Mr GARETH EVANS (Deputy Leader of the Opposition)(9.45 a.m.) —Since I did not have the opportunity when the Charter of Budget Honesty Bill came on late last night to do much more than make a kind of 90-second statement, let me begin again. It really does take a quite extraordinary degree of cheek—quite an extraordinary degree of chutzpah, if you like—to introduce a Charter of Budget Honesty Bill when you are a government which has been responsible for arguably the most dishonest single budget introduced in this country since Federation.

How can this government talk about budget honesty when in last year's budget it broke, at a minimum, $17 billion worth of promises, literally scores of solemnly given pre-election undertakings? Let me indicate for the record what some of those broken promises were, what some of that budget dishonesty amounted to.

All these are direct quotes from coalition policy. The promise that the coalition will `maintain existing levels of Commonwealth funding to the ABC', for example, was broken even before the budget, with a $209 million cut to be painfully absorbed over four years. The promise that `the coalition has no plans whatever to change the operational subsidy' to the community based long day care sector was broken by the budget, abolishing operational subsidies for community based long day care, which will increase fees by at least $14 per child per week.

The promise that none of the coalition's health policy initiatives would entail cuts in funding for public hospitals was broken by the budget, containing extensive reductions in funding to public hospitals through a combination of cuts to the financial assistance grants to the states and cuts to hospital funding grants, totalling around $800 million over four years.

The promise that the coalition `will maintain expenditure on labour market programs in real terms' was broken by the budget cutting these programs by $1.8 billion over four years. The promise to older Australians that `the coalition will maintain all current Commonwealth concessions' for older Australians was broken outrageously by the Commonwealth dental health program ceasing on 31 December, providing as it did basic and emergency dental care benefits to health card and Commonwealth seniors card holders.

The promise that the coalition `will maintain support for research and development through the 150 per cent tax concession' was broken, shamefully, by that concession rate being reduced in the budget to 125 per cent. The promise of support for R&D syndication that was widely articulated before the election was broken by that syndication system being abolished before the budget.

The promise that the coalition `will maintain regional development funding of $150 million over four years'—of crucial significance right around the country—was broken by that regional development funding, and with it the REDO system, being abolished, cancelled, before the budget. The promise that the coalition `will provide a fixed share of Commonwealth revenue to the states and territories in a way which is revenue neutral and which will guarantee current services' was broken at the June Premiers Conference, when financial assistance grants were cut by $1.5 billion over three years and specific purpose payments were cut by three per cent annually.

The promise, which featured so largely in the election campaign, that `there will be no new taxes' and `no increases in existing taxes' under a coalition government was broken by the budget containing first of all a Medicare levy surcharge of one per cent for higher income earners without private health insurance; by a superannuation contribution surcharge of up to 15 per cent for higher income earners; and by an increased tax on out-of-pocket medical expenses.

The promise to `maintain the level of Commonwealth funding to universities' in terms of operating grants was broken by the cuts—again before the budget—of $623 million over four years with further reductions in university funding, meaning that the total amount to be cut from universities is going to come to over $2 billion over four years.

I will not continue this litany of broken promises, I just make the point that, whatever else this bill is about, it is apparently not about this kind of honesty, the good old-fashioned kind of honesty, which says, `When you make promises, you keep them.' That is the kind of old-fashioned honesty which has gone spectacularly out of fashion so far as this coalition government is concerned.

If the bill is about anything, then it seems to be about some different kind of honesty: the honesty which is involved in having open and transparent fiscal regimes applicable to the presentation of government budgetary decisions and related fiscal matters; the kind of honesty where you open the books and tell the truth, the whole truth and nothing but the truth about the state of the economy at various points in the electoral cycle, about the state of play in meeting budget targets and forecasts at various points in the budget cycle; and the kind of honesty designed to produce at least a better informed parliament and community when it comes to these fiscal matters.

