Tuesday, 29 May 2012
The Hon. R.I. LUCAS (15:37): I rise to support the formality of the second reading of the Supply Bill, but in doing so want to have a look at some of the facts in relation to what are the crises confronting the state in terms of its financial management and look at some of the incompetence, ineptitude and negligence of not only the state Treasurer, Mr Snelling, and the Premier, Mr Weatherill, but indeed all the ministers who are culpable in terms of the current crisis that confronts our state budget and our state books.
Just before moving on to the particular points I want to make, I note the comments made by the Hon. Ms Zollo in her contribution to the second reading. I think it is a perfect example of the dilemmas of a backbench member of the government being given a script which they then parrot or repeat verbatim on behalf of the government. The Hon. Ms Zollo had been given a part of a contribution which said that they had noted that the opposition had raised some critical comments in relation to export performance and she then went to repeat the government's claims of how, in essence, outrageous that was because the government's export performance had been pretty good.
I remind the Hon. Ms Zollo and government members that in the period 2002 to 2004, soon after the government was elected, former premier Rann and the government announced their plan, which indicated they would almost treble exports in the period from 2003-04 through to 2013. They would take exports, in broad terms, from $9 billion to $25 billion, and that was a key focus of their State Strategic Plan, their economic plan—that exports were critical to the future of the state's development and that they would, as I said, almost treble export performance.
Here we are, just a year away from 2013, and the state's export performance has limped from approximately $9 billion to just $11 billion in exports, which is not much more than the rate of inflation over almost 10 years. In real terms, the dollar value of our export income is not much more than it was when this government was first elected. It is clear that it is a long, long, long way short of the Strategic Plan objective of $25 billion in exports.
I should note that along the way the government has recognised that they were not going to achieve their objective; I think they tried to describe it as a 'stretch target'. I understand they then said that they would meet the target by 2014 and, in the most recent incarnation, they have extended that target date to 2020. So, when you compare their original objective with where we are now, they have extended it by seven years. The reality is that if this government were to stay in power until 2020, they would still not be within a bull's roar of the objective of achieving $25 billion in export income by that target date.
Everything this government has done has been geared towards, in essence, making it harder for our small and medium-sized businesses to export: the gutting of organisations like CITSCA which were geared towards assisting small and medium-sized enterprises to export; the gutting of our trade offices, which were, again, geared towards helping small and medium-sized enterprises to export; the gutting—
The Hon. J.S.L. Dawkins: The RDAs.
The Hon. R.I. LUCAS: —of the RDAs, as my colleague the Hon. Mr Dawkins has talked about—and the gutting of the trade department itself. Yet, the government still has the gall to pat itself on the back and say, 'Look at what a good job we've done. In the most recent 12-month period, we've done relatively better than some other states.' Let's compare the government with its own rhetoric, its own objectives, and its own key performance indicators, that is, $25 billion in export income, firstly by 2013, then by 2014, and now by 2020. As I said, they will not get within a bull's roar of even a pro rata allocation of that target.
I admire the gall of the Hon. Mrs Zollo to stand up and repeat the garbage that has been given to her to read. It shows some courage to stand up and read it on occasion, but occasionally I would have thought that a government backbencher would look at some of the drivel they are given and say, 'Look, I am prepared to say this—at least that's arguable—but that is really just a step too far. You can't expect me to stand up with a straight face and repeat that sort of drivel on behalf of the government.'
Sadly, I think that is symptomatic of one of the problems we are seeing with the government's economic performance, and I want to address a number of those issues in the Supply Bill contribution. I seek leave to have tabled in Hansard without my reading it a purely statistical table of budget balances.
Table 1: Budget Balances
Net operating balance
The Hon. R.I. LUCAS: This table of budget balances looks at the government's budget performance over the period of 2008-09 and projected through to 2015-16, as outlined in recent budget documents and, in particular, the Mid-Year Budget Review. It shows the three measures of deficits that are used by the government in terms of its performance. One measure of performance is the cash measure, which is used by the federal government and which had previously been used by the state government in South Australia, and the next two measures are what are called accrual measures of deficits. One is called the net lending balance and the other one is called the net operating balance.
