Implementing budget measures – we got this

By Stephen Bartos

Wednesday October 7, 2020

Marble entrance foyer of Parliament House in Canberra. Adobe

For all the talk about this being the most important Australian government budget since World War II, it will be business as usual for much of the public service, says Stephen Bartos.

Although there is record spending, debt and deficits, the revenue measures are primarily a change in timing of something already planned, and most of the spending is along tram tracks already laid down in earlier COVID-19 response measures.

Bringing forward a tranche of tax cuts was a centrepiece of the budget. It is controversial politically, but administratively straightforward. Changes to tax rates are bread and butter work for the Australian Tax Office.

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The tax cuts are the sort of policy change a government likes to publicise. There will be extensive promotion, possibly a government advertising campaign around them. This will involve additional communications work, but nothing the Treasury and ATO have not done before.

If there were a whole new tax, as when the GST was introduced, or radical changes to rules around deductions and refunds, there would be much more involved. The introduction of the Goods and Services Tax involved hundreds of people in long and arduous preparation of new processes, procedures, IT systems, forms and reporting.

These cuts are reasonably simple by contrast. They don’t involve having to create whole new systems. They have a big impact on expected revenues but won’t fundamentally change taxpayers or the kinds of tax returns they prepare.

The work of doing the actual tax returns falls to taxpayers and their tax agents – the days when ATO staff went through and checked each individual tax return are long gone. The current systems based on risk management of returns prepared by the small army of tax agents and advisers will continue.

On the spending side there are more complexities and possible risks.

The proposed business subsidy scheme for young people will need the responsible department to develop application processes and gateways, eligibility criteria, assessments against those criteria, and careful monitoring.

A risk with business subsidy schemes like this is that they have a propensity to attract chancers and grifters who take any money on offer and then disappear. Acquittal and follow up by the public servants managing the scheme is needed to mitigate this risk.

A raft of other business subsidy and assistance programs announced in the budget involves similar risks. The last thing the Australian government needs is a proliferation of sports rorts scandals – so probity in administration of the grants will be at a premium.

The huge spending boost for infrastructure is less problematic. For the commonwealth it involves payments to the states under s.96 of the constitution. Although this spending is historically huge, the infrastructure spending is small beer compared to other s.96 payments for health and education. The commonwealth will not be responsible for the actual delivery on the ground – it is leaving that to the states and territories. This is a sensible strategy – the closer to the coalface of roads, bridges, culverts and paths, the more likely a government is to get them right.

There are, however, risks. Most of the infrastructure spending announced for the GFC stimulus package, including school building, was not spent until way past the time it was most needed.

Major transport infrastructure can be delayed for all sorts of reasons – weather, geological obstacles, industrial action, local planning objections, pressure on resources from other competing projects, failure of mechanical equipment, slow delivery of key overseas components, and myriad others.

Keeping on top of these will primarily be the responsibility of the states and territories concerned – but will also create headaches for commonwealth public servants. Although the Treasurer announced the funds would be provided on a “use it or lose it” principle, a hard line approach to reallocating unused funds to other jurisdictions will be difficult to sustain if popular and economically worthwhile projects are delayed for reasons outside of the relevant state or territory government’s control.

However, many of the other large spending initiatives will be low risk and can be delivered efficiently and effectively. The $500 personal payments to aged pensioners and welfare recipients will be welcome and can be rolled out through current payment systems quickly. A new JobMaker program aimed at young people will overtake JobKeeper, which terminates in March as scheduled. This is close to business as usual.

Where the bigger risks arise is in the smaller measures in areas such as the environment, social housing, gas. These have the potential for misallocation of resources – one possible result of the rush to get funding out the door to help with economic recovery is that a considerable proportion of the funding will be wasted.

This is a far worse problem, with programs targeted at specific industries or policy areas than it is for income support payments or broad-based business subsidies. Where payments are widespread, the aggregate impact of the decisions made by households or businesses on how they spend their money is likely to be more or less in line with where the dollars can be put to their best use. When payments rely on a ministerial or public service decision on allocations to a small sub-group of the community, there is a much higher risk they will not allocate it well.

A further potential risk is the constitutionality of last-minute spending measures. Since the Williams cases the commonwealth has had to be much more careful in checking that proposed programs fall within its constitutional powers. The appropriation bills provide legal authority for spending, but that won’t save a program from challenge if it is outside the constitution.

For proposals considered in the very thorough Expenditure Review Committee and Cabinet processes, this will have been considered.

There may be others less well thought through. We can’t tell whether there are any, or what they are, due to budget secrecy. However, almost every recent budget under either the Coalition or Labor has included last minute additions. In the rush to add them in, constitutional authority may not be considered. Public servants faced with having to implement an unexpected budget add-on would be well advised to check it falls within the powers of the commonwealth under section 51 of the constitution.

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