Bill Shorten dismissed the advice of a majority of his shadow cabinet when he announced Labor would only support an increase to the Medicare levy for people earning more than $87,000 a year.
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Fairfax Media has confirmed with three shadow cabinet ministers that during a shadow cabinet meeting a day before the opposition leader's budget reply speech, a majority of Labor MPs argued for the party to back the Turnbull government's across-the-board 0.5 per cent rise in the Medicare levy.
The leaking of details from Mr Shorten's shadow cabinet is rare, underscores the disquiet within opposition ranks, and will likely be seized on by the Turnbull government.
Nine MPs addressed the Wednesday meeting of the shadow cabinet about the Turnbull government's policy, which is designed to raise $7.8 billion over two years from July 2019 to help fund the National Disability Insurance Scheme.
Those MPs were Mr Shorten, Tanya Plibersek, Chris Bowen, Mark Butler, Brendan O'Connor, Jenny Macklin, Anthony Albanese, Shayne Neumann and Joel Fitzgibbon.
A majority of those MPs, from the Right and Left factions, told the shadow cabinet that given the federal budget was forecast to remain in deficit for years to come, the opposition should be fiscally responsible, bank all of the additional Medicare levy revenue and move on.
In addition, the MPs argued the NDIS was created by Labor and that to oppose a measure that helped fund it would be a politically risky move.
At the end of the meeting, Mr Shorten told the meeting: "It's fair to say no one is violently opposed, whichever way the leadership group decides".
No one in the room disagreed with that statement and the MPs understood they were not the final decision making body on the contentious issue.
The next day, the decision to only support the Medicare levy rise for higher income earners was taken by the smaller Labor leadership group.
Mr Shorten's position was strongly backed by deputy Labor leader Tanya Plibersek in that meeting, and the opposition leader prevailed.
In his budget reply that night, Mr Shorten announced Labor would reinstate the deficit levy and raise the Medicare levy to 2.5 per cent for people earning over $87,000 a year.
This would, the opposition leader said, raise $4.45 billion more revenue than the Coalition over 10 years and was portrayed as fairer.
One shadow cabinet member said the decision was "the toughest call the ALP had to make in responding to the budget" but the "the view in shadow cabinet was overwhelmingly to back all of the Medicare levy [rise]" given the amount of revenue it would raise.
"Bill sounded us out. It wasn't totally one way traffic but a strong majority said we should adopt it."
Another MP said that "it was a really tough decision and there was a lot of discussion. It was very tempting to take that revenue".
A third member of the shadow cabinet said the decision had made life harder for shadow treasurer Chris Bowen, given Mr Shorten also committed to spending an extra $22 billion on school funding in the speech.
"It's true that some people in shadow cabinet wanted to keep it all. Shadow cabinet was divided, so the leadership group made the call" on the day of the speech, the person said.
It's understood some Labor MPs were concerned about a fiscal gap opening up by opposing the rise in full.
When costings came back from the parliamentary budget office, those concerns were assuaged as Labor's proposal would raise more money in the medium term.
The leak comes just days after Mr Shorten's rival for the Labor leadership back in 2013, Anthony Albanese, offered an alternative budget reply speech in which he argued the federal opposition should have claimed victory after the Coalition's "ideological surrender" in the 2017 budget.
In contrast, Mr Shorten argued the document was not a Labor budget. Mr Albanese subsequently argued the substance of his speech was identical to that of his leader.
While the major measures announced by the Turnbull government in its second budget, including the rise in the Medicare levy, have been well received, last week's Fairfax-Ipsos poll showed Labor in the lead 53-47 in two-party-preferred terms.
Parliament returns for two weeks from Monday and will start debating the government's school funding plan, its plan to cut company taxes for businesses with a turnover of more than $50 million and other key budget measures.