As I said, the cash position is used by the federal government and was used in South Australia, and is one of the measures that is recorded in the budget documents. The net lending position is the one that, when first elected in 2002, former treasurer Foley said was the one true measure of the health of the state budget. He said, rightly, that cash has significant problems and that you had to have an accrual measure of budget performance and budget balance, that the one true measure was a net lending measure, and that was the measure that he would be judged by during his term as treasurer.
Of course, what happened was that in a short period of time the then treasurer realised that he was not able to balance his books in accordance with the net lending measure of budget surplus and deficit because it kept on showing—inconveniently for him—that the budget was in deficit. So, soon after that he went to the third measure of a budget balance, and that is what is called the net operating balance. It is an accrual measure, and is the measure that he and this government have used for a number of years now to say whether or not we have surplus or deficit budgets.
The table I have incorporated into Hansard shows that, on the net operating balance, which is what the government now uses to say whether we are in a deficit or surplus, in five out of six years—starting in 2008-09 and going through to 2013-14—the state budget will be in deficit, and in significant deficit: a $233 million deficit in 2008-09; a $187 million surplus in the election year 2009‑10; a $53 million deficit in 2010-11; a $367 million deficit this year; a $453 million deficit next year; a $348 million deficit in 2013-14; and then supposedly it will turn to surplus in 2014-15 and 2015-16. What we see there in terms of deficits is just over $1 billion of accumulated deficits in 5 out of 6 years in terms of managing the state budget on the one measure the state government now uses.
Now let us turn to the net lending measure—which, I remind members, is the measure that Kevin Foley, the former treasurer, said was one true measure of the health of the state budget. That shows in 2008-09 a deficit of $872 million; in 2009-10 a deficit of $1.092 billion; in 2010-11 a deficit of $1.422 billion; in 2011-12 a deficit of $1.519 billion; in 2012-13 a deficit of $1.148 billion; in 2013-14 a deficit of $500 million; and in 2014-15 a surplus. Then in 2015-16, after the next state election, this government is predicting an annual deficit of $2.479 billion in that one financial year after the election.
When you look at those accumulated deficits from 2008-09 on net lending, the one true measure according to former treasurer Foley, you are looking at $9 billion or $10 billion in deficits. This is just annual overspending, right across the board. The net lending includes budgeting for capital works and investment expenditure of $9 billion or $10 billion. Then, for finality, the cash measure, which is the measure the federal government still uses: in 2008-09, a deficit of $721 million; in 2009-10, a deficit of $1.154 billion; in 2010-11, a deficit of $1.319 billion; in 2011‑12, a deficit of $1.445 billion; in 2012-13, a deficit of $1.089 billion; in 2013‑14, a deficit of $492 million; and, in 2014-15, supposedly a surplus.
I have put those figures in a table in the Hansard record because they do not conveniently come like that, surprisingly, from the government; one has to pull them out of the Mid-Year Budget Review and old budget documents as well. I have put them together in a convenient table to demonstrate the ridiculousness of the claims of this current Treasurer and Premier in terms of any level of financial competence and financial management.
By any measure this is a budget in crisis, by any measure, this is a government which is massively overspending in accordance with the amount of money it is collecting, and by any measure all this government is doing, essentially, is saying, 'We're going to spend, spend, spend, to hope to win the election in 2014, but if we don't win the election in 2014, well, stuff it all, it's not going to be our responsibility, someone else is going to have to fix up the problem.'
That, sadly, is the driving force for the Premier, the Treasurer and the government as it leads up to budget day on Thursday and as it leads up to budget day next year, I am sure, in the final budget before the election. I also seek leave to have incorporated in Hansard without my reading it a purely statistical table on the non-financial public sector key balance sheet in aggregates.
Non-financial public sector key balance sheet and aggregates ($million)
As at 30 June
Net debt (a)
Unfunded superannuation (b)
Net financial liabilities
Net financial worth
(a)Net debt data for the years before 1999 are sourced from Australian Bureau of Statistics, Government Financial Estimates 2003-04 (Catalogue number 5501).
