MPs beg Prime Minister to rethink paid parental leave scheme

"There should be changes to indexation arrangements and eligibility thresholds": Tony Abbott. Photo: Alex Ellinghausen

"There should be changes to indexation arrangements and eligibility thresholds": Tony Abbott. Photo: Alex Ellinghausen

Prime Minister Tony Abbott is being urged by Liberals to follow his own advice by scaling down his signature $5.5 billion paid parental leave scheme in the interests of sharing the burden in the budget.

The call came as the government refused to hose down speculation of a special deficit levy and actively ramped up talk of big changes to reduce the welfare bill through cuts to the growth rates of a slew of pensions and the introduction of a harsher means test for family payments.

It has also signalled the widespread introduction of co-payments, especially in health, with Mr Abbott arguing that price signals are needed in the health system to remind Australians that "free services to patients are certainly not free to taxpayers".

Liberal MPs contacted on Monday said the government was setting up "an unwinnable argument with voters" if it proceeded with a temporary deficit levy to help balance the budget, while also sticking to a paid parental leave scheme that would give mothers full pay for six months, capped at $150,000 per year.

"I think that's an argument we cannot win," one MP said.

Another Liberal said he was encouraged that voters had understood the messages about sharing the burden but the government could not expect people to hear that message and then turn a blind eye to such a generous parental leave scheme.

"They're saying yes its tough out there, and the budget needs to be tough, but then they say 'what's he [Mr Abbott] going to do about his parental leave scheme?'," he said.

One MP said: "I think it's very very difficult to imagine doing both [deficit levy and PPL] and there's a real sense that the PM needs to be also sharing in the budget pain by dropping his beloved PPL scheme."

The electoral reality check underscores the difficult balancing act being attempted by the government with Mr Abbott using a speech last night to the Sydney Institute to signal widespread changes, including an admission that pensions will be changed in just three years with lower indexation and an older eligibility threshold.

"To keep to our commitments, there will be no changes to the pension during this term of Parliament but there should be changes to indexation arrangements and eligibility thresholds in three years' time," he said.

"There are other social security benefits where indexation arrangements and eligibility thresholds should be adjusted now so that our social safety net is more sustainable for the long-term.

"Such benefits won't be less tomorrow than they are today but the rate of increase will be slower and needs to be slower if a comprehensive social safety nest is to be preserved for everyone's future."

The comments represent the clearest indication from the most senior level of government that pensions for the aged and the incapacitated will be progressively cut as a proportion of male average weekly earnings.

With the government's first budget just a fortnight away, Mr Abbott signalled serious inroads would be made into the burgeoning family payments system used by previous governments to buy votes in middle Australia.

In the gun are family tax benefits, with a sharp reduction of $50,000 in the allowable income threshold taking eligibility from the current $150,000 per year for families to $100,000.

"Not for a second would I label families as 'rich' just because they are earning $100,000 a year," he said.

"But the best way to help families in $100,000 a year is long-term tax relief and more business and job opportunities, not social security handouts."

He said he expected people would grumble but promised that everyone would be called on to make a sacrifice, "including high-income earners such as members of Parliament".

The opposition, which suffered a relentless attack from Mr Abbott during the Rudd-Gillard years over broken promises, slammed the suggestion of tax increases and pension changes, branding the proposed deficit levy as a "deceit tax" by a government with such "twisted priorities" it would take money from pensions and the disabled while funding millionaires to have babies.

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