The Hon. R.I. LUCAS (15:47): I rise to support the second reading of the Appropriation Bill. In doing so I went back and looked at the contributions of all members to last year’s Appropriation Bill debate to see what, if anything, had changed in the last less than 12 months. Sadly I think the conclusion that many commentators have made—and I certainly agree with it—that this government is the most incompetent, most secretive and most scandal-prone government in this state’s history has again been proved correct over the last 12 months or so.
We only have to look (and I will not detail them all) at the problems, scandals and issues surrounding Premier Rann; former treasurer Foley; former attorney-general Atkinson (who seems to be involved in an almost countless number of defamation cases these days); minister Conlon; the former leader of the government, Bernard Finnigan, in this place, who resigned, after a very short period of time, from his position in mysterious circumstances; and the well-known problems now of the newest minister, the Hon. Mr Wortley, who now has the ignominious record of being only the second minister in the 168-year history of the Legislative Council to have had a successful no-confidence motion moved against him.
He joins the controversial Dr John Cornwall from the period of the mid-1980s and the then Bannon government in that dubious distinction. Further, we have the well-known problems of the welsher from the west, as you would know him, Mr President, minister ‘Turbo Tom’ Koutsantonis. The problems of minister Rankine and minister Conlon are well known.
I guess we saw the set of circumstances just over a couple of months ago where, when one set of unfortunate-for-the-government opinion poll results came out and minister Kenyon said, ‘Oh well, at least it can’t get any worse,’ and ‘At least we don’t have the scandals of the former New South Wales Labor government.’ Of course, soon after that the problems of the unnamed Labor member of parliament facing criminal charges hit the media airwaves, and we have had more recently the problems with minister Wortley. That is the problem we have with the government as we look at the Appropriation Bill debate.
Each minister, and some former ministers, are too worried about their own personal problems, issues or scandals, and are not concentrating on what they have been elected to do; that is, to govern the state in the public interest and to manage the state’s finances in a conservative and businesslike fashion. As debate on appropriation in this place and the other place has well demonstrated that certainly cannot be demonstrated by this government, the former treasurer or the current Treasurer who has continued the task after former treasurer Foley.
I seek leave to have incorporated into Hansard, without my reading it, a purely statistical table numbered 1.5, from Budget Paper 3.
This is an adaptation of table 1.5 in Budget Paper 3. The only change is that I have added in the previous year’s results—the year 2008-09 actual results from last year’s equivalent budget paper—so that we now have a spreadsheet record of the financial performance of the treasurers and the government from 2008-09 estimated through to 2014-15.
What the table shows is that, after almost a decade of the rivers of gold flowing into state coffers from the GST deal negotiated by the former Liberal government—a GST deal which was attacked by Premier Rann and former treasurer Foley at the time as a lemon of a deal for South Australia—what this government and, in particular, the failed former treasurer Foley, has left the state is a budget in deficit over a period of four years. On the best measure of deficit, the net operating balance in three of the four years—2008-09, 2010-11 and in this current year’s budget, 2011-12—are all in significant deficit, and there is a modest surplus in 2009-10 if you use that particular measure of the surplus or deficit in the budget.
We see a $233 million deficit in 2008-09; a $427 million deficit last year; and we estimate a $263 million deficit for this current year. We are looking at almost $1 billion in deficits over a four-year period—if you want to net off the $187 million, perhaps $700 million or $800 million in net deficit over that four-year period—at the end of a period when we had the rivers of gold flowing into the state from the GST financial deal negotiated by the former government.
We have often heard from members in this and the other chamber about how this government has delivered perennial surplus budgets, that this government is a magnificent financial manager and that this government was not delivering deficit budgets. Wrong, wrong, wrong on all counts. What treasurer Foley has done after the rivers of gold is left a budget in such a weakened condition that, even on the best measure of deficit, three out of the four years record deficit budgets.
I turn to the measure that former treasurer Foley, when he was first elected, said was the one true measure of whether a budget was in surplus or deficit—that was not the net operating balance which he now uses.
What he said in 2002 is that the only true measure of the health of a budget is an accrual measure called net lending. This Budget Paper 1.5 shows that, for all four of these years from 2008 through to 2012, the budget is in deficit. In fact, for all seven years from 2008 through to 2015, it has been or will be in deficit. That is not a bad record from the former failed treasurer Mr Foley and now failed Treasurer Snelling: seven years of deficits under the net lending measure which Mr Foley said was the one true measure of whether or not a budget was in surplus or in deficit.
Under this net lending measure, in 2008-09 there was an $872 million deficit in that year alone. In 2009-10, there was a $1,092 million deficit in that particular year; in 2010-11, the year just gone, a $1,821 million deficit; and, in 2011-12, a $1,252 million deficit. So, on this one true measure that measures the health of a budget, we see over a period of four years some almost $5 billion—that is $5,000 million—worth of deficits imposed on the state in the state’s budget by Mr Foley and Mr Snelling. That is a tragic set of circumstances.
