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Legislative Council - Fifty-Second Parliament, First Session (52-1)
2010-07-21 Daily Xml
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STATE BUDGET

The Hon. R.I. LUCAS (15:59): I move:

That this council notes—

1. statements made by the Treasurer and Premier before the election about the state of the budget; and

2. with concern recent information about the state of the budget and the Rann government's management of the state's finances.

In speaking to this motion, I note that we are moving into the last two days of what has been a very abbreviated sitting period since the 20 March state election, and time will be limited when we reconvene in September just prior to the bringing down of the state budget.

I remind members of the Rann government's position prior to the 20 March state election. There were any number of statements, but I refer briefly to the statement by the Premier and Treasurer, the Treasurer in particular, on 18 March, just two days prior to the election, under the bold heading 'Labor costings keep budget strong'. Our Treasurer is certainly not known for humility in anything he says or does, and he was happily patting himself on the back about how the budget, as a result of his magnificence and the magnificence, as he sees it, of his Premier and government, was in a very strong position as we went into the 20 March state election.

He indicated that throughout the campaign every Labor policy he believed had been accompanied by detailed costings and that he on that day, 18 March, was releasing those costings, and that they had been collated and reconciled against the overall state budget position. He summarised his commitments as being over the current forward estimates $1.2 billion ($752 million recurrent and $461 million investing expenditure). Further on he said:

The budget remains robust with strong surpluses maintained in 2010-11 and 2012-13, demonstrating that Labor's pledges are affordable and deliverable. Labor has struck the right balance between investing in jobs, services and key infrastructure and maintaining the strength of the state's finances.

Then, unsurprisingly, most of the rest of the statement was a two-page sledge against opposition leader Isobel Redmond and the Liberal Party and what he saw as the 'terribleness' of the Liberal Party's economic and budgetary strategy leading into the 20 March election. There are any number of other statements to which I could refer from the Treasurer, patting himself on the back in relation to, as he would see it, the magnificence of looking after the state's finances, but that document, statement and summary encapsulates the government's and Treasurer's position prior to the election.

I turn now to the truth, the reality and the information that has been flooding in to the opposition over past weeks about the state of the state's budget. A broad indicator over the years as governments, ministers and treasurers run into political and financial trouble, a fair reflection, is the extent and level of the leaks provided from those in the know in order to reveal the truth of what is really going on. We know there are many angry people who hear the claims and statements being made by the Treasurer and government and know that the facts and truth are completely and starkly different from the claims being made by the Treasurer.

We have seen that the clearest public example has been the ongoing scandal in relation to the Adelaide Oval project. We know that the Treasurer confessed that he is—and these are his words, not mine—'not the sharpest tool in the kit'. I guess on this side of the political fence that assessment of his own capacity is one of the few statements on which we can wholeheartedly agree with the Treasurer. But, sadly, even though he describes himself as not the sharpest tool in the kit, he is actually the person with the responsibility for approximately $15 billion worth of taxpayer funding and expenditure. If you have somebody who says he is not the sharpest tool in the kit, who conveniently, worryingly perhaps—if you accept his story—can genuinely forget key meetings and key figures and key commitments in relation to his management of the budget, then I am sure the taxpayers of South Australia have great concern that this is the person in charge of the state's finances.

Adelaide Oval, as I said, is the perfect example. We have a project about which the government said 'not a dollar more than $450 million will be spent'. Whilst there are varying estimates, the impact on the state budget was going to be a minimum of $350 million; it might have been 450 million, depending on whether or not the federal government was going to provide a grant of $100 million towards the Adelaide Oval project. I am going back now to late last year when this particular stunt was first dreamt up, or first announced I should say, by Mr Foley and Mr Rann.

What we know now in terms of the impact on the state budget and state finances is that, instead of being potentially $350 million over the forward estimates, at the very least it is now $535 million, and that is only on the direct Adelaide Oval project. We know that there is another $40 million to be hidden in a Convention Centre budget for the bridge over the Torrens. We know that there is approximately another $50 million to be hidden in the transport budget to pay for the buses having to get in and out of Adelaide Oval. We know that there is another $11 million to be hidden, probably in the Convention Centre budget, for an open-air car park south of the River Torrens. So there is approximately $600 million-plus of public taxpayer funded expenditure hidden in various budgets in relation to the Adelaide Oval project, instead of the approximately $350 million that was originally talked about.