Against that background, those kinds of aspirations, what have we got in this bill? We have prescriptions for budget documentation and information to outline the government's fiscal and economic strategy, provision for this information being updated with a midyear review process and provision for a final budget outcome statement subsequent to the end of the financial year. We have in addition the bill proposing a five-year intergenerational report which will assess the long-term sustainability of current policies, especially in the context of expected demographic changes; a pre-election fiscal and economic report to be prepared by senior economic bureaucrats; and a regime for the costing of policy commitments by both government and opposition by government agencies doing the costing during an election campaign.

Moreover, we have some exalted provisions in the legislation providing for the fiscal strategy to be followed by the government to be based on principles of sound fiscal management. Stated in outlined terms in this way, who could possibly be opposed to any of that? We are not, and we will vote accordingly—in support of the second reading of this bill.

But, that said, we do have quite a number of objections and reservations relating to the detail of the bill and the way in which the bill has been presented. Let me describe the first of those objections as being an objection to the kind of triumphalism which has surrounded the presentation of this legislation. If the government is to be believed, this is the finest piece of legislative prose since Moses descended from Sinai. What we are told is that this represents a kind of commitment to openness, honesty and transparency which is absolutely unique in the annals of Australian and possibly world history.

The truth is that this is not especially innovative. What the bill is seeking to do is really just build upon the general fiscal disclosure regime which was dramatically developed under Labor and taken forward far further than had ever previously been the case, together with some further reporting requirements which are partially based on the model now operating in New Zealand.

It does need to be understood that the Labor government did make some spectacular advances in genuine budget honesty. We introduced the publication of three-year forward estimates of outlays and revenue—a huge contribution to transparency and understanding of the fiscal process. We introduced the publication of an annual tax expenditure statement, which was a massive improvement in the quality and content of the budget papers. We introduced, among other things, provision for the publication of financial impact statements contained within all explanatory material for new legislation.

So, despite the rhetoric of the coalition, the truth is that the Labor government has had the best record of actual reform of budgetary processes and fiscal disclosure of any Commonwealth government. It was not only the form of the matter; it was the substance. In a number of respects, I have to say, quite genuinely, our record was substantially better than the standards which have already become apparent in this coalition government's application of its own alleged new principles and was substantially in excess of what is provided for even in this bill.

Let me mention, for example, the question of information about specific purpose payments to the states. Last year's budget omitted significant information previously provided by Labor, including, in particular, the comprehensive report of proposed specific purpose payments to the states, which is normally contained in Budget Paper No. 3. The omission of that information caused enormous difficulties for the states in the preparation of their own budgets and severely disadvantaged members of the public and other stakeholders interested in Commonwealth-state financial issues.

It is also the case that our budgetary papers contained a significant number of overseas comparisons—tabular descriptions of our performance on key indicators as compared with other comparable countries—most of which, if not all of which, were missing from last year's budget papers and which would have told quite a different story about the condition of the economy under us as compared with the coalition government.

Let me also say a word in this context about our treatment of asset sales. The coalition raised repeatedly the canard of asset sales in their assaults on Labor's integrity, claiming that we fiddled the books with regard to accounting for asset sales. But nothing could be further from the truth in that respect. We always followed the appropriate rules and we disclosed underlying as well as headline results. What we find in last year's budget is the government including a whole number of significant asset sales—including property sales of around $1 billion and the sale of the telecommunications spectrum—as part of the so-called underlying budget bottom line even though there was vigorous criticism of the Labor government on the issue of asset sales when we had a similar practice.

Of course, all the rules in the world—and this is further on the subject of triumphalism—that you might introduce in this respect are not going to amount to a row of beans unless you get the numbers right in practice. If the numbers in all these documents and forecasting reviews and all the rest of the baggage that is provided for here are wrong—whether deliberately, inadvertently or as a result of incompetence—then, obviously, all of this is worth very little indeed.

