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Legislative Council - Fifty-First Parliament, Second Session (51-2)
2008-07-24 Daily Xml
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APPROPRIATION BILL

Second Reading

Adjourned debate on second reading (resumed on motion).

(Continued from page 3711.)

The Hon. R.I. LUCAS (16:52): When I was last speaking on the bill, I was warning about the importance of monitoring our net financial liabilities, in particular our net debt and our unfunded superannuation. I think I was dealing with not the warnings of opposition politicians but the warnings of credit rating agencies, such as Standard & Poor's.

At the time of the state budget this year (5 June), Standard & Poor's issued a statement that was generally supportive of the maintenance of a AAA credit rating and a stable outlook for South Australia. That is a credit to our state's financial position, and I acknowledge that. However, in amongst the words is a cautionary note from the rating agency, as follows:

However, it will become more difficult for the state to retain the current rating if it exceeds its debt level forecasts.

What that rating agency warning is saying is, 'Hey, the former government had very significantly reduced the net debt in South Australia, and for the first time we are now seeing a very significant increase in the level of net debt in South Australia.' As I have said, there has been a 150 per cent increase in just four years, from a base of $2 billion, and an increase of $3 billion on top of that to $5 billion in terms of net debt.

Standard & Poor's is saying that that is about the limit and, if this government and this Treasurer were to continue in that way, that may well jeopardise the state's AAA credit rating. That is a very strong warning sign in rating agency speak, if I can put it that way, to the Treasurer and to the government in relation to the management of the state's finances. As I have said, whilst they do not report on it, hopefully, they, too, would have done the same analysis to indicate that the net lending position in this budget has a $2.2 billion deficit over four years and the cash position is in deficit by $2 billion over four years, and the only measure where there is any modest surplus is using the net operating balance.

They will be mindful also of some of the warnings that are being made that some of the savings programs by the government are proving to be illusory. Again, I will not go into all the detail this afternoon, but the work of the Budget and Finance Committee has demonstrated that, for example, the claimed savings from the much vaunted shared services savings initiative or the Future ICT program are, in significant part, illusory. We have been warning for some time that the shared services initiative was not going to achieve the savings that were claimed, and we are certainly seeing evidence of that at the moment. A number of agencies have already said that they have already made those savings that are now being attributed to the shared savings initiative and that the Under Treasurer has allowed them to keep those as their own particular savings required by Treasury, as opposed to a centrally controlled shared savings initiative.

The Future ICT has been a complete farce. We took evidence again only this week from the Police Commissioner, who again confirmed the evidence we have had from a number of departments that there was no saving for SAPOL in relation to Future ICT. These departments had an attributed or notional cut; that is, Treasury said, 'You are going to save money from Future ICT, and your budget is cut.' They said to Treasury, 'Well, I'm sorry, but we actually haven't seen those savings. We're going to have to therefore cut our budget in other areas,' and that is what they have had to do. We took some evidence of the replacement policy for assets being delayed by a year, and all sorts of measures like that having to be implemented within the police force to meet some of those cuts that have been imposed upon it by Treasury.

Earlier today, some members made reference (as occurred in another place) to the proposition that at the last election the Liberal opposition had openly and transparently indicated that it would fund its spending programs through a reduction, but with no sackings at all, of some 4,000 public servants in South Australia. A number of members have said how terrible that was and also used other sorts of adjectives. I remind those members that this government is in the process of implementing cuts of almost 3,000 full-time equivalent public servants from government departments and agencies.

In the budget two years ago, the government announced cuts of 1,600 full-time equivalents over the forward estimates period. That was straight after it had already implemented cuts of some 200 to 300, so about 2,000 was announced in the budget two years ago. In this budget it announced further reductions in funding to government departments and agencies.

For example, we spoke to the Police Commissioner this week and he told us that a particular night shift service for records management, which essentially was being provided to country areas but also to other areas, had been cut, and I think three or four staff members had been removed from that particular administrative area.

Right across the board in this budget the government has announced two departments and agencies which have to reduce expenditure. As the Police Commissioner indicated, 80 per cent of his expenditure was salaries related. The only way in which these departments and agencies can reduce expenditure significantly is to reduce full-time equivalent Public Service numbers.

