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Legislative Council - Fifty-First Parliament, Second Session (51-2)
2008-04-02 Daily Xml
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MATTERS OF INTEREST

HEALTH BUDGET

The Hon. R.I. LUCAS (15:26): The morning newspaper carried an article headed 'Problems strangling hospital efficiency'. It refers to an expensive government-commissioned report, one of the key findings of which is stated as follows:

The report says inefficiencies are forcing the State Government to regularly step in with emergency funding [for hospitals and health services]. This bail-out funding process has become a generally expected annual practice and fostered a culture of not having to manage within allocated targets.

There have been further statements from the government and its ministers today highlighting the problems with the bail-out funding culture within the health system.

I want to remind members and, in particular, the government that this particular problem that has now been identified after almost six years of the Rann government was specifically created by the Rann government itself and Treasurer Foley in the decisions that he took from 2002 onwards.

For those with long memories in this place, in 2002 when the government was elected it created the fictional black hole in the state's finances to justify various broken promises and made various claims in relation to overspending within government departments and agencies. It referred to various documents that had been moving between Treasury and myself (as the former treasurer) in relation to decisions the former government had taken, in essence, to penalise agencies that had overspent such as health and education.

In a memo to the Under Treasurer on 15 January 2002 I said:

As you are aware, I have strong views agency overspending should not be rewarded by writing it off—so I do not believe we should provision for it.

On 8 May 2002, in outlining the details of that documentation of early 2002 I made the following observations in relation to what the government was doing. The government basically said that these agencies had overspent, that it was going to give them additional money and that it believed that the policy of the former government to tell these agencies that they had to manage within their budget was unsustainable. I said a variety of other things, that the government had been deceptive, and I made other accusations along those lines because they were trying to make a political point that supposedly there was a black hole. On 8 May I said further:

If a treasurer is to adopt a position—

that is, this current treasurer—

that overspending would be rewarded by the debts being written off, no agency, in essence, would have the incentive to manage their budget within the strict terms of the funding agreements which have been provided to them.

Further on, I said:

If you have a treasurer and a government that says, 'Don't worry about that. We'll just give you the extra money'—if that is the Treasury approach that is to be adopted, let me warn you now that that is a recipe for disaster. That is indeed the response this current Treasurer is adopting.

I highlighted that the former government had told the health and education departments, 'You have overspent your budgets, and we're not going to accept this.' Over a period of time (we told education that it had four years), we entered into what I described in essence was a scheme of arrangement, whereby its forward estimates would be reduced by the amount it had overspent; and a similar situation applied to health.

For the sake of a political point, Mr Foley came in and said that that was outrageous and that we were trying to make health and education stick within their budgets. He provided bail-out funding and, for the past six years, he has been providing bail-out funding every year whenever the departments and agencies overspend. I assume that they spent many thousands of dollars on this report (I am not sure how much it cost them) to find out what the problem was. They found out that there was a culture of rewarding overspending—that is, if an agency like health overspent, you just gave them money at the end of the year. Of course, that did not encourage them to stick within their budget.

That is the problem—a problem that was created by Treasurer Foley because he just wanted to make a political point about a fictional black hole in 2002, and he has continued to bail out these agencies every year since. Now he and the health minister are saying, 'We've got to cut $51 million from the health budget because there are inefficiencies, overspending and a culture of overspending within the agencies.' That decision was taken by Kevin Foley. It was a political point, and his chickens have come home to roost as of today.

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