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Budget cover-ups

By David Leyonhjelm - posted Monday, 14 May 2018


When someone does something they shouldn't, it's often the cover-up that heralds their downfall rather than the original error.

In Tuesday's budget the Coalition Government broke its commitment to offset new spending measures with reductions in spending elsewhere. For a fan of small government like me, this is disappointing enough. But for many people, it's the Government's attempt to cover up its breach that might disappoint them more.

The Government's affirmation of its commitment was as clear as day in the key budget document: "new spending measures will be more than offset by reductions in spending elsewhere within the budget".

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And the Government pretended to deliver on this commitment by claiming that: "the overall impact of new spending decisions in this budget is an improvement to the bottom line of $404 million over the four years to 2021-22".

However, this $404 million figure is a result of creative accounting that would make our banks blush.

First, the Government decided to rush a billion dollars of new spending out the door before 1 July so that it wasn't counted in the four years to 2021-22. This was supposedly to provide long-term support for research and supercomputing infrastructure, apprenticeships and the Great Barrier Reef '2050' Partnership Program.

There were no offsetting spending reductions elsewhere to compensate for the end-of-financial-year splurge.

Second, the Government still plans an increase in net spending in the four years starting on 1 July; it just doesn't look like that at first glance. In an accounting trick that Enron would be proud of, the Government provided $500 million to the Defence Department before 1 July, but reduced spending by $488 million in the four years starting on 1 July.

Inevitably, the Department will spend this stockpile of funds over the coming four years, rather than in the next six weeks. If Defence spending was honestly accounted for, it would be plain to see that the Government is increasing net spending in the four years starting on 1 July.

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Such manipulation of money flows to the Defence Department is nothing to do with national defence and everything to do with hiding the Government's failure to meet its commitment to reduce net spending. It's a cover up – plain and simple.

The Coalition Government clearly felt it necessary to fake its compliance with a commitment to reduce net spending. This suggests the Coalition knows that reducing spending is a good thing, but just can't muster the courage to do it. It's hard to say what's worse: a fan of big government who unashamedly increases net spending, or a supporter of smaller government who increases net spending and feels guilty about it.

Even leaving aside its accounting fiddles, the Government's claims that it is controlling spending are undermined by the fact that it plans to increase net spending next year and the following year, and only plans to cut net spending in 2021-22. That's two elections away, in the political the never-never.

Increasing net spending is shameful when we are stuck in an 11-year stretch of budget deficits and growing government debt; a cruel burden on the next generation. And as the budget papers reveal, real government spending per person has never been higher.

With even a little bit of spending restraint, perhaps drawing on the ideas I set out in my alternative budget, we could achieve a budget surplus and be paying down debt right now.

Unfortunately, the Government's plan for eventually returning to surplus continues to rely on extracting more revenue. Yet the real tax burden per person has never been higher than it is now, and the Government is planning to increase this burden every year for the next four years, notwithstanding its plans for tax cuts (some of which are up to three elections away). By every measure, tax is going up.

Even the Government's plan to tax its way to surplus is far from certain. For instance, it hopes to raise an extra $3.7 billion in tobacco taxes over four years by cracking down on the black market (which the Government created when it put $20 of tax on a pack of cigarettes). The idea that tobacco smugglers will suddenly give up because of increased enforcement, and the smokers buying illicit cigarettes will swap back to legal taxed products, and not use imported e-cigarettes, is totally fanciful.

It seems we will continue to live beyond our means and suffer tax-and-spend governments for many years to come, regardless of which party is in power.

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About the Author

David Leyonhjelm is the Liberal Democrat Senator for NSW.

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