(b)There is a structural break in the methodology used to calculate superannuation liabilities between June 2003 and June 2004. This accounting change, which involved the adoption of Commonwealth Government bond rate for valuation purposes in line with AASB119, Employee Benefits, resulted in a significant increase in superannuation liabilities.
(c)There is a structural break in 2007 reflecting the amalgamation of SAFA and SAICORP on 1 July 2006. The transfer of SAICORP assets and liabilities from the general government sector to the public financial corporations sector resulted in an increase in non-financial public sector net debt of $99 million at 1 July 2006 and an increase in net financial liabilities of $90 million at 1 July 2006.
(d)There is a structural break in 2008 reflecting the amalgamation of the South Australian Community Housing Authority (PFC) with the South Australian Housing Trust (PNFC). This results in an increase in net debt and net financial liabilities and a decrease in net financial worth of $98 million in 2007-08, with no impact on net worth.
(e)There is a structural break in 2008 reflecting the first time recognition on the general government balance sheet of South Australia's share of the net assets of the Murray-Darling Basin Commission. This has no impact on net debt, however results in a reduction in net financial liabilities of $615 million in 2007-08, and increases in net financial worth and net worth of $615 million.
The Hon. R.I. LUCAS: This document comes from page 63 of the Mid-Year Budget Review and summarises the net debt of the State of South Australia, the non-financial public sector, from 1988 through to the estimated net debt in 2015. That shows that in the aftermath of the State Bank debacle our net debt in South Australia was $11.6 billion. At the changeover of government in 2002 that had been reduced, through the ETSA privatisation and financial management policies of the former government, down to a more than manageable $3.2 billion in 2002.
These figures now show that the net debt, having gone from $11.6 billion down to just over $3 billion, will now climb to $9 billion in 2015. Interestingly, this table does not include the 2016 number because, if it included the 2016 number (and we will see this in next year's budget document) that $9 billion will go to over $11 billion because there is a $2.8 billion Royal Adelaide Hospital figure that will have to be added to the net debt position of the state.
While we will not have the exact figures here yet, next year we will see a net debt figure in this state of over the peak of the net debt in 1993 with the State Bank. The $11.6 billion will, after a decade of this government, have been surpassed. They have had to work hard at it: that degree of incompetence and negligence does not come easily. I am sure they have had to work very hard to turn a $3 billion net debt position into a net debt position of almost $12 billion in just over a decade, but that is the record of this government.
Similarly, the unfunded superannuation figures at the time of the change of government, in 2001, were $3.2 billion. That number in June 2015 will be $10.4 billion, and will see a total of our net financial liabilities, which is our debt and unfunded super, in 2015 of $22.7 billion. As I said, the following year, when you add in the Royal Adelaide Hospital, that will take that figure over $25 billion in 2016.
They are a lot of figures, but I have incorporated those into Hansard for those voracious readers of Hansard. For those who are interested, it demonstrates very clearly the extent of the financial crisis and the budget crisis that is confronting the government and the state. A key part of the reasons for that has been a decade of financial mismanagement, of overspending, by this current government and its administration.
We had a period soon after the pay down of the debt, the renegotiation of the GST deal, where rivers of gold were flowing into the state's budget coffers. We were getting about half a billion ($500 million) a year, on average, more each year than we budgeted. Simply, that means that, at the start of each budget year, Treasury would estimate that we were going to get $9 billion or $10 billion in terms of what we were able to spend, and every year we were winning X-Lotto and getting an extra $500 million to spend.
What the government did every year, when it won X-Lotto, was to spend the whole dang lot of it. It did not spend it on a capital asset. What the government did was lock in ongoing expenditure of an operational nature—employees, staff, services and a range of other commitments right across the board.
If the money had been either spent on a capital project as a one-off, because it was an unexpected benefit—it was, as I said, the equivalent of winning X-Lotto in that particular year—or the government had put aside some of that money for the days when you do not win X-Lotto, when you do have problems and when there is a downturn in income flowing into the state, either of those options would have presented, first, a better set of books and prepared us for the inevitable downturn when it was to come.