When we were in office, we learnt, to our peril, about the problem of relying too much on Treasury forecasts—particularly in our last two years of office, when there were estimates of growth and inflation that proved wildly astray and which did have budgetary consequences. We were told by Mr Costello, by the then opposition, that this was a product of negligence, incompetence or worse—deliberate misleading behaviour by the government.

But now we see in the very first days of this new year Mr Costello, the Treasurer, now learning to his cost that premature ejaculations, if you like, about the budget are as dispiriting as they are in other contexts. He is now sitting at the bottom of his very own new budgetary black hole with egg on his face, with no redeeming strategy in relation to jobs or growth in sight—and it is not a pretty sight to see that conspicuous absence of credibility from someone who was crowing so triumphantly about his own superior virtue when it came to fiscal management and fiscal honesty with the Australian public.

So much for triumphalism and more general objections to the way in which this whole legislation has been approached by the opposition. Let me come now to some more specific aspects of the legislation itself and its language. Part 3, this exalted section, is on `Principles of sound fiscal management'. At one level, this can be regarded as a rather bland and meaningless set of motherhood statements. They include, for example, references to the government managing financial risks prudently, achieving adequate national saving, achieving a reasonable degree of stability and predictability in the level of the tax burden and so on. The Joint Committee of Public Accounts, in its report of November 1995, said:

. . . the Committee does not see a need to formulate binding statutory principles of fiscal responsibility. In any case, such fiscal principles would be so imprecise and so wide open to interpretation that there seems little point prescribing them in legislation. The Committee is also wary of the idea that there are enduring fiscal principles.

So we have had this parliament's own expert financial committee saying that these kinds of principles are essentially meaningless in statutory guise. The least one can say about this set of provisions is that their insertion into the legislation is simply window dressing with no particular practical effect.

At a second level, however, I think it is fair to say that the provisions are meaningless in another way because the government has manifestly no intention of applying them. Certainly there is no legal obligation upon it to do so, the way this bill is constructed. The worst example in this respect is principle (d) which binds the government to maintaining the integrity of the tax system. We know already that this government has no intention whatever of doing that. I think one of the clearest examples of this behaviour by the government is the announcement by the Treasurer by way of press release—in the last budget he gave it no greater attention than that—that the government would not be proceeding with significant anti-avoidance legislation which had, in fact, been foreshadowed by the Labor government concerning the alienation of personal services income and the avoidance of the PAYE provisions in this respect.

Those provisions were to be aimed squarely at arrangements undermining the integrity of the personal income tax base which the Taxation Office has confirmed, in estimates last year, to be worth literally hundreds of millions of dollars per annum. So we have seen already in at least this one respect, and there are others, the Treasurer breaching his own principles. Of course, it does not matter if they are breached because there are no penalties for non-compliance here as elsewhere with this bill. So supposedly tough new rules or standards have already been broken. There is no penalty for their contravention. One possible way to strengthen these provisions would be for the Taxation Office and the Treasury to make independent annual statements concerning threats to the integrity of the tax system and for the Treasurer to be judged against his action or inaction to deal with those threats. The key issues here are obviously resourcing for the tax office and the adequacy of existing legislation to protect the tax base, both of which are squarely within the responsibility of the Treasurer.

There is another point to be made about the so-called principles of sound fiscal management. In some ways it is rather more serious because the principles, as they are drafted, reflect a view of the world, a view of the nature and purpose of fiscal policy, which is frankly quite out of touch with current community needs and realities. These principles are all about accountancy. None of them goes to the fundamental purpose of this whole enterprise which is to get the economy right for the people who inhabit it. There is no provision in the principles of sound fiscal management for appropriate consideration to be paid to the employment outcomes of the fiscal regime in question. There is no reference in these principles of sound fiscal management for regard to be had to the income distribution implications of a particular fiscal regime that has been introduced. There is no reference to a myriad of other important goals of overall economic policy.