The fact that there has been a blow-out of more than 12,000 full-time equivalents above that which the government has estimated in the past six years does indicate that there is probably some flexibility in terms of reining in the total number of administrative public servants within departments and agencies.

Let us not accept the nonsense of wholly-owned subsidiaries of Labor factions and ministers and backbenchers in this place and another place, and, indeed, I think the Leader of the Government in the past week, when they have trumpeted, 'You wanted to cut 4,000 public servants, what a terrible thing!' His own government—and he has been a member of cabinet over the past two budgets—has been implementing cuts of 2,500 to 3,000 full-time equivalent public servants (on my estimation) throughout the public sector.

The Liberal government was going to channel moneys into other priorities, which would have led to further employment of police and nurses and provided other front-line services, so the total numbers would not have been impacted by the 4,000 number. So, too, this government can indicate that, while it is cutting back on administrative full-time equivalent public servants, it will add additional police and other public servants in other high priority areas, as well.

The third area to which I refer is the latest calamity to befall this government—and there are many that one could address that have had, and will have, an impact on the budget—in relation to the government's handling of the SA Water fiasco in the past week, or so.

I want to turn to a quick analysis of what was said. I refer to The Advertiser of 19 July. Obviously, a statement was given the night before, exclusively to Michael Owen from The Advertiser. Kevin Foley came out, all guns blazing, indicating that he would sort out this mess and turn the blowtorch on Anne Howe, Chief Executive, and other officers within SA Water. The article states:

Treasurer Kevin Foley has apologised to householders and business owners deliberately overcharged by SA Water…he would 'sort this mess out'...On Monday, SA Water chief executive Anne Howe will be summoned to Mr Foley's office to face a 'please explain'.

Further, it states:

SA Water knew exactly what the government's intentions were and in a classic case of Yes, Minister we have been wrong-footed. I am not happy. Blind Freddy could see that people would be angry and upset if after having said these charges would apply from July 1, they were actually backdated to December. You don't have to be a rocket scientist—

And I certainly indicate that the Treasurer is not a rocket scientist. It continues:

You don't have to be a rocket scientist to understand that is not what the government committed to.

The fearsome Treasurer is quoted as saying:

SA Water will know exactly how I feel when I meet with them on Monday morning.

The Treasurer in ominous tones said to The Advertiser on Friday: 'SA Water will know exactly how I feel when I meet with them on Monday morning.' Of course, that continued throughout the weekend. There were threats and intimidation to take on Anne Howe and SA Water.

However, little known to the Treasurer is that Anne Howe actually had a paper trail. Anne Howe actually had documents. Anne Howe actually had records of advice that had been provided to her minister (Hon. Karlene Maywald) and the Treasurer. Anne Howe actually had a paper trail of documents from officers within SA Water. Anne Howe also had a paper trail of documents from officers from Treasury. She may well—and, of course, I am not in a position to know all this information—also have had copies of emails and notes of discussions that indicated that what Treasurer Foley was saying (that is, 'I know nothing', the Sergeant Schultz defence) on Friday evening to The Advertiser was untrue, was not correct.

The Hon. I.K. Hunter: I think you said 'may'.

The Hon. R.I. LUCAS: Well, let us look, for the benefit of the Hon. Mr Hunter, at the language on Friday when the Treasurer was saying, 'SA Water will know exactly how I feel when I meet with them on Monday morning. I am not happy. They will be required to please explain on Monday.' What happens on Monday morning when suddenly the temperature is turned up a few degrees by the Treasurer? What happens on the Monday? Suddenly, on the Monday, Treasurer Foley is back-pedalling with five gears. He is in overdrive in reverse. He is apologising: 'This is a stuff-up. This is a breakdown in communications. We are very sorry. Mea culpa. It should not have happened.' The intimidatory language of Friday night and Saturday morning had changed markedly. Why had it changed markedly, Mr President?

The PRESIDENT: Perhaps you will tell me.

