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Tuesday, 22 June 1999
Page: 7109


Mr LAURIE FERGUSON (9:20 PM) —In my speech on the Appropriation Bill (No. 1) 1999-2000 on 2 June, I highlighted a number of misleading aspects of the Defence budget papers. The next day, the honourable member for Herbert, Mr Lindsay, responded to my speech on behalf of the relevant minister. But his reply did nothing to rebut either my intentions or those of earlier articles in the Financial Review . Let me first consider the question of the Defence Reform Program. On 2 June, I pointed out that cabinet had adopted a target of 50,000 personnel, not the figure of 42,500 that was proposed by the Defence Efficiency Review. I noted that this meant that up to one-third of the proposed savings had disappeared, despite the former minister, Mr McLachlan, issuing a press release on 9 December 1997 saying:

Annual savings will be $900—$1,000 million—that is an additional $10 billion over a decade to spend on new equipment, better training and more exercising.

The member for Herbert responded by claiming that the reform program was well on track and is in fact ahead of plan. He notably failed to repeat the former minister's undertakings in his media statement of 9 December 1997. What does the Defence portfolio budget statement for 1999-2000 say about these figures?

Firstly, on the question of the 50,000 target, revised up from 42½ thousand, I draw attention to table 1.4 on page 15 of the portfolio budget statement. For the year 2001, it predicts that the amount available for reinvestment from alleged reform program savings will be $675 million. It then lists total new spending, labelled `Reinvestment Initiatives Details' totalling $866 million, of which $338 million will be to fund the higher than planned personnel numbers.

So there we have in black and white that total new spending next financial year will be almost $200 million more than reported savings from the Defence Reform Program. And, just as I said, more than one-third of the new spending will be to meet the revised personnel target. Further, a footnote on page 16 of the portfolio budget statement says that the costing given for the 50,000 personnel target is `an interim measure only', being subject to further study of the required rank, profile, disposition, skill level and readiness of the force.

The clear implication is that the required cost may turn out to be higher than that reported in the PBS. My point in again raising this issue is obviously not to question the 50,000 target. I certainly do not advocate further cuts in uniformed positions, and the efficiency review's targets were patently unachievable. My point is to again highlight the government's duplicity in promising service people `an additional $10 billion over a decade to spend on new equipment, better training, et cetera'. But it knows that it cannot deliver. I also point out that the government's figures, relied on by the member for Herbert quite dutifully, count as reform program savings a number of administrative cuts that were adopted in the 1996 budget, a year before the reform program began. These savings were reallocated within the Defence budget up to and including 2001. On page 15 of the Defence PBS we read:

Reinvestment of the unallocated savings from 2000-01 onwards has been combined with the Defence Reform Program reinvestment for reporting purposes.

In plain language, savings that predate the reform program now appear in the estimates for 2001-02 and 2002-03 to make it appear that the reform program is on track. The amounts involved are $66 million and $117 million respectively.

The second aspect of the Defence budget that I highlighted in my 7 June contribution was that the government had not provided any additional resources for any of its new initiatives. Nothing in the reply by the member for Herbert really disputes this point. I repeat that these new initiatives can only be funded by moving funds away from other parts of the Defence budget, thus on page 19 of the Defence portfolio budget statement the government itself says:

While the real level of Defence funding has been maintained in 1999-2000, Defence has been required to absorb within existing outlays a range of additional costs and expenditure pressures arising from Defence and Government-related initiatives. Examples include the cost of bringing a second army brigade and associated units to 28 days notice to move . . .

Indeed, the Defence department makes it clear on page 16 of the portfolio budget statement that it was unable to fully cost the government's decision to place a second brigade on increased readiness by the time the official budget estimates were due. (Time expired)