What we have in these fiscal management principles is a dream come true for those who advance a traditional Treasury agenda, a dream come true for the dries, a dream come true for the restrictionists and a dream come true for the so-called economic rationalists—those who approach economic management wholly in terms of numerical aggregates, accountancy numbers and simply do not worry about the people implications of what all these numbers mean. Even the Reserve Bank, in its charter of good housekeeping behaviour in terms of interest rate management, does have an obligation to have regard to the employment implications of its interest rate decision making.

Mr Barry Jones —And always has.

Mr GARETH EVANS —And always has. Well, it has had under Bernie Fraser. I am unsure whether it is having an equal regard under the present regime given today's announcement of no change in interest rate figures, which is really pretty extraordinary given the terribly limping condition of the Australian economy particularly after yesterday's retail figures, and the further news about the anticipated slump in rural commodity prices. It is very obvious that the economy does need a major impetus, a major growth initiative. The Reserve Bank, notwithstanding its charter obligations to have regard to growth and in particular employment, is not doing so but at least—and this is the point that I am making—it is there in the statute. What we have got in these principles of sound fiscal management is nothing of the kind.

Mr Barry Jones —I think it goes back to the Coombs period.

Mr GARETH EVANS —Indeed it does. A third objection to be made to this legislation are the numerous omissions which are evident in the way in which the obligations to articulate new information are simply cast. The bill provides, in some respects, for even less accountability than that which was recommended by the government's own Commission of Audit on the question of the charter. For example, the Commission of Audit recommended making the economic forecasts in the budget, the mid-year review and the pre-election report, the responsibility of economic bureaucrats directly rather than being at the discretion of the Treasurer. The government, in this legislation, has agreed to this only in respect of the pre-election statement, not the budget itself and not the mid-year review. It is to be noted that by contrast in New Zealand, which is an example which usually captivates this coalition government in these sorts of matters, its legislation requires a certification of the economic forecast by relevant bureaucrats for all parts of the budget cycle.

The question can reasonably be asked: why isn't the Treasurer prepared to submit himself to the same level of honesty in this respect as obtains, at least in the legislative model, in New Zealand? Has he already doctored the forecast as a lot of people suspect in his first test of integrity and honesty in budget presentation, that is to say, in the recently released mid-year review? Did he reject Treasury advice to revise downwards the growth estimates for 1996-97? There is every reason to believe that those figures have been massaged. There is no discipline in the way in which this legislation is couched which would counteract that.

It is all in rather stark contrast to Mr Costello's own performance and demands in opposition when, it will be remembered, he asked that the then Treasurer—with the economic forecasts in the 1995-96 budget—ensure that they were certified by the Secretary to the Treasury as having been prepared without political interference. You can all remember the song and dance that was made about that. That was duly done in writing in response to that request, but there is no equivalent provision in this bill to bind the Treasurer to undertake the practice that he demanded of the Labor government. Why is there that inconsistency? Well, I think the answer speaks for itself.

There is another specific further pre-election promise that has been broken in relation to all of this and that ought to be addressed in this legislation. That was for the Treasurer to seek the release of independent economic forecasts prepared by the Reserve Bank. The very obvious reason for wanting that alternative view on the world, the economic outlook, to come from the Reserve Bank is so that we—the community and the parliament—can make judgments about the veracity and adequacy of the forecasting, the growth projections and so on that have been made by the Treasurer massaging his own particular department and the bureaucrats under him.

It was a highly desirable suggestion that was made as a pre-election promise. Where is it now that we have had the opportunity to actually implement it? One suspects that the reason for the omission, here as elsewhere, is that the Reserve Bank well knows, and the Treasurer knows that they know, that the 3½ per cent growth forecast that was massaged through the Treasury for this year, both in last year's budget and in the mid-year review, simply cannot and will not be met. Again, I make the point that yesterday's retail figures and the further projections about reduced rural income make it more and more abundantly clear that those growth projections, to put it at its most kindly, are wildly optimistic. In fact, we are looking at something like a zero growth for the December quarter, ending 21 quarters of consecutive growth. That is very bad news in every possible way for the Australian economy.