We are talking there, on just one project, of a hit of $250 million at least, at the moment, on the state budget. In addition to that, there are additional costs that we are still only establishing. The most recent evidence that we took from a Treasury officer on the Budget and Finance Committee indicated that for some reason the government—the Treasurer, the caucus—has agreed to subsidise the loans that SACA has taken out on the western stand redevelopment. We are told that $469,000 has already been paid for that, and up to $800,000 will be paid by August.

Why would this caucus, this government, approve an $800,000 subsidy to SACA, in addition to the grants they have been getting, and a government guarantee on their loan, as opposed to a situation—and we heard a story only yesterday—where those involved with breast-screening clinics in South Australia are having to work through budget cuts which they know are coming, about which they have been told, and which indicate—as was revealed yesterday on ABC Radio—that in all the circumstances there will be an increased number of up to 20 on the various options of undetected breast cancers in women in South Australia.

So how this caucus—how you, Mr President, in caucus—can support those sorts of priorities when breast cancer clinics are scrimping and saving for every last dollar and there is a blowout of $250 million-plus in the cost of this project at Adelaide Oval, and they are providing subsidies on interest costs which no-one was told about, I do not know. In fact, the Treasurer explicitly told the parliament that there was not to be $1 of subsidy and the truthfulness of that particular statement has been demolished by the evidence of one of his own senior Treasury officers.

The more that we look at this particular project the more we will see costs being hidden in other budgets. That does not reduce the taxpayer cost: the taxpayer is still paying for it. The point of the contribution I hope to bring together quickly today is that, when one looks at the total budget (which is what this government is going through—the Sustainable Budget Commission and the budget processes), the Treasurer is going to say, 'Well, I've got to find hundreds of millions of dollars in cuts to pay for all these blowouts in these other sorts of projects.'

It is about time the community and, I would hope, at least somebody in caucus start to wake up to this particular issue and that over the coming weeks the decisions, some of which I suspect I will outline for the first time to caucus members in this contribution today, and the hard questions are put to the Treasurer. I hope that he is not glibly allowed to just get away with, 'Well, we have to do this and we have to do that.'

Some difficult decisions sometimes have to be taken, and hopefully some competence in terms of managing not only the budget but also specific projects like the Adelaide Oval project needs to be brought to bear. That is part of the reason why the Treasurer was sacked from handling the Adelaide Oval project but, lo and behold, they put minister Conlon in charge of the project, who is the second most notorious minister in this government for managing overspending and blowouts in projects; one only has to look at the South Road/Anzac Highway project, the trams project or the Northern Expressway project. Anything that that minister touches, similar to treasurer Foley, has blown out in terms of overspending.

Someone hopefully within the caucus will have the courage at least to stand up, ask the questions of the Treasurer and the Premier and say, 'Don't talk to us just about, ''We have to make these particular savings,'' what about you managing some of these projects better? Instead of blowing out costs by $250 million plus in relation to Adelaide Oval, and some of the other examples, what about managing them better so that we don't have to then start cutting programs likes BreastScreen South Australia, etc?'

There are many others. The Royal Adelaide Hospital project is one that this community and the government will have to monitor because the government has said that it is going to be able to build this project for $1.7 billion. It wants to do it as a PPP, and what most people do not realise is the reason it wants to do it as a PPP is that it does not have to make any payments out of the budget until the budget year 2016-17. So, for the next four years it can have the private sector attempt to build this particular hospital without any significant payments having to be made by the taxpayers in the budget over the next four to five years.

Of course, what happens is that from 2016-17 taxpayers will have to pay $200 million to $300 million, and I think that the Hon. Mr Darley issued some figures on this particular issue during the election campaign. We will have to pay $200 million to $300 million a year for the next 30 to 35 years to pay for those costs. Of course, that does not worry the current Premier and the current Treasurer because their view is that they are not going to be around in 2016.

Some from their own party would unkindly suggest that they will not be around at a much earlier date than that. The Hon. Mr Wortley will be well aware of those sorts of discussions going on in the caucus at the moment, but I will not be diverted. The Hon. Mr Wortley is well known for his loyalty to whatever his particular faction cause is at the particular time that suits his purpose, but I am not going to be diverted here.

