MPs urge Labor to increase GST - Sydney Morning Herald

KINGMAKER independent MPs Tony Windsor and Rob Oakeshott are putting the squeeze on the Labor government to get rid of middle-class welfare entitlements and increase the GST.

The two government allies, worried about the shaky economy, plan to use their muscle to pressure Prime Minister Julia Gillard and Treasurer Wayne Swan to face unpopular decisions before next year's election.

Mr Windsor told the Labor leadership pair during a weekly meeting it was time to wean Australians off middle-class welfare if the government was ''serious about the surplus''.

Mr Windsor also backed former New South Wales premier Nick Greiner's call to examine and widen the scope of the GST, saying he supported raising the tax to 11 per cent. He urged the government to take seriously the GST review, led by Mr Greiner and delivered to Mr Swan on Friday.

Mr Greiner said the tax was failing to deliver the revenue expected of it. He proposed a national debate to consider applying GST to fresh food, health and education services.

Mr Windsor said it was time to address the ''elephant in the room''.

''There is no reason in the world, apart from the sheer politics of it, that it couldn't be objectively looked at. I'd be very supportive of it,'' he said.

But the review is certain to fall on deaf ears on both sides of federal politics as any change to the GST is considered political poison.

Mr Windsor conceded raising the GST rate was not his preferred tax reform. He told Ms Gillard and Mr Swan in a meeting held with Mr Oakeshott last week that it was time to ''bite the bullet'' and remove large parts of the middle-class welfare handouts. This included the baby bonus, which the government announced in last month's mini-budget would be reduced from $5000 to $3000 for the second and subsequent child, and family-based cash incentives implemented ''during the Howard era as straight-out vote buyers, when the mining boom was rolling and we had the cash''.

''It is a poison pill because once something is there it is tough to take it away. But it is time,'' he said.

Mr Windsor said he believed Labor would seriously consider deeper cuts to family entitlements if they ''really, really want to chase that elusive surplus''.

Ms Gillard flatly ruled out any plans to increase the GST, saying she was looking at how best to distribute the tax.

Mr Oakeshott kept out of the spotlight yesterday as Ms Gillard was forced to intervene in a potentially explosive situation between the independent and a cabinet minister. Ms Gillard confirmed Federal Resources Minister Martin Ferguson would drop plans to sue Mr Oakeshott for comments made in The Sydney Morning Herald criticising the government's mining tax.