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Wednesday, 25 March 1998
Page: 1232


Senator BISHOP (11:14 AM) —I want to make a few comments on the Charter of Budget Honesty Bill 1996 [No. 2] which is currently before us. It has been a fairly topical issue in Australia in the last four or five years, and probably derives from similar discussions and concerns in a number of Western European countries and particularly in the United States over recent years.

It derives from concerns that developed in the late 1980s and early 1990s which arose primarily from decisions made in the United States in the early years of the Reagan government which legislated for massive tax cuts, with continued outlays growing at significant rates. That resulted, in the late 1980s and early 1990s, in huge budget deficits in that country. It was suggested that, in due course, the budget deficits that arose, and which were forecast to go on if the then budget prescriptions had continued, would imperil the welfare, health and social security systems of that country.

One of the results that emerged from discussions in the United States in the early 1990s was the balanced budget bill, which was passed by both houses of the US Congress. That bill required the Congress to legislate for balanced budgets by the end of this decade. They have achieved that, not particularly as a result of that balanced budget bill, but because of growth in the US economy.

Australia has picked up on a variation of that debate and it is apparent in the title of this Charter of Budget Honesty Bill. A number of issues arise from the presentation of the bill to the parliament which are worthy of discussion. I seek to place the views of the Australian Labor Party firmly on the public record. The issues of concern to us are, firstly, the lack of commitment to the real intent of this bill by the current government; secondly, the government's performance to date in relation to the spirit of the legislation behind the bill; thirdly, transparency; and, fourthly, compliance and interpretation when the bill becomes law.

From the outset, I would like to place on record my support for the bill which has at its core the intent to ensure that there is transparent honesty in fiscal reporting by governments in this country. Such transparency is essential through all stages of the electoral cycle, and the spirit of the bill, as its title suggests, attempts to address this outcome. Unfortu nately, the spirit of the bill has not seen justice in the drafting by the government.

That brings me to my first point: the lack of commitment by this government to the real intent of the bill. That intent, as the government has suggested for many years now, is integrity. There has been much discussion by coalition members of both chambers on the virtues of the Charter of Budget Honesty Bill. It has been heralded by the Prime Minister, Treasurer and government backbenchers as one of the great savers and enforcers of fiscal rectitude in the history of federation.

Government members have talked ad nauseam about the importance of such a bill and the impact it will have on governments in the future. From the outset, I must say that I understand the need of this government to sing such high praise for this initiative. It is almost as though, if they keep talking about the charter of budget honesty long enough, the electorate may forget the blatant dishonesty that has characterised the budgets of this government to date. Unfortunately for the government, however, neither the community nor the Labor Party will forget the budget dishonesty exercised by this government.

However, the opposition also believes that this bill presented to us by the government does little more than make nice noises about honesty, rather than drafting legislation that would actually play a role in enforcing some standards of decency and honesty in budget reporting. The problems with this bill are paralleled by the hypocrisy of the government. When this government was in opposition it made a commitment to budget honesty, while making a range of other promises.

Those promises included: to maintain funding levels for the ABC; to make no changes to the operational subsidy of the community based long day care sector; not to introduce health policies which would entail funding cuts to public hospitals; to maintain expenditure on labour market programs; to maintain all concessions for older Australians; to continue support for research and development; to maintain regional development funding of over $150 million over four years; to give a fixed share of Commonwealth revenue to the states and territories; not to increase taxes or to introduce new taxes; and to maintain funding levels for Australian universities.

What has happened to the promises made by the coalition, remembering that they were part of the package that promised the charter of budget honesty? I am sad to report that all of the above-mentioned promises have been broken in one form or another. The ABC has had its budget cut by $209 million over four years. Operational subsidies for community based long day care were abolished, costing families in the order of an extra $14 per week. The health budget was severely cut, with widespread reductions in public hospital funding, totalling approximately $800 million.

Labour market programs were cut by $1.8 billion over four years. Concessions for the elderly were cut, with the most notable being the dental care scheme. Research and development concessions were reduced and syndication was abolished. The regional development program was abolished. Fiscal grants to the states and territories were cut by $1.5 billion over three years, and specific purpose grants were cut by three per cent per annum. New taxes have been introduced on superannuation, and the Medicare levy has increased for those without private health insurance. Operating grants for universities have been reduced by over $600 million over the four-year period.

The government's response to the intent and spirit of the legislation is not the only issue. One of the fundamental problems with this bill and with the government's attitude is the lack of transparency. The Howard government provides significantly less information in its budget papers than the previous Labor governments. In the 1996 budget papers, the government excluded information detailing specific purpose grants to the states and territories, thus denying the states information necessary for the preparation of their budgets over time. After pressure from the opposition, the government agreed to publish those figures in the 1997 budget papers.

Additionally, the government removed from the budget papers international comparisons that were common under previous Labor budget regimes. These international compari sons play an important role in the comparative analysis of the Australian economy. By excluding these comparisons, the government was trying to avoid that detailed comparative analysis.

Finally, in respect of budget paper presentation, is the treatment of asset sales. The Labor Party was constantly accused by the coalition of fiddling the budget papers through asset sales. This was untrue as the Labor government always disclosed underlying as well as headline results. The coalition in government, though, has included asset sales, including property sales, only in its underlying budget bottom line, even though it attacked Labor for a similar practice.