The Premier and the Treasurer are happy to delay those sorts of $200 million and $300 million payments a year, and therefore it is not impacting on the current four-year estimates because, as I said, they do not believe that they will be here in 2016-17. If the PPP cannot be brought to a conclusion—that is, if there are no private sector people prepared to engage in a PPP—the government will then have to build the $1.7 billion project on budget.

What that means is that over the next five to six years, between now and 2016, instead of there being no budget impact, the government will have to find out of the budget $1.7 billion-plus (because no-one believes it will be built for $1.7 billion) which is not currently in the forward estimates. That is just a massive hit on the state's budget, and it is a fair indication why the government wants to build this as a PPP.

The third thing that needs to be brought into reckoning is the issue of asset sales. The government announced in the Mid-Year Budget Review of 2008-09 significant asset sales, and two of those of most interest were the sale of our forestry assets and the sale of government buildings. We have now been advised (although it was not clear in the early days but I suspect the decision might have been taken in the last 12 months) that the government has included in its current forward estimates, in terms of the health of the budget, estimated revenues from both forest asset sales and the sales of government buildings.

Those who followed the forestry asset sales processes in Victoria and Queensland will know that they are fraught with some difficulty. It is not impossible, but they are fraught with some difficulty. Whilst we do not know what the valuations that have been included in the budget for possible collection from the forest sales are, that is obviously going to be an important issue in relation to the integrity of the budget figures over the next four years; and it will be an issue, I am sure, we will be pursuing with the Under Treasurer in the Budget and Finance Committee in the coming week or so.

The fourth key area, of course, is the massive area of election promises. The Rann government, as I said earlier, in its calculations made $1.2 billion in promises over the four years which it said were costed but, frankly, its costing document did not bear scrutiny.

There are obviously dozens and dozens of other issues but they are four of the key issues at the moment impacting on the health of the state budget—together with, obviously, other issues such as the ongoing challenges of managing the finances of a health budget which continues to haemorrhage and a range of other budgetary problems that the government has.

The situation we were in was that the government (prior to the election, of course) came up with this idea of a Sustainable Budget Commission, and it announced prior to the election that it was going to establish this highly paid person, Mr Geoff Carmody, to be in charge of the Sustainable Budget Commission and it was going to be charged with the responsibility of coming up with $750 million worth of budget cuts over the forward estimates period. However, of course, conveniently for the government, the Sustainable Budget Commission was not going to be asked to produce a report until after the state election. The Sustainable Budget Commission has been, since late last year and early this year, supposedly working its way through those particular processes.

One of the first things that the Sustainable Budget Commission established, and this is within the confines of the work the Sustainable Budget Commission was doing, was that the budget was not in the healthy position that the government was publicly proclaiming. To put some numbers on this, the Treasurer said just prior to the election that the budget remains robust with strong surpluses maintained in 2010-11 and 2012-13.

The government's position was that in 2012-13 it was claiming that the net operating balance, which is its latest measure—its only remaining measure of a surplus or deficit—at the time of the Mid-Year Budget Review was going to be $316 million for 2012-13 and for 2009-10 it was in deficit by $174 million. I think we need to bear in mind, when the current Leader of the Government in this chamber talks about budget deficits, that this government, after receiving billions of dollars from the GST deal that the former government negotiated, still managed to plunge the state into deficit on every measure, including the net operating balance measure that the Treasurer uses.

That was the claim, but what the Treasurer knew but did not reveal and what the Sustainable Budget Commission established in its discussions with the Treasury was that, when you actually go to the final year of the forward estimates (which is actually not 2012-13 but is 2013-14), in that particular year the estimates are that the net operating balance (that is, the last remaining measure of surplus or deficit) straight after the election has been calculated at almost $500 million deficit. So, in the following year (because the government had put off until that following year, 2013-14, a number of significant commitments and expenditures), instead of this supposedly healthy position in the previous year of a $300 million-strong surplus, as he was patting himself on the back for, he was looking at a deficit of almost $500 million in that particular year.

It is as a result of that that the Sustainable Budget Commission and the government have had to go through, and are going through, a process of having to find significantly greater savings than the supposed $750 million that the Sustainable Budget Commission was tasked with last year. I will quickly go through the process and then the break-up of it. Information provided to the opposition indicates that on 6 April this year the cabinet approved an additional savings task of $1.3 billion over and above the pre-existing savings tasks. So, what we are looking at is a total savings task at the moment which might be a combination of cuts and, as we have seen today, revenue raising measures, such as increased liquor licensing figures—and I am sure there will be other massive increases in licensing fees and fees and charges right across the board.