If it were a government coming out of the calamities of the State Bank disasters of 1992‑93, there would at least have been an explanation. Certainly, the opposition will concede that, in 2008-09 with the global financial crisis, there were particular problems in that year rolling over into the following year, but we do not see the situation improving since then. We see it actually getting worse. As I said, there was an $800 million deficit in the global financial crisis year of 2008‑09 and a $1821 million deficit in this last year 2010-11, so a couple of years after the global financial crisis, the situation has markedly deteriorated in terms of the state’s finances.
Sorry, I stand corrected: this particular table shows that six of the seven years under the net lending measure will be in deficit. In the final year, 2014-15, the Treasurer is predicting that it will finally turn into surplus if one believes those figures so, rather than seven years of deficit, it is six years in a row and then, in 2014-15, they finally predict a surplus.
Similarly, when one looks at the cash measure, which is the third measure of whether a budget is in surplus or deficit, which is the way the federal budget is reported—the headline either surplus or deficit figure as a cash measure under the federal budget arrangements—if we look at it on a cash basis, we had a $721 million deficit in 2008-09, a $1,154 million deficit in 2009-10, in this last year, a $1,840 million deficit and, in the coming year for 2011-12, a $1,182 million deficit and, again, deficits right out to 2013-14 with finally a surplus in 2014-15.
That is a stunning indication of the state of the state’s finances. Using the measures that the former treasurer and the current Treasurer said are the most accurate measures of whether or not we have been managing our budget well, clearly those figures demonstrate in an independent way that the treasurers past and present are not managing the state and the state’s budgets well. I seek leave to have incorporated into Hansard without my reading it table B.7 from Budget Paper 3.
The Hon. R.I. LUCAS: This touches on some of the issues that my colleague the Hon. Jing Lee has just referred to, but it provides a list of the net debt figures in fact going back to 1988.
What it shows this year is that it peaked (the net debt figure) at $11.6 billion in 1993 at the height of the State Bank problems. Under the stewardship of the former Liberal government it reduced to $3.2 billion; from $11.6 billion down to $3.2 billion, an $8.4 billion reduction by the period of 2001, just before the change of government. That is the measure that the Hon. Jing Lee has referred to.
That figure is now estimated to jump to $8.175 billion in 2013. So, in simple terms: from $11.6 billion down to $3.2 billion, and now jumping back up to a peak estimated of $8.2 billion in 2013. That table also shows the unfunded superannuation figures, the total net financial liability figures of the state, where one just adds the net debt and the unfunded superannuation figures together.
It is a pretty damning indictment of the former treasurer, the failed former treasurer who had to be dumped from his portfolio by his Premier and colleagues, but also a stunning indictment of the current Treasurer, supposedly part of the future direction of this Labor government. One can see that the budget that he has brought down just continues the misery; continues the poor performance; continues the financial incompetence of the former failed treasurer and the failed Labor government.
During the last few years, one of the claims by the government, in particular the former treasurer and now the current Treasurer, is the impact of the global financial crisis: the reason why we are having problems is the global financial crisis. For a period of a year or so, Mr Foley claimed that as a result of the global financial crisis the state budget was going to lose well over $3.4 billion, but during last year that claim came back to: we are going to lose $1.4 billion to $1.5 billion as a result of the global financial crisis.
Through the work of the Budget and Finance Committee, we sought advice from Treasury, and it took some time because the government would not provide the answers. We actually said to Treasury, ‘We want a detailed breakdown of this claim about a $1.4 billion to $1.5 billion loss.’ What we found was, and I seek leave to have incorporated into Hansard without my reading it a purely statistical table listing the Treasury estimate of the impact of the global financial crisis on the state budget.
Treasury estimate of impact of GFC ($m)
This information was provided to the Budget and Finance Committee and what it shows is that this $1.4 billion figure that has been claimed, most of that was actually in past years. In 2008-09, there was a $439 million impact, in 2009-10, there was a $510 million impact, but in the current circumstances, 2010-11, it was $148 million, in 2011-12, $160 million and in 2012-13, $96 million. That adds up to the $1.35 billion that the government had been talking about.
As you can see from that, almost $1 billion of that occurred a number of years ago. It is in the past tense. It has nothing to do with the current budget situation in terms of the impact on the current budget. So, if we actually look at the impact in the financial years 2010-11, 2011-12 and 2012-13, the average impact on the budget is about $135 million a year, or less than 1 per cent of a $16 billion to $17 billion budget.
So, in real terms, we are talking about a modest hit or a modest impact on the health of the state budget. It is not insignificant—we accept that—but it is a modest estimated impact as opposed to the headline figure which has been trumpeted to the media for some time of a $1.4 billion impact. It is a deceptive figure because it refers to five years. It is a deceptive figure because the bulk of that—almost $1 billion—has occurred in the past and does not impact on the current budget circumstances.
There is no doubt that this claim from the government and the former failed Treasurer, Mr Foley, is a fraud designed to conceal from South Australian voters the main reasons for the state budget crisis and savage budget cuts. Those main reasons are the financial incompetence of the government and the financial incompetence of the ministers in the government.