The Hon. R.I. LUCAS: Thank you, Mr President, I will tell you. The reason it changed, Mr President, is that suddenly Anne Howe said to her minister, to the Treasurer and to the advisers, 'Okay; you have a look at this stuff. You have a look at this. Have a look at these documents. Have a look at what I told you. Have a look at what was in the cabinet submission. Have a look at this particular acknowledgment from Treasury officers.' Suddenly, Treasurer Foley thought, 'Whoops! I've turned the wick up Friday night and Saturday morning, and there is going to be a please explain. They're going to know I'm not happy.' Suddenly from, 'They're going to know I'm not happy', it is 'I'm very sorry. Mea culpa. There has been a breakdown in communications.' All in the space of 48 hours we see this major change going on in the approach of the Treasurer.

It is clear that what we were being told as South Australians in relation to the government's knowledge of all this was not correct. As a result of Anne Howe plonking on the table, in a figurative sense, all the documents and saying, 'Well, there you go'—and I'm not sure, but certainly I would have thought that, if they had the opportunity, a number of parliamentary committees ought to be bringing Anne Howe and her senior officers before them and directing that copies of all those documents be produced with the power and authority of the parliament, of the Legislative Council, and saying, 'Okay; let's have a look at all these documents.'

I think that Kevin Foley, the Treasurer, realises that that is what potentially will happen, because he is now starting to concede, 'Well, there were references in various documents. There were references in various submissions that went to cabinet. There were references.' The arrogance of this government! It has not taken minister Maywald long to pick up the fleas from her fellow travellers, if I can use a colloquial expression that you, Mr President, would understand very well. It has not taken her very long at all. The arrogance of this minister shows almost no bounds. This morning was the first time her regalness deigned to give an extended interview on the issue of the monumental stuff-up, as described by Treasurer Foley.

This issue having been identified almost a week ago, minister Maywald was prepared to give her first extended interview on the Matthew Abraham and David Bevan show on ABC Radio this morning. There were a few fleeting grabs here and there. She certainly went into hiding for the first few days and refused to answer any questions. She was flushed out a bit for a little grab or two here and there, but that was the first extended interview, where she was probed (in the political sense, I might say) by Mr Abraham and Mr Bevan in relation to her knowledge and responsibility.

I must say that her definition of ministerial accountability now is certainly much different from that which she held when she was in opposition. I will not extend my contribution in the Appropriation Bill debate by looking at that. However, I will refer to the arrogance of this government. As I said, it has not taken long for this minister to take on the arrogant nature which was first demonstrated by the Premier and the Treasurer on so many issues and which is now being demonstrated by this minister on the issue of who ultimately accepts responsibility.

I think the interesting thing is that now, when the question is put to minister Maywald and the Treasurer, 'Whose head will roll over this? Does Anne Howe's head roll?' the answer from the minister is, 'No, no, no.' I can tell members why she is saying that: because Anne Howe has all those documents. She has the cabinet submissions; the notes of the meetings with officers; the emails, if they were to exist (I am talking about the emails now). She has all of that material, and it would be very embarrassing if this government were to take action against Anne Howe and then, through one form or another, all of that very embarrassing material was to become available by way of a parliamentary inquiry or some other mechanism.

Given that we will be debating and hearing the minister's replies next Tuesday, I now want to turn to a series of questions that I want to put on notice for the minister to reply to. I turn to the budget paper that looks at the portfolio statement for Treasury and Finance, in particular. On page 3.27 there is a reference to a significant change in inventory levels held by the Department of Treasury and Finance. In 2006-07, the inventory levels actual were $43.7 million. In 2007-08, it was budgeted to be $2.3 million but the estimated result was back to $43.7 million, and this year it is again budgeted to be $43.7 million. Can the Treasurer indicate what the budget reduction in inventories was to have been last financial year and why that did not occur, and what the change of policy decision was that might have resulted in that?

On page 3.39 there is a reference to past service superannuation payments of about $200 to $300 million per year for the periods that are covered. Given that the government's position remains (as was the former government's) to repay the unfunded superannuation by the year 2034, I ask the Treasurer to provide a copy of the repayment schedule from this year, 2008, through to 2034, with the estimated amounts of repayment in each of the financial years from 2008 to 2034. This budget estimates, I think, that the level of the unfunded superannuation will now peak in about 2014 and decline from then onwards.