The Sustainable Budget Commission and the government are looking at total savings measures of over $2 billion over the forward estimates period. That $1.3 billion, on our advice, is approximately $100 million extra in 2010-11, $200 million in 2011-12, $400 million in 2012-13, and $600 million in 2013-14. I think the important one—because they are a lot of figures—is just to go to the end period, 2013-14: that is where the government is looking to end up—it is obviously at the time of the next state election; it is the final year of the forward estimates.

On the information that has been provided to the opposition, the government and the Sustainable Budget Commission are going to be looking for budget saving measures of at least $1.2 billion per year—not over a four-year period but per year. In a budget aggregate, which is currently around $15 billion, and it is obviously going to increase to over $16 billion or so over the forward estimates period, we are talking about a very significant cut to the state's finances, coming after a period when we have had the rivers of gold flowing into the state coffers, through the GST deal and the property tax revenues that have been flowing into the government.

There is no excuse à la 1993-94, when the state went broke as a result of the State Bank and we had to tighten our belt to match the extent of the state's finances at that stage. Nothing like that has occurred. What has occurred is simply eight years of ongoing mismanagement in terms of the state's finances. The revenues have been flowing in, but the government has failed to manage those revenues, for example, Adelaide Oval and the infrastructure projects I have highlighted earlier.

The extent of the problem we have is that, whilst the figure of more than $2 billion—and on some estimates (and we will explore this with the Under Treasurer) the total required savings over the forward estimates are around $3 billion for government departments and agencies—is a big figure, I think the critical figure is what will be the annual savings, ultimately, that the government and the budget savings commission are trying to drive. That figure would appear to be well over $1 billion and, as I said, possibly over $1.2 billion per year. We are talking about a very significant cut or increase in taxes and charges to be imposed on the community.

How this has come about is obviously through financial mismanagement and incompetence by a man who describes himself as not the sharpest tool in the kit; so, it is perhaps unsurprising. However, we the taxpayers are the ones who will have to put up with the implications of this incompetence and/or negligence.

In relation to the work being done by Treasury, the budget commission and others involved in this matter, a memo went out to all chief executives on 7 April, the day after the cabinet meeting approved the additional savings task. I understand from my colleague the member for Davenport that the Treasurer has again denied some aspects of this story today. Sadly, we have seen so many times where he says something in the house only to remember that he forgot something or forgot that he remembered something, and he has had to go back into the house and correct the record. I am sure we are going to see a similar circumstance again once the budget comes down in September.

The memo that went out to all the chief executives on 7 April makes it clear that there is now to be one aggregated savings task for each agency. Those who have been on the Budget and Finance Committee for the last few years will recall that what we sought to do with each agency was to go through the implications of the 2008-09 budget, the 2008-09 Mid-Year Budget Review cutbacks, the implications of the 2009-10 budget cutbacks and, in some cases, going back as far as the cutbacks announced in 2006-07.

What most members perhaps do not realise is that, whilst these cuts were announced in those years, the agencies make decisions only on a year-by-year basis. Some do make some decisions on an ongoing basis, but in most cases when we would say to an agency, 'Okay; you've been told to cut $5 million this year, $10 million next year, $20 million in two years' time and $30 million in four years' time. Outline to the Budget and Finance Committee what you are going to cut.' They would say to us, 'Well, here's how we are going to get the $5 million in the first year.' Then we would say to them, 'Okay; how are you going to get the $10 million the second year?' 'We'll talk to you next year about that.' 'How are you going to get the $20 million in the second year?' 'Well, we'll talk to you in that particular year about that.' It has all been put off on the never-never. It is a bit like putting it on the credit card. These are cutbacks on the credit card, basically; they have all been deferred.

What we have tried to do with the Budget and Finance Committee, as the Hon. Mr Darley, in particular, and some other members would know, is that, as we went through each agency, we tried to add up, in some cases successfully, what the aggregate savings task was going to be two years down the track for each agency. The one good thing the Sustainable Budget Commission has done (in our view, it could and should have been done by Treasury) is that it has aggregated all those five particular areas. These include the 2008-09 budget savings announcement; the 1,600 full-time reductions announced in the 2008-09 Mid-Year Budget Review; and the efficiency dividends announced in the 2006-07 budget, which were an ongoing efficiency dividend and which had to be done each year with new and additional savings.

