NT Chief Minister: agencies must tighten belts but no ‘savage cuts’ required

By Stephen Easton

Thursday January 17, 2019

The Northern Territory government is moving into belt-tightening mode guided by former Western Australian Treasury boss John Langoulant, who says the public service can no longer see budgets as rough estimates.

Public sector chiefs will have to front the government’s budget review subcommittee and justify the programs they run against four priorities, in a “root and branch examination” of all spending that aims to halve expenditure growth and turn around the territory’s increasingly parlous financial position.

NT CM Michael Gunner

Chief Minister Michael Gunner, who chairs the budget review committee, said programs would be assessed in terms of their contribution to new jobs and investment; community safety and cohesion; government transparency and integrity; and a “generational change” policy that aims to reduce demand for government services in future.

“Our plans for generational change – investing in kids, investing in remote housing, investing in health and education after CLP cuts, properly funding and resourcing police, and fixing the broken youth justice system to get people back on track – are all investments which are needed to curb demand for government services in the medium and long term,” he said in a statement.

Gunner said this kind of “social reform” was crucial to the budget repair plan, because blowouts were most common in policing, healthcare and corrections.

After the public service chief executives front up and make their cases, the subcommittee will prepare cabinet submissions on where the savings should be found in this year’s budget. The goal is to balance the books “over the medium term” in line with a plan for budget repair being devised by Langoulant.

Gunner promised to “hold CEOs and agencies to account around their budget allocations” but did not say exactly how, the ABC reports. The former head of WA Treasury, however, noted some options from his home state: entities that overspend could lose a lot of control, and heads could roll in some circumstances.

Langoulant, who served WA governments of both persuasions from 1995 to 2004, said public service leaders would have to lead a change of mindset and culture around what budgets mean. Financial allocations could no longer be seen as “an estimate which can be broken” for the plan to succeed.

‘Not about slashing and burning jobs’

The Chief Minister said the expenditure review was “not about slashing and burning jobs and programs” in the public sector, or raising power prices.

One key recommendation from Langoulant’s interim report, released in mid-December, was that cutting expenditure growth from about 6.2% to 3% would make the budget more manageable, particularly in terms of getting government debt under control.

Gunner blames the previous Country Liberal government for spending too much in times of growth, and a recent reduction of about $500 million in annual GST revenue, as does his budget repair adviser.

“Over the past 20 years the territory has incurred fiscal deficits not only during contractions in the economic cycle but also in times of expansion,” said the interim report from Langoulant, who recently ran a special inquiry for the WA McGowan government with similar aims towards budget repair, in somewhat similar circumstances.

“This practice has complicated the budget and debt management task in the current economic downturn.”

“When the government came to power in August 2016, the territory had been enjoying the highest level of untied GST revenue since the GST commenced in 2000-01. However, in the following 18 months, encompassing the 2017 and 2018 budgets, a total of $3.4 billion was wiped off the territory’s share of GST between 2017-18 and 2021-22, without a corresponding reduction in the territory’s expenditure needs.”

Langoulant goes on to note a billion-dollar reprieve came in the form of “Commonwealth assistance and time-limited guarantees” after the passage of the federal government’s “Making Sure Every State and Territory Gets Their Fair Share of GST” legislation in November, but says NT will still feel a major impact from the yearly reduction of over $500m.

“With a relatively small own-source revenue base, the Territory Government is reliant on the Commonwealth for $4 in every $5 of revenue and has little capacity to withstand fiscal shocks of this magnitude.

“The reduction in GST revenue is a major burden for the Territory’s finances. Unlike larger states that have more diverse and robust sources of other revenues, the magnitude of the reduction in the Territory’s GST is pronounced and the impact harder to defray.”

“This fall in GST revenues has also coincided with a pronounced moderation in the Territory economy, reflecting the transition of one of the largest ever projects in the southern hemisphere, the Ichthys liquefied natural gas (LNG) project, from the construction phase with a peak workforce of over 10 000 to the operational phase with a workforce of around 400.”

The final report is due “in coming months” and will provide the complete long-term plan, Gunner said.

“The economic and fiscal challenges the territory is now facing have been decades in the making, and they will require sustained implementation of targeted, longterm plans to overcome.

“We will need to make tough but smart decisions to bring the budget back to operational balance in the medium term.

“I can guarantee Territorians we won’t be putting the economy and jobs at risk by following the advice of those calling for savage cuts to the public service.”

Top image: Flying the NT flag. Photo: facebook.com/ntgovernment

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