Monday, February 25, 2013

Swan tries to legislate for budget honesty

It's too much to hope this year's election campaign will be a "contest of ideas" or even a debate over the pros and cons of the parties' rival policies. But one thing I confidently predict: there'll be endless arguing over the cost of promises and where the money will come from.

For maybe 30 years the people who worry most about maintaining budget discipline - the econocrats in Treasury and Finance - have striven to discourage politicians from engaging in election bidding wars they don't know how they'll pay for. Last week this unending struggle took another lurch forward.

The econocrats have tightened things up by persuading their political masters to impose restrictions on their own freedom of action. They've had more success in this than you'd expect, mainly because, when it comes to being fiscally cavalier, governments are at a disadvantage to their opponents.

It's a rare case of the disadvantages of incumbency. Governments' actions are scrutinised more closely than oppositions' are, and they can escape neither the higher obligations of office nor the sober counsel of their bureaucratic advisers.

At present, the need for fiscal responsibility weighs heavily on the Gillard government, with its hugely expensive plans for a National Disability Insurance Scheme and the Gonski education reforms but, as yet, no indication of how they'll be paid for. But Julia Gillard has already accepted she has no choice but to spell out in the May budget a longer-term plan for funding them.

That being so, the new measures to increase budgetary "transparency" Wayne Swan announced on Friday are no doubt aimed at turning up the heat on Tony Abbott, who has his own list of expensive promises he hasn't yet said how he'd pay for, and may have been hoping he'd be able to skid through the campaign without revealing much.

The econocrats' long campaign to discourage irresponsible election promises began early in the term of the Hawke government, which was persuaded to add to the published budget figures for the coming financial year the "forward estimates" for the following three years. Surely this would be long enough to reveal any plans that could lumber the budget down the track? As it's turned out, it wasn't. In Swan's last few budgets he's been using a kind of fiscal bulldozer to push his ever-mounting spending commitments off into the invisible years beyond the forward estimates.

The next advance came with Peter Costello's charter of budget honesty in 1998. In the election campaign of March 1996, the Keating government failed to disclose how much the budget balance had deteriorated since the previous May. It also sought to conceal the size of its deficit by counting the proceeds from asset sales.

Costello made much of the "black hole" he discovered on coming to government and used it to justify breaking a lot of spending promises retrospectively declared to be "non-core". (In this he was using the same device Paul Keating used against the Fraser government when Labor came to power in 1983.)

As well as seeming to outlaw the use of asset sales to fudge the budget balance (while actually leaving a few loopholes Swan happily jumped through in this year's budget), the honesty charter sought to end for ever the possibility of black holes by instituting the "pre-election fiscal and economic outlook" document.

Whenever an election is called and the writs issued, the secretaries of Treasury and Finance have up to 10 days to issue, in their own names, updated economic forecasts and budget estimates. That's fine - though successive oppositions have used it as a reason to delay issuing any policy costings until they know what it says.

The honesty charter also sought to improve the costing of election promises by permitting both the government and the opposition to submit their policies for costing by Treasury and Finance during the campaign.

But this arrangement was biased in favour of the government of the day (which can get its policies costed by the same people before the campaign starts, thus minimising the chance of embarrassment).

Oppositions have refused to play by these rules. But, under its agreement with the independents, the Gillard government has established the Parliamentary Budget Office to provide all parties with Treasury-quality costing advice any time up to the election campaign.

Even so, it's not clear the Abbott opposition will use the office's services to make its costings public in good time before the election. Which brings us to the latest effort to tighten up on parties attempting to get through the campaign without adequate disclosure of where the money's coming from.

Labor will seek legislative approval for the budget office to conduct a post-election audit of each political party, publishing within 30 days of the election full costings of their election promises and their budget bottom line.

So, should any party make it through the campaign without honestly disclosing the cost of their commitments, their dishonesty or incompetence would soon be revealed. It's not hard to see this measure is aimed at forcing the opposition to be more forthcoming than it was in the 2010 election, when its unchecked costings proved to have a hole of up to $11 billion.

And, should Labor lose the election, the audit would prevent the new government from exaggerating the size of any "black hole" it left. To all but the politically one-eyed, Labor's ulterior motives don't stop such audits being a good move. The noose is tightening on irresponsible vote-buying.

But with competition between the parties becoming ever more intense - and voters ever more easily distracted by election trivia - it's hard to believe audits would eradicate budget dishonesty.