Monday, August 16, 2010

Blowing the whistle on unfair costings game

I refuse to dignify the parties' predictable squabbling over the cost of each other's promises by taking it seriously. I don't know who's right and I don't much care. There are more important things to worry about. It's a three-yearly farce that drips with hypocrisy and fake importance.

I'm not sure why the parties always fall to furious arguing about Costing Blunders. Perhaps it's always started by the government of the day - because it's seeking to exploit the advantage of incumbency - and whoever's in opposition feels obliged to muddy the water by sniping back at the government.

These arguments are so arcane I'm sure the swinging voters at whom election campaigns are aimed take zero interest. So perhaps the pollies carry on about costs because it makes them look active and responsible, while distracting journalists from inquiring into more important matters.

It's the gross unfairness of the game that turns me off. Governments have year-round access to Treasury and the Department of Finance to get their costings done by the experts, using a process of iteration: "If you do it that way, minister, it will cost you 2X, but if you change this detail here the cost falls to X."

Governments pepper the econocrats with what-if questions in the weeks before the start of the election campaign. So only if they really cock things up are their costings ever found wanting when their promises are submitted to the people who costed them in the first place.

Oppositions, on the other hand, get no access to such official advice. They have to hunt for clues as to what things cost or pay an accounting firm big bucks to do their costings and, likely as not, get them wrong because the relevant information is so closely held by the econocrats.

This game of both sides submitting their promises to the econocrats for costing arose from Peter Costello's Charter of Budget Honesty. He knew it was stacked in the government's favour. Labor whinged repeatedly about the unfairness of it all and sought to minimise the (high) risk of embarrassment by submitting its costs at the very last minute.

In power, however, Labor's reforming zeal evaporated and it has delighted in turning the screws on the Libs as they did on it. And these guys wonder why they have lost so many supporters and are struggling to win what should have been their easiest-ever election.

Lemme give you a tip, Wayne: "We're no worse than the other lot" isn't a great rallying cry.

In opposition Labor lacked the courage to challenge this unfair arrangement but, fortunately, the Natural Party of Government had no such inhibitions. It has used the occasion of the leak of a flaw in its costings (more likely to have come from Labor than the econocrats) to refuse to submit further promises.

Good. If oppositions refuse to play ball, some government will be obliged to introduce a fairer system if it wants to stay in this silly game.

Because they're not in government with the econocrats' advice on tap, all oppositions have difficulty saying how they would pay for their promises. They are never game to give the honest - and quite satisfactory - answer: if we win, Treasury will tell us how - that's what it's paid to do.

Treasury and Finance know where all the waste is. They also know how to tweak promises in ways that greatly reduce their cost.

So great is the pollies' proclivity for solving problems with a chequebook, however, that neither side has been able to stick to its vow to find savings to cover all the cost of its promises over the "forward estimates" (that is, until June 2014).

They searched out a loophole: promise to spend money beyond the forward estimates. According to my colleague Jessica Irvine's estimates, by last Wednesday Labor had made promises worth $6.6 billion in this never-never land, while the Libs had IOUs worth $6 billion.

No doubt both figures are higher by now. It's remarkable to think the punters' votes are being bought with promises to spend money after the next election.

While we're on the subject of government spending - when have we been off it ? - I trust you noted Tony Abbott giving notice at his campaign launch that, should he win, he'll pull the standard trick of incoming governments: declare a fiscal crisis and introduce a horror budget.

He said he would set up a "debt reduction taskforce" in his first week to "get to the bottom of Labor's waste and mismanagement, to see the real state of the government's books and to prepare a comprehensive plan to start repaying Australia's $90 billion debt". In one month an economic statement would be issued "outlining Australia's risks and opportunities and the new government's response to them".

It's known in the trade as Doing a Mother Hubbard. You come to office, discover to your horror the cupboard is bare, and say you have no choice but to break promises and make emergency spending cuts you didn't mention in the campaign.

It's a harder trick to pull off these days because the Charter of Budget Honesty's "pre-election economic and fiscal outlook" statement, signed off by the econocrats early in every campaign, is designed to ensure everyone knows the latest state of the books.

But Abbott would claim the extent of wasteful spending was far worse than expected. In politics, a wasteful program is one your heartland supporters have no interest in.

That's the point. Though some effort would be made to reduce net spending, the objective is to cut out your predecessors' pet programs and replace them with your own.

Should Abbott win, he's already taken out fiscal insurance.