Isra-Mart srl : Carbon price to fund tax cuts

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Tax cuts, pension increases and bigger welfare payments will be used to compensate households for a higher cost of living under the Gillard Government's carbon tax.

Climate Change Minister Greg Combet will today reveal that more than half of the revenue generated by the carbon tax on Australia's 10,000 biggest polluters will be spent on household assistance.

Though the initial carbon tax price is yet to be finalised, Mr Combet will also assert that millions of low and middle-income households will be better off under the proposed carbon tax, once it comes into effect from July 1 next year.

Importantly, the minister will reveal that the assistance to households will be permanent - in effect ruling out one-off payments or payments that erode over time in favour of tax cuts, higher welfare and increased pensions.

"The Government has already committed that every cent raised from the carbon price will be used to assist households, support jobs in the most affected industries and to encourage the transition to a clean energy future," Mr Combet will tell the National Press Club in Canberra today.

"We will put households first.

"There will be generous assistance to meet costs that may be passed on by the companies that are paying for their pollution.

"Assistance for pensioners and low and middle-income households will be a priority."

_The West Australian _ understands that the Government currently intends to put 55 per cent of carbon tax revenue towards households, with between 20 per cent and 30 per cent earmarked for industry compensation.

Under former prime minister Kevin Rudd's abandoned Carbon Pollution Reduction Scheme, 48 per cent of the revenue generated from pollution permits would have gone directly to households and 17 per cent towards offsetting the impact of the scheme on fuel prices.

Another 31 per cent would have gone to emissions intensive trade-exposed industries, including the liquefied natural gas sector, with the rest going to electricity suppliers and a climate change action fund. By making any assistance for the carbon tax permanent, the Government would create a headache for Opposition Leader Tony Abbott, who has vowed to rescind the tax if he won power.

His policy is for "direct action" to tackle climate change.
Without the carbon tax to pay for the various compensation payments, Mr Abbott would be forced to abolish the tax cuts and reduce welfare payments or find huge savings within the Federal Budget.