ tax cut won’t fix cost of living

A “sandwich and milkshake” income tax cut is not the right way to address pressure on household budgets, the Australian Council of Social Service (Acoss) has said.

The social services body has called instead for a $75 a week increase in income support for single people and an extra $1bn investment in social housing in its pre-budget submission, which was released on Tuesday.

The Turnbull government has suggested it will include income tax cuts in the May budget in addition to pushing to reduce the company tax rate to 25%, despite growing opposition in the Senate.

The Acoss chief executive, Cassandra Goldie, said that pursuing personal and corporate tax cuts was “a big mistake … when we’re facing major funding shortfalls in areas such as the NDIS, health, needs-based schools funding and action to reduce poverty”.

Goldie said it would be “unconscionable” to cut taxes while slashing services, warning the government not to repeat the mistake of “handing out unfunded tax cuts in the run-up to elections” as occurred from 2003 to 2011.

“Income tax is not the main pressure on household budgets.”

Goldie said the biggest hit to family budgets was out-of-pocket costs for essential services, with healthcare costs up 40% from 2011 to 2017, childcare up 57%, schools by 37% and dental care by 14%, all exceeding the inflation rate of 11%.

“A ‘sandwich and milkshake’ tax cut isn’t the answer to these pressures on household budgets,” she said.

Goldie was referring to a gaffe by the Howard-era minister Amanda Vanstone, who said a $5 tax cut would buy “a sandwich and a milkshake if you are lucky”.

Acoss has proposed a total of $3.2bn in extra spending in this year’s budget and $6.7bn in 2019-20, to be paid for by $3.4bn in revenue measures this year, ramping up to $13bn in 2019-20.

That money would increase social support by $75 a week for single people who are unemployed or studying full-time, $1.2bn to be spent on dental care, $1bn for states and territories to spend on social housing and $630m for family payments and to reduce child poverty.

Currently Newstart pays single people just $274 a week, which Acoss said was “too low for people to afford the basic essentials of life”, with a further $65 on rental assistance, not enough for housing in major urban centres.

Acoss called for a new social security commission to advise government on the cost of living and report regularly to parliament on the adequacy of social security payments.

Reforms to the family payments system would include lifting unemployment payments for adults and single parents, the family tax benefits for families on low incomes and increasing payments as children grow older and their costs rise, rather than the status quo, under in which they decline.

Acoss also called for a redesign of employment assistance, with wage subsidies and training targeted at long-term unemployed as oppose to current incentives, which it said “discourage patient investment in people who are most disadvantaged in the labour market”.

“The May federal budget provides this government with a clear choice,” Goldie said. “It can pursue a senseless tax cut handout now and leave the nation with the prospect of another horror budget down the track to pay for it, or it can take the fair and sensible path of deferring any tax cuts until we can actually afford them.”

Acoss endorsed a number of aspects of Labor policy, including reducing capital gains tax concessions and limiting negative gearing deductions, but also welcomed the Coalition’s successful move to curb superannuation tax concessions and intention to raise the Medicare levy to pay for the NDIS.

Labor has made cost of living issues central to its pitch in 2018, promising to cap private health insurance costs for two years and leaving the door open to pegging the minimum wage to median incomes.