Labor’s franking credit policy wasn’t significant vote changer, by itself

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Labor’s pre-election policy of stopping most refunds of excess franking credits wasn’t a significant changer of votes by itself, but did contribute to the election loss, a review of Labor’s election campaign has found.

The ALP has released its Review of Labor’s 2019 Federal Election Campaign. It finds that “Labor lost the election because of a weak strategy that could not adapt to the change in Liberal leadership, a cluttered policy agenda that looked risky and an unpopular leader. No one of these shortcomings was decisive but in combination they explain the result”.

One of these factors was Labor’s franking credit policy, though an “internal statistical analysis” was not able to identify either the franking credits refund or negative gearing policies as “significant vote changers in their own right”.

Instead, “better-off” voters – higher recipients of franking credits and negative gearing concessions – swung towards Labor. But the policies did expose Labor to a “Coalition attack that these spending measures would risk the Budget, the economy and the jobs of economically insecure, low-income workers.”

“Voters most likely to be affected by Labor’s franking credit policy swung to Labor. Economically insecure, low-income voters who were not directly affected by Labor’s tax policies swung strongly against Labor in response to fears about the effect of Labor’s expensive agenda on the economy, fuelled by the Coalition and its allies.”

But the report argues that franking credits and other tax policies were necessary to pay for other promises.

“Beginning with $14 billion extra for schools, Labor had decided well before the election to commit large amounts of taxpayers’ money to new spending initiatives. The total additional spending over 10 years was more than $100 billion. Having decided to spend this much more than the Coalition, Labor faced two choices: increase the budget deficit and public debt by the same amount or announce new revenue-raising measures to cover the cost.”

“Going into an election campaign with unfunded expenditure of more than $100 billion would have exposed Labor to a highly effective attack of massively increasing budget deficits and debt. If the extra spending was to be funded by revenue measures, which was the Labor leadership group’s position, then alternatives to negative gearing and franking credit refunds would need to be found.”

As Labor had already made other commitments on tax rates, the “only alternative revenue source would be from lower and middle-income earners”.

However the spending promises were also somewhat counter-productive, with the “sheer volume” of announcements creating a “sense of risk in the minds of the main beneficiaries of Labor’s policies – economically insecure, low-income voters – about Labor’s economic management credentials.”

The franking credit policy was also a point of attack from the Coalition. “The Coalition badged the franking credits policy as the “retirees’ tax”, as if it applied to age pensioners as well as self-funded retirees.”

The review doesn’t mention that when Labor first announced its franking credit policy there was no exemption for Age Pensioners. A chronology of “relevant events in Labor’s time in opposition” lists “Labor announces it will halt cash payments of franking credits” on 13 March 2018. At that time Age Pensioners were not exempted from the policy. The timeline does not list the announcement on 27 March 2018 of the ‘Pensioner Guarantee’ by Chris Bowen – the exemption from the franking credit policy for Age Pensioners, and SMSFs with a pensioner as a member as at that date (excluding other SMSFs from the exemption going forward). Labor’s review report does not mention the Pensioner Guarantee.

Former Labor leader Bill Shorten, in a statement released on Twitter shortly before the review report was made public, said: “Were the universe to grant re-runs, I would campaign with fewer messages, more greatly emphasise the jobs opportunities in renewable energies, and take a different position on franking credits.”

Labor’s policy position on franking credits remains under review.

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