Next week the charm for scrapping carbon tax

AFTER botching the passage of the carbon tax repeal legislation - a key election commitment - and suffering defeat on key budget savings this week, the Abbott government hopes to repeal the tax next week.

The government's budget savings were in tatters on Thursday after the first week of the new Senate saw an extra $2 billion in savings destroyed, piling on the pressure to return to its promised surplus by 2020.

Among the savings the government has lost, or is likely to lose, are almost $2 billion in income tax cuts retained by the Senate, cuts to growth in welfare payments and family tax benefits among others.

Savings and extra revenue, including expected foregone revenue of billions of dollars in repealing the carbon tax, could yet total more than $30 billion, undoing the work done to find savings in the budget.

The government took yet another blow on Thursday, failing to pass its much-vaunted carbon tax repeal bills in the Senate, after a chaotic morning in the Upper Chamber.

Despite pinning its hopes on the new Senate to secure the passage of the repeal legislation after one previous failed attempt, Fairfax MP Clive Palmer forced the government into a corner.

Clive Palmer
Clive Palmer DAN PELED

Mr Palmer said he had originally hoped to pass amendments to the repeal laws to ensure savings would be passed on to consumers, but said the government had "double-crossed" him on Thursday.

He claimed the government had failed to circulate the latest changes in time for the Senate to consider them, and tried to pass earlier amendments instead, with lower penalties for companies not passing on savings.

But he said when the Palmer United party realised; they were forced to withdraw their amendments, effectively removing the party's conditional support for removal of the tax.

The machinations meant that when it came to a vote, the government's repeal bills were defeated 37-35 in the Senate, with PUP senators voting against it.

But, in what appeared to be a botched negotiation between the government and PUP before the vote, the government has pledged it will now support the PUP's latest changes.

The new amendments, Mr Palmer said, would impose massive 250% penalties on power companies and electricity providers should they fail to pass on the full savings of the tax removal to consumers.

Environment Minister Greg Hunt
Environment Minister Greg Hunt

However, Environment Minister Greg Hunt said there were already penalties in place; but those penalties were lower than Mr Palmer's, and instead applied across all big carbon emitters.

The change in penalties came as Australia's two biggest supermarkets chains, Woolworths and Coles, and two biggest airlines, Qantas and Virgin, publicly declared they did not plan to pass on any savings.

While Qantas planned to remove a "carbon tax surcharge", it claimed the surcharge had not raised prices, and removing it would not lower the cost of flights.

Leader of Government in the Senate, Senator Eric Abetz, denied the government had "double-crossed" the minor party on the amendments, instead describing the setback as a "technicality".

He said the PUP amendments were withdrawn by PUP Senate Leader Glenn Lazarus on advice from the Senate clerk.

Senator Abetz said the government had agreed with the PUP changes earlier in the morning, and he hoped the repeal bills could be introduced to the House of Representatives on Monday and passed by the Senate by the end of next week.

The confusion capped off a messy week for the government, with the new Senate flexing its crossbench muscles through blocking gags on debate and voting down key bills.

Motoring Enthusiast Party Senator Ricky Muir marked his independence from the PUP by voting against a bill to remove the $2.5 billion Australian Renewable Energy Agency.


Motoring Enthusiast Party Senator and occasional Palmer ally Ricky Muir,
Motoring Enthusiast Party Senator and occasional Palmer ally Ricky Muir,


The government's repeal of income tax cuts Labor brought in alongside the carbon tax was also cut short, with Labor, The Greens and PUP senators voting that down as well.

That move saw more than $1.5 billion in savings from removing the tax cuts, which start next year, cut from the government's budget targets, further entrenching the government's troubles in meeting its target of a budget surplus in 10 years.

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