By Michelle Grattan
DESPITE the outcry from the opposition and in sections of the media, the Gillard government hasn't slain the sacred cow of middle-class welfare by its cuts to family benefits in Tuesday's budget. It has merely nicked its tail.
From the reaction, you'd think there was blood everywhere - a classic example of how a modest (and in this case responsible) initiative can quickly explode to unsettle a government.
Illustration by SpoonerCredit: Spooner
In a $2 billion saving over four years, the budget extended an existing freeze on the indexation of the cut-off limits for eligibility to family tax benefits A and B, and imposed a freeze on the threshold at which the basic benefit A is reduced. It also froze the end-of-year supplements these provide to all recipients.
The cap on Family Tax Benefit A means that in 2012-13, the top 1.6 per cent (31,000 families) of the 1.9 million families receiving the benefit will become ineligible, as will the top 0.6 per cent (9000 families) of the
1.6 million families on benefit B.
The freeze on the supplement - which is $726 per child a year for Family Tax Benefit A and $354 per family for FTB B - will mean families on FTBA will initially miss out on an increase of $18 a year per child; families on FTB B miss out on $11 a year. By the third year, these losses would have trebled but only to a little more than a dollar a week.
In associated changes, 700 families will become ineligible for the baby bonus in the first year.
Unsurprisingly, Tony Abbott has leapt on the measures. It's easy politics - easier to prosecute than the government's response yesterday that getting to surplus in 2012-13 is vital.
The small percentages suggest that few of the old Howard battlers whose votes Abbott seeks will be affected by the threshold freeze. But many will fear they may be. The opposition believes it will strike a chord by casting Labor as attacking ''aspirational'' families, and invoking emotive terms such as ''class war''. It all also feeds into people's concerns about the cost of living, which MPs on both sides of politics report are coming through strongly.
Labor points out that when the government first froze family benefits thresholds in 2009, Abbott, then families spokesman, backed the change, saying, ''The opposition recognises the need for some savings.'' It's a ''gotcha'' quote. Nevertheless, Abbott's anti-means testing line wasn't just dreamt up this week. In his book Battlelines, he wrote: ''Over time, means testing family benefits has significantly worsened the financial position of middle-income families, with far-reaching social and economic consequences.''
More generally, he argued that as a result of changing Western mores, ''government policies are no longer pitched to support families with children as a self-evident good but to households with low incomes judged therefore to be objectively in need''.
There are two ways of looking at family benefits: as a universal entitlement that should be given simply as a recognition of the social value of bringing up children - so not ''middle-class welfare'' - or as payment that should be targeted to those needing help.
A respectable case can be made that the tax/family payment system should discriminate in favour of children at every level of income. Indeed, Treasurer Wayne Swan makes such a case for most income levels. But when there are so many demands on the public purse, the argument for adding a ''needs'' element is compelling. The needs-based approach to family payments is especially appropriate, on fairness grounds, when the government is adopting a tougher stand to those on welfare benefits as part of its effort to get more people working.
There is another means test looming that will be difficult for Julia Gillard - the imposition of a means test on the health insurance rebate. Worth about $2 billion in revenue, this measure has been rejected twice by the Senate but will be brought back to Parliament soon.
The Senate will be on side once the Greens get the balance of power on July 1. The question mark is now in the House of Representatives because, with the opposition voting against, the support of four of the six crossbenchers is needed for a majority. Most are keeping the government on tenterhooks.
Greens MP Adam Bandt would vote in line with his party's support. Independent Tony Windsor has previously voted against the measure; fellow NSW independent Rob Oakeshott has voted both against and for. Neither now has a fixed position.
Queensland independent Bob Katter, who voted against in 2009, could not give a definite answer about what he will do but is worried about cost-of-living imposts. Tasmanian independent Andrew Wilkie and West Australian National Tony Crook won't commit.
The in-principle argument for means testing this rebate is strong. We have a universal health system financed by taxpayers; it is hard to make a case for them also having to subsidise people, especially the better off, going private. That is people's absolute right, but one for which they should pay. One practical argument is that means testing could put more burden on public hospitals, but that is not compelling at the levels proposed.
But the politics of the rebate means test could be toxic for the government, because health is such a sensitive issue for voters.
Many blame John Howard for getting the voters used to excessive government largesse. Labor should be given marks for some limited attempt to rein it in. One suspects, however, that it won't be. The ruckus over the family payments is a sharp reminder of how politics often and inevitably can get in the way of sensible policy.
Michelle Grattan is political editor.