Saturday, May 7, 2011

Sack the Treasury head, make Victoria look good

ARE you very trusting of the way politicians handle taxpayers' money? Do you fear a lot of government spending is wasted on vote-buying, frippery and gimmickry? Do you want to pay higher taxes?

Do you worry about pollies running big budget deficits and racking up too much government debt? Do you think state politicians are more fiscally responsible than their federal counterparts or less? Do you really believe Labor is hopeless at budgeting but the Libs are fine?

I think I know your answers to these questions. Few of us want to pay more tax and all of us fear a lot of our taxes are wasted on spending that does more to advance the pollies' interests than the public's. Many of us don't like the sound of all that government debt.

If anything, state pollies are more of a worry than federal pollies. And you have to be terribly one-eyed to be confident all the fiscal irresponsibility is contained on one side of the political fence.

The hard truth is, democratic politics puts governments under enormous temptation to be financially irresponsible. All governments succumb to a greater or lesser extent.

Trouble is, although all of us believe government spending is excessive and wasteful as a general proposition, as soon as we get down to cases we change our tune. We can all think of particular problems governments need to fix, usually with wads of money. By definition, wasteful vote-buying spending must please some voters. And any attempt to cut spending usually meets an indignant outcry.

This wouldn't be such a problem if we were prepared to pay the taxes needed to cover all that spending, but we're not. We want to have our cake and eat it. And the pity is that, rather than set us straight on the realities, the pollies rarely resist the temptation to pander to our happy delusion that how much governments spend need bear no relation to how much tax we pay.

Election campaigns are about all the new spending both sides are promising, with never any suggestion of higher taxes. It's not uncommon for pollies to promise both more spending and lower taxes.

So the two sides of the budget have a natural tendency to pull apart. And what makes it trickier is that no one with any sense says they must always move in lock step. It's not a problem for the budget to go into deficit when the economy's weak. And, up to a point, government debt isn't a worry, particularly if it's helping to finance worthwhile infrastructure spending.

Paradoxically, this qualification makes it all the harder for governments to resist the temptation to let their spending and their taxing get too far out of line. When you think about it, it's a wonder governments don't get into more bother than they do. And here's the point: have you ever wondered why they don't?

It's because it's the duty of one department - Treasury - to hold the show together. Every other department is busy urging the government to spend money, and only one department is trying to hold the line, minimise the need for tax increases, oppose wasteful spending and avoid the accumulation of excessive debt.

There's never any shortage of people from spending departments willing to bad-mouth Treasury, but that's because treasuries are the taxpayers' champion within government.

Treasuries have a long and honourable history of fighting hard in defence of fiscal responsibility, of keeping their governments out of financial trouble. When you think of it, the strength and persistence of this ethos over the decades is quite remarkable.

Of course, to be effective in their efforts, treasuries rely heavily on the effectiveness of the treasurers who lead them. And, even assuming the treasurer is up to it, he or she relies on the support of their premier or prime minister in the unending battle with ministers who just want to keep spending and hang the consequences.

Without a premier with the wit to understand the essential role played by Treasury and its treasurer in keeping him out of financial trouble, even the most able and determined treasury won't be able to save a government - and the public - from its folly.

This makes it all the more remarkable that the first act of the new Premier and Treasurer of NSW, Barry O'Farrell and Mike Baird, was to sack their treasury secretary, Michael Schur. Schur was not a political appointment but a career public servant. He was diligent, capable and innovative. He'd prepared a particularly thorough briefing for the incoming government, full of proposals for reform.

Whereas the audit commissioned by the incoming Baillieu government was focused on proposing longer-term improvements, O'Farrell's audit seemed aimed merely at proving the previous Keneally government had been cooking the books, as O'Farrell had repeatedly claimed.

It seems that when the audit failed to find such evidence, O'Farrell covered his embarrassment by sacking Schur. What worthy candidate would want to succeed him?

Once again, the New South Welshpersons have made Victoria look good.