The reality is that the former treasurer could not believe his luck, because he did not win the equivalent of X-Lotto one year: he won it for six or seven years in a row. Every year he would go in, roll the dice and he would win, on average, an extra $500 million, which was unexpected, and every year, he would line up to lock in expenditure of an ongoing nature, using the extra $500 million of unanticipated revenue that had been received.
So, when the inevitable downturn came, the rivers of gold stopped flowing, and there was a return to normal growth levels and, in some cases for some years, with the GFC, even a downturn, we were left with the position where we were locked into ongoing expenditure, but we did not have the rivers of gold flowing into the state anymore; we returned to normal levels of revenue and income.
That is why we see net operating balance deficits of up to $453 million a year; that is why we see net lending deficits of up to $1½ billion a year; and that is why we see cash deficits of up to $1½ billion a year being accrued in terms of the final budget balances.
Soon after this government was elected in May 2002 (and I am returning to this notion of overspending as a key problem this government has failed to address), it sought to construct a set of circumstances where, shock horror, it said that the former government had not managed the books, there was a black hole, and those sorts of claims.
In May 2002, the former treasurer was very critical of a policy the former government had adopted that basically said that if you were an agency with a history of overspending you needed to be penalised or held to account for that persistent record of overspending. We are not talking here about an isolated example but about agencies with an historic record of overspending. What the former government decided to do was to say to some agencies (and in those days it was education and human services), 'You've overspent your budget—education in one year by $25 million—and you need to repay the budget over a period of time.'
I think in the education department's case it was two years, and in the health department's case I think what was being envisaged was three or four years. My colleague the Hon. Caroline Schaefer interjected at the time I raised this issue in May 2002 and said that the previous position—that is, where you reward departments, CEOs and ministers who overspend by just writing off their deficit and their debt—was 'a reward for inefficiency'.
That was the view of cabinet ministers around the former government's table—to say it was unfair on those ministers and CEOs who, having been told they had to meet a budget requirement, worked hard to meet the savings target, delivered on the savings target and then, as they sat around the cabinet table, another minister and CEO who had persistently overspent in their department or agency conveniently had their deficit and their debt written off and could blithely go on with their overspending.
That was the policy of the former government. The first thing this government did—the former treasurer, but the cabinet took the decision—was to say, 'We're going to get rid of that policy.' The first decision it took, the first message it sent to ministers and CEOS was, 'If you overspend, then we will write off the overspending, we will write off the debts and you can start again afresh.' I said at the time, on 8 May 2002:
As I said, I place on the record again that the current Treasurer's soft [touch] approach to overspending by government agencies is a recipe for financial disaster. A few bureaucrats in government departments and agencies will be delighted to hear that the overspending policy of the previous government has now been overturned by this Treasurer.
He is quite relaxed about overspending: there will be no sanctions; there will be no repayment; those issues will be written off.
Those were my words of warning on 8 May 2002. I just wish that perhaps they had not come true, that those warnings had not come true and that the former treasurer, if he were here now, would be able to report that that in fact had not occurred; however, we know that in fact that is exactly what has occurred over the 10 years. Agencies continued to overspend, ministers overspent, CEOs overspent, and they did so in the full knowledge that the government would just write off the deficits and the debt and allow them to start again—until we found out, and it was not announced at all, that the Budget and Finance Committee established, that last year for the first time the health department was told that it was now going to have to repay its overspending from the 2010‑11 financial year.
Very quietly, without being announced, the government reversed the decision that it took in 2002 and has returned to the position adopted by the former government in the period from 2000 to 2002; that is, they said to the health department, 'We are not going to tolerate this overspending: we will now require you to repay the budget for your overspending.'
When the CEO of the health department came before the Budget and Finance Committee this year and we are looking at another significant overspend for 2011-12, he indicated, and so did the Under Treasurer, that the option of requiring some repayment, or all repayment, of the overspend for 2011-12 was firmly on the table in relation to the health department. I think the government's intention is to try to present the accounts in the best form possible and I suspect they will adjust the books for the health department to require some repayment over the coming years, as they have done the previous year.
