Auditors take your seats! Old money becomes new money when it’s time to pay out election promises

By Verona Burgess

Friday August 9, 2019

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VERONA BURGESS: THE OBSERVER All political parties play fast and loose with spending promises during election campaigns but once the rubber of government hits the road afterwards, it is worth taking another look at them, especially with the Australian Public Service having to cough up the extra $1.5 billion from the extended efficiency dividend to pay for them.

The final budget outcome for 2018-19 is still a minor mystery but it has to be released by the end of September.  You can be sure the numbers will happily shore up the promised surplus for 2019-20, especially given Prime Minister Scott Morrison’s most memorable linguistic contortion of the campaign, “We’ve brought the budget back to surplus next year”.

The coalition even promised its election commitments would add to the cumulative surpluses outlined in the 2019 Pre-election Economic and Fiscal Outlook statement by a grand total of $102 million over the forward estimates. That is quite some magic pudding.

The extended efficiency dividend (election commitment COA 066) is budgeted to save $135 million in 2019-20; $379 million in 2020-21; $505 million in $2021-22; and $493 million in 2022-23, so a total of $1.512 billion over four years.

The dividend will comprise 2% in 2019-20 and 2020-21; 1.5% in 2021-22 and 1% from July 1, 2022 (most public servants will be taking the latter two projected reductions with a large pinch of salt). There is some mercy for agencies with fewer than 200 average staffing levels and a handful of others.

The illusion of generosity

A classic feature of election promises (and, indeed, budgets) is governments’ ability to fund new things from existing pots of unspent money and repurpose funds already announced but not yet “allocated”, even if they are not technically “underspends”. It’s an illusion of generosity that is supposed to spread the love (or should we say pork), especially in regional grants. What it actually does is make people distrust governments even more than they currently do.

So, there is “new” money, and then there is previously unused “old” money swept into the coalition’s 2019 election commitments in its document, “Our plan to deliver budget surpluses without increasing taxes”.

Where it’s all going

For example, in the table that includes efficiency dividend savings, we learn that the $500 million Agribusiness loan facility (election costing number COA 001) is having its terms and conditions changed to provide for restocking and replanting — in short, no new money.

There will also be an unspecified amount for loans for forestry plantation developments (COA 006) to be drawn from changing the mandate of the Regional Investment Corporation. Again, no new money.

The National Water Infrastructure Development Fund took quite a hammering. Redirected from it will be $100 million to state and territory governments for water security projects (COA 009); the Department of Agriculture will absorb associated costs. Another $7 million will be offset from the fund for rural financial counselling for drought-affected small businesses (COA 013). And a further $14 million will be redirected to expand the drought communities program (COA 040). So again, no new money.

Over in Department of Defence, the $150 million cyber security package (COA 016) will all be absorbed by Defence, as will the extension to the Defence Home Ownership Assistance Scheme (COA 017) and $30 million for the Tasmanian Defence Innovation and Design Precinct at the University of Tasmania (COA 018). Eligibility for The Defence Homes Insurance Scheme will be extended with no extra money (COA 048)

In Energy, the $100 million Australian Recycling Investment Fund will be established from existing resources of the Clean Energy Finance Corporation (COA 22).

And $10 million will be spent in grants for farmers from the existing $50 million energy Efficient Communities Program (COA 23).

Health does quite well for new money from the election costings but Seafood Industry Australia will receive $600,000 over two years for additional mental healthcare support for commercial fishers (COA 027) — absorbed by the department through the National Suicide Prevention Leadership and Support program.

The Department of Social Services will also pay for the $45 million National Disability Information Gateway (COA 042).

And in the Treasury portfolio, the government will provide $100 million equity in the Australian Business Growth Fund (COA 047) but again no newly budgeted money.

So, on top of the new money for commitments to be funded from the increased efficiency dividend, another $1.056 billion will be drawn from existing or repurposed funds over four years.

But wait, there’s more. Further down is another list of spending and, you guessed it, there’s no new money there either.

Another $495.2 million worth of grants for 53 lucky projects will be funded from previously “unallocated” money in the Infrastructure Investment Program’s Urban Congestion Fund. A further $84 million will be spent on seven commuter car parks from “unallocated” money in the program’s Commuter Car Park Fund. Then there are the Roads of Strategic Importance, also part of the Infrastructure Investment Program, where 36 more listed projects will get $111.4 million of the previously “unallocated” money.  So, a subtotal of some $690.6 million not of new money but “allocated” from the Infrastructure Investment Program — after all, why not commit to the grants before the election rather than let the Opposition get its grubby hands on the money if it had won government.

In addition, Tasmania will also benefit to the tune of $40 million for a new ship loader at the Port of Burnie from “unallocated” money from the Tasmanian Infrastructure Investment Program.

Unspecified “unallocated” funds had also been committed, we were promised, from the Community Development Grants Program, the Community Sport Change Rooms and Swimming Facilities Fund, the Environmental Restoration Fund, and the Indigenous Advancement Strategy.

(Separately, there will be $4 billion available to whichever Victorian government, if any, decides to build the controversial East West Link, listed as a $1 billion increase to the contingent liability, which is counted as a different pot of money in the budget).

So, not including the East West Link contingency, that’s at least another $730 million subtotal being spent from previously “unallocated” money.

This brings what is effectively the “no new money” election spending announcements to at least $1.786 billion in the next four years — on top of the more than $1.4 billion effective “new money” commitments being nominally paid for from the extended efficiency dividend.

That could easily keep the auditors quite busy.

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