I hasten to say, having been a former treasurer, that that particular document to which I am referring is not something that will have to be prepared: it already exists. As treasurer, Treasury provided me at varying stages with copies of the schedule of repayments and also a graph which summarises that.

On the same page (3.39) are the references to the three contingency provision lines. First, I want to refer to contingency provisions for employee entitlements. In 2007-08, the budget paper indicated there was $15.8 million in contingency provisions for employee entitlements, yet the budget is reporting that the estimated result for that year is that the contingency provisions were actually $75.9 million. Logically, when you look at what a contingency provision is, it is headroom in the budget—it is money that can be used for employee entitlements. The budget indicated that $15.8 million was there. I am asking the Treasurer to explain how, in the end, you report a result of $75.9 million in terms of an estimated result.

I can only assume that it means that the Treasurer has transferred into that line funding from another line. Some of it might have come from contingency provisions for supplies and services but also it would have had to come from some other line as well, because it is an increase of almost $60 million. I am seeking an explanation as to what it actually means and from what line funding was transferred. This is last year now, so it does not indicate anything about where contingencies will go this year. This is reporting on the past, so how did that actually occur?

I also ask a question about the contingency provisions supplies and services line, because the budget had $82 million in the contingency provisions line, and then at the end it has the estimated result at $34 million. What does that mean? At the start of the year $82 million was in there for unforeseen supplies and services contingencies; then at the end of the year it has the estimated result at $34 million. Is Treasury indicating that $34 million of that was spent or that $82 million was there and then they transferred some of that money (just under $50 million) into another line, which is the employee entitlements line? I am seeking an explanation from the Treasurer in terms of what exactly the budget document is telling us.

I highlight, in order to assist matters on Tuesday, that if the written reply is not clear this is an issue I want to explore with the Leader of the Government and his Treasury adviser who will be here during the committee stage of the debate, because I think it is important for members of the committee to understand how the contingency provision lines are being used by this government in the lead-up to the election.

The reason for that is that there is a massive increase in the contingency lines in this budget. We have a total of $334 million in those three contingency lines in this year's budget, whereas just two years ago the contingencies were only approximately $85 million, so they have jumped from $85 million two years ago to $334 million. The Treasurer may well argue that that is because we are about to settle deals with doctors, nurses and teachers, and I can understand that; however, it is interesting that the biggest contingency is held in the supplies and services line and the employee entitlements line, which is the wages and salaries, is only $69.7 million.

It is clear that the Treasurer has been moving funds from supplies and services into the employee entitlements line to help fund some of these wage settlements. I acknowledge that some of the wage settlements such as in teaching may well include supplies and services. I think the example that Treasury used in the estimates committees was that increased teacher numbers, for example, might be part of a settlement rather than a wage increase. I am not sure that increased teacher numbers was actually a supply and service, and would not preferably be in employee entitlement, but again I give forewarning to the Leader of the Government that I want to explore this issue with him and his Treasury adviser during the committee stage next week.

On page 3.40, the Industry Financial Assistance Fund, last year, was meant to spend $15.9 million and spent $23.7 million. I seek an explanation as to the reason for that increase. I note that the next line, Land Management Corporation—and this is in the cash flow statement under 'grants, subsidies and transfers'—has declined over the last two years from $15.8 million. Last year it was meant to be $20.7 million but it was actually only $6.1 million, and then this year it is only $1.1 million. I seek an explanation from the minister as to the reason for that reduction in terms of the estimated payments in that particular line.

I seek an explanation to the line referring to long service leave costs. What does that $30 million transfer in the cash flow statement for 2008-09 refer to, because there is no equivalent payment for long service leave costs in the past two financial years on that page? What is the explanation for that $30 million line? On page 3.42, under the Country Price Equalisation Scheme, there is a reference to an actual payment, in 2006-07, of $740,000. I seek an explanation from the Treasurer as to what that refers to.

On page 3.43, in last year's estimated result, there is a receipt of $442,000 under the heading of 'Support services to parliamentarians'. There was nothing budgeted, but there was a receipt of $442,000, and this year there is a receipt of $455,000. I seek an explanation from the Treasurer as to what is that receipt line, support services to parliamentarians. It is included in the administered items for the Department of Treasury and Finance.