How any administrator, how any treasurer, how any administration could believe that you could adopt the policy which essentially said, 'We are setting a budget but, in essence, you don't have to keep to the budget and if you overspend we'll just write off the debt,' is beyond me. I know there are not many in the government who have had much experience in financial management practices of either a private sector business, a government sector organisation or an NGO. There are some, but there are not many.
How you could even contemplate that, if you were running a business, with divisions and units, the CEO of that business would say to a divisional CEO, 'Here's your budget but if you don't meet your budget and you overspend, don't worry about it, we will just write it off,' and still manage to run a successful business is beyond comprehension. That is the mentality, that is the logic, of this Labor administration. That is the policy that the former treasurer and former premier, supported by the current Treasurer and the current Premier, adopted.
That has been their policy: 'Don't worry about overspending. There's plenty of money to go around. We can always tax and charge more, and there's more where that comes from in terms of being able to write off the overspending.' That is the cultural shift that has occurred in the last 10 years, and that is the cultural shift which will have to change. It cannot and it will not change under this government, because they are incapable of understanding the simple logic that you cannot run budgets in the way this government has sought to run them.
You only have to look at the health department with the disasters that the Budget and Finance Committee has looked at in terms of the implementation of the Oracle IT system and a range of other IT systems within the health department, the massive budget overspending and the massive waste that goes on within that particular agency to see that it is not all about (and I acknowledge in some years it has been) increased demand and increased costs within health, as is experienced nationwide.
The government has inflicted upon itself the additional problems of budget because it has not been able to actually manage things like ICT programs and a range of other programs within the health department. I had an answer only today to a question on the health department. It is a question I asked almost two years ago, so I ought to be grateful, I guess, that I have got an answer today.
My question in relation to the health department was: what are the job title and total employment costs of each position with a total estimated cost of $100,000 or more which has been abolished in the financial year 2009-10—it is more than two years ago now—and the job title and total employment costs for each new position which has been created? Just in this one financial year, unsurprisingly, there were more positions created at $100,000 a year or more than were abolished. There were about 30 that were abolished and there were a bit more than 30 that were created.
I want to give you an example of where the money goes within Health. Two of the positions were abolished in Health. One was a director of ICT projects—payment $119,000 a year—and the other was a director of ICT contracts and performance—payment $109,000 a year. In the same year, two new positions were created: a director of ICT operations at $198,000 a year and the second position was a director of ICT programs at $210,000. We have two new positions created at a total cost of $400,000, and two old positions were abolished at an approximate cost of $228,000. It has almost been a doubling of the salaries in one financial year.
They changed the titles, so you cannot say someone has had a $100,000 salary increase. They changed the titles and abolished the positions but they created a new position doing almost exactly the same work. I am sure they will come back and say that these are significantly increased responsibilities, but the information provided to me, and one of the reasons for answering the questions, is that these were just restructured and renamed so that they could pay significantly increased salaries.
That is part of the problem within Health. They are living within a system which said that money is unlimited, don't worry about overspending, if you want to abolish a couple of positions, double the salaries and call them something else, hop on the gravy train. I am intrigued, too, that one of the new positions that was created in 2009-10, and I am sure we are all eternally grateful for this, was a director level position paid $225,118.90—so, almost a quarter of a million dollars—and this person is the Director of Financial Turnaround.
Aren't we lucky! We have had a director for financial turnaround since 2009-10, and what has happened with the financial performance of the health department? It has continued to massively overspend, budgets have blown out and they have not met their departmental budgets at all. I would love to see the key performance indicators for the Director of Financial Turnaround.
Let me be frank here, I am being a little unkind to the Director of Financial Turnaround because of the title that has been given because the responsibility of the overspending does not rest just with that director position. It rests with the CEO, it rests with the minister in the first place, and all of the other director level positions—too many to count at over $200,000 a year or more. Just going through these positions created in that financial year, there are six being paid at more than $200,000 a year, another two or three being paid more than $190,000. So, there are about eight or nine being paid more than $190,000 a year. That is a problem that this government faces in terms of its own budget.
