Exclusive: Ricky Muir, John Madigan and Nick Xenophon request extra $200m to help restructure industry, but are told they must pass family tax benefit cuts first

This article is more than 4 years old

This article is more than 4 years old

The innovation minister, Christopher Pyne, has told crossbench senators the government will only provide extra assistance for the car industry if they back down on their opposition to cuts to family tax benefits paid to low income families.



Pyne made the link in a meeting last week with crossbench senators Ricky Muir, John Madigan and Nick Xenophon and representatives from the automotive industry.

The meeting was discussing a plan to provide an additional $200m over four years under the Automotive Transformation Scheme (ATS) and broaden its criteria to assist new companies that might employ some of the tens of thousands of car workers who will be made redundant when the major carmakers leave Australia in 2017.

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But some attendees were surprised when Pyne told the senators that unless Labor and the crossbench passed the family tax benefit cuts, there would be no expanded ATS.

The independent senator Nick Xenophon, who like Pyne, comes from South Australia which will be hard hit by the closure of General Motors Holden, suggested he could see some rationale for the linkage.

“At this stage these are very preliminary negotiations, but in my view if you can stem the tsunami of job losses coming from the closure of the automotive industry, that would have a big impact on the number of families on welfare, and that’s a good thing,” Xenophon said.

But the Motoring Enthusiast senator Ricky Muir is understood to have told the treasurer, Scott Morrison, and Pyne that he believes the two issues should be treated entirely separately.

Facebook Twitter Pinterest Crossbench senators from left; David Leyonhjelm, Dio Wang, Ricky Muir, John Madigan, Bob Day and Glenn Lazarus at the senate doors of Parliament House on Wednesday. Photograph: Mike Bowers/The Guardian

And Victorian senator John Madigan said “the welfare of Australian families and Australian manufacturing are both important to me, and I will not undermine either to advance the other.”

The Coalition proposed deep cuts to family tax benefits in its first budget in 2014 – but about $6bn of those savings remain stalled in the Senate, opposed by Labor, the Greens and a majority of the crossbench.

Morrison, who was responsible for the cuts in his former portfolio of social security, has been in negotiations with the crossbench over a compromise plan, softening some of the cuts and forgoing almost half of the savings.

A Senate committee has been looking at what the government could do to help auto workers facing redundancy when the car industry closes in Australia.

The government originally planned to cut $900m from the ATS as the car industry prepared to close and the Coalition declared the “age of industry entitlement’ to be over. But this year it partially reversed that decision, budgeting to spend $105m, and diverting the rest back into Treasury coffers.

Under the plan now on the table, another $200m would be available to around 20 companies – most of them not currently eligible for the payments. They could include businesses making aftermarket parts and accessories or low emission components or engines for export. The funding would help component makers diversify and continue in business even after the big carmakers close.

Last week’s meeting was attended by the Motor Trades Association, the Federal Chamber of Automotive Industries, the Australian Automotive Aftermarket Association and Bosch Australia.

The government has also hypothecated the savings from the cuts to family tax benefits as a way to “pay” for a $3.5bn childcare shake-up that was the centrepiece of this year’s budget.

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In recent talks with the crossbench, Morrison and his advisers have offered to ditch the plan to freeze the indexation of family tax benefit part A payments (received by families earning up to $100,000), which is booked in the budget to save $2.6bn over four years.

Instead of stopping family tax benefit part B (paid to sole parent and single income families) when the youngest child turns six (the current cut off is 18) they have floated a compromise cut off when the youngest child turns 12 – a move that would significantly erode the estimated $1.8bn in savings from that change.

Annual end-of-year “supplements” paid to family tax benefit recipients would over time be rolled into the fortnightly amounts that families receive, with proposed cuts part of the phase in.

And the negotiations have also included the promise to pay an additional $1,000 a year to stay-at-home parents with a child under one, which was also promised as part of new prime minister Malcolm Turnbull’s coalition agreement with the National party.

Pyne declined to comment on last week’s meeting.