On the same page, the Country Price Equalisation Scheme, under 'supplies and services', there is $99,000 in the budget line for 2007-08. What does that refer to? The Independent Gambling Authority, under 'supplies and services', last year saw an increase in the budget from $697,000 to $974,000. What is the reason for the increase? Same page, South Australian Motor Sport Board, last year's budget was $20.6 million in terms of supplies and services, yet the actual expenditure was $31.6 million. What is the reason for that?

I turn to page 3.44, the Industry Financial Assistance Deposit Account, under 'Intra-government transfers'. Last year the budget was for a transfer of only $1.5 million, yet there was actually a transfer of $35 million: $33.5 million above budget. Will the Treasurer explain what that significant increase in intra-government transfers refers to? That is all in relation to the Portfolio Statement.

In Estimates Committee A of 25 June 2008, on page 73 of Hansard, there is a reference to some questions that were being asked about PPPs. The Treasurer was talking about the cost of capital to government as compared to the private sector. He stated:

...I might add. It could be a couple of hundred basis points or, hopefully, less than that so we are not talking a big variation but it is a higher number.

I would seek advice from the Treasurer, because I am assuming that that is a slip of the tongue; he could not possibly be talking about a differential of a couple of hundred basis points. If he is, I am mightily concerned. I am asking the question as to whether or not that was a slip of the tongue from the Treasurer, his reference to a couple of hundred basis points.

I must admit that I was listening to the committee at that particular stage and I heard him say that, so it is an accurate reflection of what the Treasurer said to the estimates committee in June of this year. I do seek clarification as to whether that was a slip of the tongue.

The Hon. R.D. Lawson: That assumes he knows what he's talking about. That is a big assumption.

The PRESIDENT: It is a wonder that the shadow treasurer did not say something.

The Hon. R.I. LUCAS: I leave that to the minister whether he can indicate whether that is, indeed, a mistake and that the level of differential would be significantly less than a couple of hundred basis points.

On page 73 of the estimates committee of 25 June the Treasurer, in relation to some very perceptive questions from the shadow treasurer about this particular issue, indicated:

I do have in the forward estimates expected payments for schools and prisons.

Then he goes on to say, 'But I'm not going to tell you what they actually are.' We can debate that on another occasion, but, whilst I understand that the government is saying that they are not going to indicate exactly what the numbers are at this stage, can the minister indicate which particular budget lines they have been incorporated in or included in currently? That is, are they being held within budget lines within education and within corrections or justice, as they relate to PPP payments, or are they being held within Treasury contingency lines? If they are being held within Treasury contingency lines, are they held within those three Treasury contingency lines to which I referred earlier when I asked a series of questions, or are they being held in some other contingency line which is not expressly listed in the budget papers?

I have one other issue to mention in relation to SA Water. Much was being made evidently in another place, obviously not that I was there or followed it with too much detail, but my colleagues have raised with me the issue of evidently a press statement that I issued on 6 December 2001 in relation to water prices for 2002-03. My memory was reasonably clear, but I have nevertheless checked the record. For the record I indicate that two days prior to that, on 4 December, I had the great honour of being appointed the minister for government enterprises evidently. On recollection, that was because Michael Armitage did not continue in the ministry under the new premier, Rob Kerin at that particular time.

Two days prior to my issuing the release on the 6th, which was the Thursday, I was appointed the minister for government enterprises. The cabinet submission and all of the water pricing submissions were taken through the cabinet process and the SA Water process by my former colleague the Hon. Mr Armitage. One of the joys of having been appointed as the minister for government enterprises was that two days later I had to go out and explain the government's decision in relation to water price increases.

I also note that that was on 6 December 2001. The election was held in March 2002. We went into election mode in late January/early February 2002. During that six to eight week period, on my understanding, very few, if any, SA Water accounts would have gone out. Most of the accounts, as I understand it, were probably going out in the period March, April, May, June and, of course, that would have been under the Labor government. Certainly at that stage I was no longer minister for government enterprises. For the sake of the historical record I thought I would place on the record when I took over responsibility for government enterprises and announced the water rate increase for 2001-02. With those comments, I indicate my support for the second reading of the bill.

Debate adjourned on motion of Hon. I.K. Hunter.

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