Economic Ministers: Missing in action

A column from the Fin Review:

During the next few weeks, the expenditure review committee (ERC) of federal cabinet will finalise the 2007-08 budget. One of the committeeâs tasks is to hunt down waste, but recent budgets show that the principal custodians for the taxpayer, the treasurer, Peter Costello, and the minister for finance, Nick Minchin, might as well be absent.

Minchin disclosed a peculiar view of taxpayersâ money when he recently discussed the commonwealthâs ten year, ten billion dollar take-over of the Darling-Murray basin. âOne billion dollars a year, which is less than half a per cent of commonwealth government expenditure – letâs keep it in perspectiveâ, Minchin told a senate estimates committee. As for Costello, as chair of the ERC he could require ministers to identify savings. Instead, for several years he has held the record of highest taxing treasurer in Australiaâs history.

Last week we heard the defence minister, Brendan Nelson, telling all that he had a dream. He had to spend an additional six billion dollars on two dozen Super Hornets to stop wings falling off ageing F-111s. It was really an expensive nightmare. No matter to Nelson or the ERC that defence personnel saw no problems with scrapping the F-111s before the F-35 joint strike fighters start to arrive in 2013. No matter that aviation experts say the Super Hornet is already an inferior aircraft. No matter that six billion dollars would save numerous lives if dedicated instead to health and road improvements.

Nelson will get his extra billions because Costello and Minchin have given up on expenditure restraint and their ministerial responsibilities.

The commonwealth uses a marginal approach to budget setting. Most programs, even those costing billions of dollars, are not closely examined from year to year. But proposals for additional expenses should be carefully studied before they are accepted. And the ERC should demand savings proposals, either developed by ministers or by treasury and finance departments.

In a budget of $220 billion dollars, governments should be able to find more than half of a per cent of spending which is wasteful or of dubious priority. That would leave up to 99.5 per cent unscathed. The Howard governmentâs first budget of 1996-97 – admittedly the coalitionâs first in 13 years – identified nearly $4.5 billion of savings measures for that year, 3.3 per cent of proposed spending. Total savings for the 1996-97 and the next three budgets were $27 billion.

There was less enthusiasm in Howardâs second budget; nevertheless, spending cuts totalled a respectable $14 billion over four years. Thereafter, the government neglected its responsibility to taxpayers. The 1998-99 budget identified only $63 million in cuts.

The budget for 1999-2000 seemed to offer new energy. Claimed net savings amounted to $2.5 billion for that year. But that was a nonsense figure: payments to the states were dropped from the budget when the GST was introduced; and, of course, spending the GST wasnât counted either. Genuine saving decisions – there were 28 of them – realised $111 million, out of $159 billion of spending.

From that time, the Howard government decided to hide its lack of commitment to spending cuts. Budget documents were changed so that the governmentâs soft approach to departmental waste could go unnoticed. Ever since, if you want to know anything about savings, you have to wade through hundreds of pages and compute the figures yourself. That is what accountable government now means: you do the counting.

If we do comb through the 355 pages of ERC and other decisions made in the lead up to the 2006-07 budget, we see that there were over 600 issues considered by ministers. Of these, 582 lead to total extra spending of $4.6 billion. New programs outmatched spending cuts by more than ten to one. There were no razor gangs; there was no effort to find more than a couple of worthwhile savings.

It seems the commonwealth has a new approach to budgeting. It is far removed from ZBB – zero-based budgeting – which requires ministers to justify every dollar of spending. The budget approach used by the Howard government is called JAM; it means âJust Add Moreâ. This is why ministers say that money is not a problem. It is why public servants, when talking about their next budget, use the phrase, money for JAM.

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steve
steve
14 years ago

When Howard flies into Brisbane supposedly to announce an upgrade to the Ipswich motorway and instead announces a four bridged bypass at a cost of $1 Billion Dollars extra and against the advice of the State Government, State Liberal Leader Bruce Flegg and ‘Gridlock’ Cambell of Brisbane City Council we can declare the plot well and truly lost.

Cortexvortex
Cortexvortex
14 years ago

It reminds of the US senate quote : “a billion here, a billion there and soon you’re talking about some real money!”

Bill Cushing
Bill Cushing
14 years ago

Well said, Tony.

Cancelling the $10b back-of-envelope ‘water plan’ would be a good start on future savings.

Killing off Rudd’s $4.7b broadband rort would be another (if that lot get in).

Etc

A billion here, a billion there, savings can soon amount to real money.

But I doubt if either side would be interested in a list of workable suggestions such as you or I could readily compile.

Especially with that ‘Future Fund’ honey pot just sitting there.