In concluding my remarks on the Supply Bill, I only list those as examples of the problems. Again, I place on the record that the need for this parliament—through the parliament itself, through questions and through its committees such as the Budget and Finance Committee and the Economic and Finance Committee in the House of Assembly, if it was allowed to—to continue to probe government waste and overspending.
I make one final comment in relation to these committees. In recent days I have been involved in the recruitment of staff for some of the committees, and I have noted now having had to take advice from various parliamentary staff (House of Assembly mainly) that a number of these committees have two full-time staff members. Some of the more recent committees have one full-time staff member, generally remunerated at a higher level.
When talking about efficient expenditure, if the committees that are staffed full-time are to continue to have two full-time staff, in my view, they should have a full-time researcher and a full-time administrator. I think having, in essence, a committee secretary and a committee research officer, with the committee secretary paid at the higher level at the researcher at the lower level, should be reviewed and changed. Sadly, this government is unprepared to take those decisions, even though some members of the government backbench, I suspect, strongly share my views.
If there is to be an incoming government, or a re-elected Labor government, I would urge someone within that government to have the courage to look at this particular issue and start making some changes. As I said, if you have a committee with two full-time staff, it would seem to me that the sensible way to go would be two full-time researchers/administrators or one full-time researcher and a researcher who takes on the administrative functions of the particular committee. Some standing committees have to survive the historical practice of one staffer who does the lot: the research and the admin work. Those committees seem to survive, and that may well be a model.
As members know, this chamber has actually passed a motion supporting the provision of a full-time staff member for the Budget and Finance Committee. I know that we will get nowhere with you, Mr President, but I hope that the new president—who will come in, we understand, in a few months (Octoberish)—will be prepared to address this important issue and reflect the views of this chamber. This chamber has voted and has expressed a view to the President that the Budget and Finance Committee should be staffed by a full-time staff person.
As I said, I hope that the incoming president will be prepared to look at the views of this chamber and put them into action, and there will be a capacity over the medium term, I believe, to do this in a revenue-neutral way. The Liberal Party has indicated that, if elected, it will look at a review of the committee systems of the parliament, and it might be through a rationalisation that some efficiencies and savings might be able to be made. In the short term, the decision rests, of course, with the presiding members—whether it be the Speaker or the President—in terms of the budgets they control and whether or not they are willing to listen to the views that have been expressed by a majority of their chamber in relation to the Budget and Finance Committee.
I will just repeat again what I have said a couple of times: I believe that, whether there is a Liberal or a Labor government, the Budget and Finance Committee will be a permanent feature of this chamber's work. I certainly believe that it should be. If a Liberal government were elected, I would be mightily amazed if the Labor opposition, together with Independents and minor parties, did not support the continuation of the Budget and Finance Committee.
However, the work of the Budget and Finance Committee is obviously most effective when it has a combination of both efficient and effective staff, together with efficient and effective members of the committee. Not every member of parliament will have the financial background necessary to work on the Budget and Finance Committee. That is why it is important—if people could see beyond their noses—for the Budget and Finance Committee to have staff that can assist members of the committee in the important work they do in trying to keep the executive arm of government accountable.
I can see that, sadly, this Labor government and yourself, Mr President, are unwilling to provide, in accordance with the wishes of the Legislative Council, that sort of staff assistance to what is an important committee of the parliament. Yet other committees, because they have been established by historical precedent and an act of parliament, have two full-time staff members operating on those particular committees.
It is a historical anomaly, in my humble view, and it ought to be corrected, in my humble view, hopefully by an incoming president, prior to the election, and if not then either by a new government after 2014 or (unlikely, I guess, that it would do it) a re-elected Labor government that would be prepared to allow the Legislative Council committee to try to undertake the sort of work that it should in terms of keeping the executive arm of government accountable. With that, I support the second reading.