The fourth one was a CPI adjustment announced in the 2009-10 budget, which was an announcement, basically, that you would not get CPI adjustments on some of your grants and things like that. The fifth one was the 2009-10 budget savings announcement of $750 million, and in the sixth one the chief executives had been told of the additional savings requirement (which the Treasurer is now denying), which we are saying is $1.3 billion.

What the agencies have now been told is, 'Here are the six savings tasks. We are going to add them all up, and this is what you've got to save in 2010-11, 2011-12, 2012-13 and 2013-14.' I have seen some of those in relation to some agencies and, without putting the numbers on the record, they are very significant. Those who have been looking at the work of the Budget and Finance Committee perhaps will not be surprised, other than the additional savings requirement which has now been incorporated into each agency target.

The point we make about this meeting in April is that this is less than three weeks after the state election and, because of the cabinet processes, it means that two weeks after the state election the Treasurer and the Treasury would have had to have been in a position, at the very least, to finalise a draft of this document and circulate it to cabinet for that meeting on 6 April.

There is nobody in South Australia who is going to believe anybody who says that the government, the Treasury and the Treasurer, in particular, were unaware that what they were saying prior to the election was not rubbish; that is, no way in the world could this budget be described as strong and robust with surpluses, which is what they were talking about. As I said, once they incorporated the election commitments of the government, they were staring, for 2013-14, at a post-election net operating balance of close to $500 million, including the government's supposedly funded election commitments.

The Treasurer certainly would have known that, and I believe the Premier must have known that as well, prior to the election because all of this does not just happen in 10 days after the election, particularly given the first week after the election, when ministers and everyone else were still running around trying to work out exactly who had won, and the inevitable transition to a re-elected government.

The Sustainable Budget Commission, in outlining to chief executives the process that it wanted to adopt, said that it was meeting with (and did meet with) all of the chief executives in April. This memo was going out on 7 April. Savings proposals from agencies had to be submitted by the middle of May this year, and the Sustainable Budget Commission would then meet with chief executives again during late May. Through June, the Sustainable Budget Commission would work through these particular proposals.

We were advised that the Treasurer received only last week or this week either the final report from the Sustainable Budget Commission or a final draft for his consideration. Certainly, in the next two weeks, cabinet is going to have to consider the $2 billion plus in revenue from the budget savings measures that agencies have proposed. It will be at that stage when cabinet will ultimately make some decisions.

Let's be quite clear on this: the Treasurer is saying there has been no additional target. He had better go off and look at the memo that has gone out to chief executives because that makes it quite clear, in the language it uses, that an additional savings target to help restore the fiscal position of the budget has been included in the work that has to be undertaken. All chief executives have copies of these particular documents and memos.

The chief executives were told that ministerial consultation and liaison were the responsibility of each executive. I think it is important to note that the directive given to chief executives was that all proposals had to be forwarded to the commission for consideration. What the budget commission was saying to the chief executives was that, if there were any sensitive or difficult proposals, they had to be considered by cabinet once in receipt of the commission's report; that is, ministers were not to impose up-front restrictions or limitations on what could go forward to cabinet—for example, the breast screening type reductions.

Even if he had wanted to (and I suspect he probably did not), the directive was that the Minister for Health could not rule out those cuts prior to cabinet consideration; it had to be a cabinet consideration. No political filters were to be applied at that early stage. All submissions, controversial or otherwise, were to be submitted to the commission for consideration by the cabinet. So, that is where we are at the moment in relation to the budget.

The purpose of my contribution today is, at this stage, to place on the record the reality in terms of what is going on within the government at the moment—a forlorn hope perhaps that someone in the caucus might ask the Treasurer some questions over the coming six weeks as we lead up to the state budget in relation to his contention that this is the only way that the budget can be managed in terms of the very significant additional cuts and the way in which the cuts are to be proposed.

Things such as, for example (and I have spoken on this before), the Public Sector Performance Commission, and agencies such as that, should be the first things to go, whereas we saw the passionate defence from the Leader of the Government in this chamber about what he saw as the magnificence of the work of the Public Sector Performance Commission. These are the areas where cuts ought to be made, rather than in areas such as breast screening and other services that are being delivered of benefit to the community. With that, I seek leave to conclude my remarks.

Leave granted; debate adjourned.

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