It is very much a bottom-line-up Budget. The Chief Minister and Treasurer, Kate Carnell, has set some very firm targets, or bottom lines. They are not overall bottom lines within which the Government can rob Peter to pay Paul. Rather they are detailed prescriptions of spending limits within each of the 123 sub-programs. Moreover, with the on-set of accrual accounting next year where every cost has to be annualised and accounted for, there can be no fudging between capital and recurrent spending and no fudging with hidden costs like superannuation, future maintenance, accommodation and the like. Also, there can be no fudging figures by allowing for inflation on only one side of the ledger.
In some respects Mrs Carnell has viewed the ACT as being in the position of Victoria, Western Australia and South Australia 10 to 15 years ago … facing a financial cliff and walking rapidly towards it. She is determined that the ACT will not squander its inheritance at self-government. The Budget papers yesterday fairly convincingly showed that without action that was precisely what was going to happen.
In that respect, the three-year Budget program brought down yesterday was very financially responsible. It was very strong on what needs to be done with ACT financing and why it needs to be done. But it was short on how it is to be done, with the notable exception of health.
What needs to be done is to reduce the cost of providing services and to straighten out governmental accounting and budgeting so that can be monitored. Why it needs to be done is that the ACT has drained its reserves and borrowing for recurrent spending results in unsustainable debt causing strife and more pain a decade later. Usually this is several elections away so the political temptation is there. The ACT can be thankful Mrs Carnell has not succumbed to it … even if it costs her government, as she pointed out yesterday.
However, how these bottom lines are to be achieved is a more difficult issue. The Government’s approach is to say to departmental heads: “”Here is your bottom line; now achieve it.”
That may be fine as far as internal administrative efficiencies are concerned. The trouble comes when achieving the bottom line goes beyond administrative efficiencies and requires reordering spending priorities. To take a simplistic example, a manager might be require to cut spending on public libraries. It is one thing to computerise, get books cheaper, sell expensive shelving and replace it with cheaper shelving and so on. It would be quite another matter for the manager to achieve the cuts by closing, say, the library at Tuggeranong. Similarly, the difference between rearranging bus drivers’ shift and closing the service to outer Gungahlin. The latter type of decisions are not really a managerial, but political.
Ultimately, the allocation of resources, preferring some people and things over others is essentially a political matter. It has to be done by politicians, not bureaucrats. The way this Budget is constructed and by the sound of what Mrs Carnell was saying yesterday it seems that as the year goes on there could easily be a disagreement between a Minister and a departmental heads as to whether a decision to help achieve the bottom line is a management one or a political one. In an environment of performance contracts for departmental heads, the departmental head is placed in the invidious position of taking the decision or having his contract renewal threatened. The bureaucrat is in an equally invidious position if he or she makes what is fundamentally a political decision and the political fall-out is so unpalatable that the Minister reverses it.
Fortunately, voters will not fall for it. Typically voters blame elected politicians for funding decisions, not bureaucrats and ultimately it will be impossible for politicians to shift the blame for unpopular decisions. At best the Government can postpone and dribble out the fall-out for tough and unpopular decisions in the hope that it can persuade the voters that they are necessary and desirable in the long term.
The political nature of funding decisions was demonstrated by the Budget itself. Education was not given the Booz-Allen treatment because the Government relies on the support of Independent and former teacher Michael Moore. The Grants Commission makes it clear that ACT education is no more immune from inefficiency and over-spending than health.
Providing a three-year program has the advantage of helping create business certainty. However, the Government leaves itself a potential dilemma if circumstances change substantially. Does it go back on some of its bottom lines so it can respond flexibly to the new conditions in the best way possible for the people of the ACT or does it put fiscal rectitude before flexibility? This Budget itself shows how fluid fiscal conditions can be; three major taxes had to be changed in the face of changes to conditions in NSW. Earlier Budgets had to yield to changes in Commonwealth conditions. It is quite likely that fiscal conditions will not be constant in the next three years, in which case the Government will have to hope that its growth targets are indeed conservative.