With the coalition's broken promises in mind and its hesitancy in ensuring transparency of budget papers, claims of budget honesty appear not to ring overly true with this government. To justify these broken promises, the coalition introduced the classification of core and non-core promises. It would appear that this classification of core and non-core promises overrides the necessity for budget honesty as far as this government is concerned.

The introduction of the non-core promises fiasco and the blatant disregard for pre-election promises by the government highlight another key problem with the bill before the chamber—that is, transparency and compliance. If the government is serious about the need for budget honesty, then it ought to consider a range of options that would improve the process and make budget forecasting more transparent.

Firstly, the government should allow full scrutiny of the bill. Appropriately, this would require the legislation to be examined by the Joint Committee of Public Accounts and Audit. Such an examination is recommended by the committee for all fiscal reporting mechanisms. This is an idea opposed by the government in the House of Representatives, but imposed upon it by the Senate. However, the time allowed for such examination was very restrictive. The chair of the joint committee himself made this point, `Even without committee examination, there are a number of apparent problems.'

Accountability is a significant issue. It has been widely recognised that this bill provides less accountability than that recommended by the National Commission of Audit, the government established body. The primary recommendation of the commission was that economic forecasts concerning pre-election reports, the budget and the mid-year economic review should be the responsibility of, and at the discretion of, economic bureaucrats instead of the Treasurer.

The government has rejected this recommendation of its own commission and has decided instead to allow bureaucratic discretion for only pre-election forecasts. New Zealand, which is a country that this government likes to model itself on in terms of economic reform, requires bureaucratic certification of economic forecasts at all stages. It is apparently okay for that country but not for the government of this country to adopt.

I would now like to turn to some comments regarding the fourth area of significant concern, which is compliance. Essentially, the government has drafted legislation that does little to ensure compliance. The bill is really a set of motherhood statements. The government has failed to draft legislation that ensures—or, indeed, even encourages—any degree of budget honesty. Why has the government failed to address this issue of compliance? Because at the end of the day it is not serious about the charter of budget honesty. The government has no intention of enforcing standards of decency and compliance. With its record we can see why it has avoided this compliance issue. This is the key problem with the bill. It is meaningless without compliance provisions.

I return to the comments made by the Joint Committee of Public Accounts and Audit. The financial committee stated:

. . . 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.

Of course, the committee is referring to the type of motherhood statements espoused by this government. For example, part 3 of the bill talks about managing financial risks prudently, achieving a reasonable degree of stability and predicability in the level of tax burden, and achieving adequate national savings. All of these points are worthy of support. The problem, however, is that all of them can be interpreted differently by varying governments. With the problem of interpretation we are brought back to the issue of compliance. On what basis is compliance enforced and what is the impact of no enforcement?

If we need an example of compliance problems, we need look no further than the performance of this current government. Principle (d) of the bill requires the government to maintain the integrity of the taxation system. Yet the first test of their commitment to the integrity of the tax system has resulted in failure by this government. I refer to their refusal to cut back on tax avoidance, particularly in the area of family trusts. The first chance this Treasurer got to show his commitment to the charter, he broke one of the fundamental principles and, as we know, there is nothing that can be done about it because there are no compliance provisions.

In the House of Representatives question time on 11 March the Treasurer was asked to comment on the opposition's view that the charter is unenforceable. Mr Costello responded:

It is a completely binding law of the country. Once it is enacted it binds our government, Mr Beazley or any future government to come clean to the Australian people.

However, section 3(2) of the bill states:

Nothing in the Charter of Budget Honesty creates rights or duties that are enforceable in judicial or other proceedings.

When the Labor Party proposed to delete this section from the bill, the government used its numbers and opposed such a measure.

This is not the only failure of the government in regard to this charter, however. As I have already mentioned, the legislation espouses the commitment to achieving adequate national savings. We have been told time and time again by this government that fundamental to its budget strategy is the need to boost national savings. Yet when it comes to scrutiny of this commitment, as is the role of parliament, the government refuses to provide savings projections. The same issue arises when it comes to unemployment. The Treasurer continues to refuse to provide employment forecasts from the mid-term review beyond the immediate year. Clearly, the government has no commitment to transparency in budget preparation.

The final significant problem with this piece of legislation is the government's lack of understanding of the real role of government. This matter shows itself to us in the principles of sound fiscal management. These principles, as drafted by the government, illustrate a commitment to government and budget formulation that is not appropriate. These principles are an accountant's view of the way in which government should be managed. There is no commitment within these principles to the role of government as policy maker. There is no real thought given to the government's role in solving problems such as unemployment, education and health care. In this regard, the document is an accounting tool and little else.

The notion of a charter of budget honesty is one worthy of support. The spirit of the legislation is clear. However, the weaknesses in the legislation are also blatantly apparent. One can immediately recognise the spirit of the legislation and directly ignore that spirit, as this government has done, as there are no consequences for such action. If the government were sincere about a charter of budget honesty, they would accept a detailed review and examination of this legislation by the joint committee. They would take advice in a bipartisan manner to ensure that transparency in fiscal policy and management were unquestionable.

Instead, they have presented this chamber with a piece of legislation that is highly cynical, largely ineffectual and potentially irrelevant. They have dishonoured their election promise through the shallowness of this bill. However, as I have said, the notion of budget honesty is indeed worthy of sup port. We should all aim for greater transparency within government and, importantly, through the parliament. For this reason, the Labor Party is supporting the bill, even with the acknowledgment of its many flaws. The best outcome for decision making transparency would be for this to be recognised as the first step towards honest fiscal reporting.