Jon Stanhope is in it for the long haul.
This is why he went now for a Budget that is tough – or in ministerial words one that is “economically responsible”.
Several factors allowed him to be tough – a-dollar-a-day tough, or more than $450 per home-owner if you add the utilities charge that will inevitably be passed on by ActewAGL, Transact and Telstra.
Politically, he is more than two years out from and election and the Opposition is in disarray.
Economically, the ACT is booming. Unemployment is lower than the Australian average. Profits and economic growth are good.
And fiscally, the ACT is in sound shape, at least for now. Most of it has been inherited. There is no net debt. And the total government worth is higher per head and compared to revenue than average. And so it goes on.
But one factor forced Stanhope to be tough – the ACT is now on the wrong side of Micawber’s equation. Expenditure is greater than income. And if things keep going the same way, the ACT eventually will run up debt and tie the Government into vicious spending cuts in the next term or the term after. Stanhope knows he can weather a bit of a slash and pillage now to give himself political happiness rather than political misery later.
Charles Dickens’s Micawber at least had the advantage of a simple accounting system with just one ledger. He knew that to have just sixpence more spending than income “equals misery”.
Government these days has complex accounting. This Budget the ACT brought its system in line with the rest of Australia. The new system strips away windfall loses and gains on shares in superannuation funds or on land sales. It measures pure governmental performance. And until yesterday the ACT was staring at misery of Micaberian proportions unless something was done. And done it was.
But there was far more pillage than slash than can be justified by the figures. The Government should have done more to cut spending and not increased revenue as much.
Its excuse does not add up.
The Government says that the ACT is raising less per head than the Australian average – by 11 per cent — and spending more – by 20 per cent.
The overspending is because of inefficiency and policy reasons. Policy – like some program or other to help some people — is fine, if the policy is not frivolous. Inefficiency – like half-empty schools and bloated public housing – is not. But much of the 20 per cent overspend can be put down to inefficiency and frivously spending.
The revenue underperformance is difference. The Commonwealth Grants Commission says that the ACT is raising about right the right amount per head by Australian standards when you consider its disabilities. The biggest property owner and biggest employer in the ACT is the Commonwealth Government. The biggest ACT revenue sources are rates, land tax and payroll tax. But the Commonwealth is immune from them.
The grants commission recognises this and gives the ACT a big lump sum each year to compensate for it.
So when Stanhope says his government is under-taxing by 11 per cent it is rubbish. When he wants to increase revenue by about $450 per household because of this “under-taxing” it is double-dipping. His government gets money from the grants commission to compensate for the 11 per cent under-taxing and now he wants to slug the ratepayers for it as well.
Stanhope has at least done well to recognise the pickle the ACT is heading for and to do something about it, but he should have done more slashing of his government’s overspending and less pillaging of the ratepayer.
In any event, part of what he has done on the spending side is likely to come to naught. He expects an efficiency dividend by centralising government services. It is just a fad and will give the same result as the previous fad of decentralising government services – it will cost more than just leaving well alone.
Ends