A further kind of information which the government continues to refuse to provide which is not specifically provided for in this legislation but which could be is forecasts of national savings. That is an important omission because we have been constantly told over and over again that what the budget strategy of this government is all about and what its economic strategy is all about is improving Australia's saving performance—an entirely sensible objective, one that we share and one that we were doing an enormous amount to achieve with our own superannuation strategy, which looks like being cut to pieces by the government in this coming budget.

The key to it is: what are the implications for saving, both public saving and private saving, of all these various measures? A lot of them do work against each other and cancel each other out. It is very important to know with any given fiscal regime what the implications are for the overall savings out comes in its individual components, public and private, and in its aggregate. Why won't the Treasurer provide this key information—savings projections—for the Australian people? Why won't he equally provide forecasts which are again conspicuously missing from the mid-term review beyond this year of the rate of unemployment that is likely to occur as a result of the fiscal regime in question?

These are conspicuous omissions. Many of these issues were specifically addressed by the Joint Committee of Public Accounts. Many of them were the sort of thing which should have been contained in this legislation. It is very important to understand that there is a deliberate omission of all of that which might have added real meat and real bones to the mere gristle of this particular legislation, were it to be there.

Finally, there is some real concern in our minds about the last part of the legislation, which goes to the pre-election costing regime. We believe that this needs further examination in a number of respects. What we have got is what, on the face of it, purports here to be something which gives some dignity and substance to what has hitherto, let us frankly acknowledge it, been a bit of a circus in terms of the pre-election assessment by each side of each other's costs of announced policy.

What we have here is a regime which says that the government can, during that caretaker period after an election is announced, get costings of its own policies from its own bureaucrats but not of the opposition's and that the opposition can seek from the bureaucrats costings of its own policies but not the government's. What is the problem with all of this? Let me mention these ones for a start. The costing of opposition policy can only be undertaken at the discretion of the Prime Minister, whereas on the government side it is entirely a matter of in-house discretion for the government party as to whether it wants to go through this process. The opposition has to run the gauntlet not only of the exercise of its own discretion but of relying on the honour, good faith and cooperation of the Prime Minister of the day, who is obviously going to have a very specific political agenda to take into account. This clearly advantages the incumbent government and it is a very unsatisfactory aspect of this particular legislation.

There is a further problem in that it is only the costing of previously announced policies that is allowed in this legislation. This, of course, is not something that will inhibit the government of the day getting all the assistance it requires from Finance and Treasury and elsewhere within the system for the costing of its policies and doing it over as many months as it likes to get it right. The opposition will not have the luxury of that kind of support. We will be placed, or any future opposition will be placed, in the position of having to make policy decisions on the basis possibly of incomplete information, announcing those decisions and only then being able to get the precise costing from the government agencies, which would add effective weight and credibility to the financial implications analysis of those initiatives.

There is also a problem with the pre-election report requirements which, on the face of it, do represent a useful step forward, requiring a report to be released after the election is announced on the state of play of the financial accounts and current economic projections. That only has to be released, however, within 10 days of the election being announced. That can be a significant way into the election campaign period. If that is held back to the last possible moment, as one can anticipate in many circumstances—it being the motivation of the government of the day, particularly this government, to do—you have a very much less happy and sensible environment for the discussion of these matters than would be the case if that was on the table earlier.

What it all comes down to is this. While we do not oppose this legislation in principle, we are very dubious about its effectiveness in a number of respects and are concerned about the fairness of a number of its provisions. This is legislation which should be carefully considered in its actual detail by the Joint Committee of Public Accounts, which, in its November 1995 report, requested the opportunity to look at any legislation that was brought forward and implementation of its report before it was finally passed. The government, as I understand it, has not been inclined to accept that recommendation. It is presently not inclined to enable the matter to be referred to the JCPA. I propose to test that at the end of this second reading debate—after the second reading—by moving that the matter be referred to the JCPA for early report. (Time expired)