The Budget and Finance Committee has commenced doing some work—and will continue this work in the coming week when Treasury revisits the committee—on trying to get behind the detail of the Royal Adelaide Hospital public-private partnership deal. What we have established in our first discussions with Treasury is that, when one looks at the fine print of the PPP for the Royal Adelaide Hospital, the state of South Australia, in particular the taxpayers, will be exposed in a number of significant ways which have not been highlighted or publicised. We will explore this in further detail with the Under Treasurer and senior Treasury officers next week.
The Under Treasurer Brett Rowse has confirmed to the Budget and Finance Committee that taxpayers would be exposed to additional costs for interest rate movements and to some contamination costs. Taxpayers will be responsible for 80 per cent of the cost of remediation of unknown pre-existing contamination—whatever that is—and 100 per cent of contamination caused by the state. In relation to the latter case—contamination caused by the state—Mr Rowse’s view was that it would only relate to the period of the hospital project, but he has taken that question on notice and will come back to the committee.
The reason that is highlighted is that it is contrary to the earlier evidence that had been given to the Budget and Finance Committee that the private sector bidders would be responsible for all the contamination cleanup costs at that particular site. Treasury has also taken on notice to ascertain who will be responsible for the costs of cleanup of any possible contamination of the underground aquifer.
The Under Treasurer also confirmed that taxpayers will be exposed to interest rate risk in certain circumstances. The fine print of the deal shows that taxpayers will take base interest rate risk from the refinancing of the deal, which is likely to be as early as about 2018. So, in simple terms, this means that, if there are significant interest rate increases when the first refinancing of the whole deal occurs, the cost to taxpayers will be significantly increased.
We already know that average annual repayment costs are estimated to be about $391 million per year, or about $1.1 million a day. That is an average figure. The Under Treasurer has taken on notice what the peaks and troughs in that particular repayment schedule might be, but he did concede that in some years it might be higher than $500 million a year.
If we take additional interest rate risk and if interest rates move in an unfavourable way during the refinancing period, those particular estimated repayment costs of $391 million a year on average, peaking at over $500 million a year, will obviously increase significantly as a result of the state taking on that additional risk. Treasury has also confirmed that taxpayers will be exposed to the costs for any legal challenges to the development planning consent and also native title or heritage claims.
We have called on the Treasurer and Minister for Health to be transparent and accountable in relation to this PPP deal. Although I have no great expectation that they will be, I would hope that as we move into the period when the Auditor-General is preparing his annual report that he will cast a close eye over the project documentation for the PPP deal and look at not just the risk exposures (some of which I have highlighted) but also at whether or not in his judgement it is a good deal for the people of South Australia.
An issue we are exploring in the Budget and Finance Committee is that the former government and this current government for a number of years had a set of guidelines, called Partnership SA guidelines, which are up on the Treasury website and which were obligatory for all departments and agencies of government to follow if they were to look for any PPP project or any private financing of an infrastructure project. One of the many requirements in the Partnership SA guidelines document is that any proposed PPP had to pass the value for money test (VFM test). In doing that, it had to construct what is called a ‘public sector comparator’, which was the cost of doing the project in the traditional way, through debt financing, through government departments and agencies.
One of the guidelines was always that it could only go ahead as a PPP if it was value for money and if it was demonstrated to be cheaper to the people of South Australia by going down the private financing route; that was always the guideline. When the first PPP under this government was done, which was a small PPP in relation to country courthouses and police stations, the government proudly proclaimed that it passed the value for money test and that it was cheaper than doing it in the traditional way, and it went ahead as a PPP.
However, when it came up against the super schools, what happened was that, when you applied the test, it actually failed. It was about $9 million to $10 million more expensive than if it was done in the traditional way. It was at that stage that the government threw the rule book out of the window—that was the start of the process—and said, ‘We’re going to go ahead and do it anyway, even though it’s more expensive than if we did it in the traditional way.’
The rule book was torn up—and it is something which has been little reported on by the Auditor-General—and the government proceeded with the project. At that time, we asked the then under treasurer, ‘What’s going to happen with the Royal Adelaide Hospital PPP, because here we are talking about a $1.7 billion project,’ which was the claim at the time, ‘and are you going to insist on a value for money calculation?’
What we have established—and we are interested in some answers from Treasury on this—is that mysteriously in the last few months the Partnership SA guidelines, which have been up there until recently, all of a sudden disappeared and some new guidelines, called the national infrastructure guidelines, have now been listed. When the Under Treasurer was asked about this, he said, ‘Well, that must have been an oversight because the government for some time now has got rid of the Partnership SA guidelines, and we moved to these new national infrastructure guidelines some time ago. If the Partnership SA guidelines were still up on the Treasury website until recent times, that was an oversight or a mistake.’ I find that hard to believe, but we will nevertheless explore that with the Under Treasurer when he returns to the Budget and Finance Committee.
The important point with this is that the reason the government has jettisoned the public private partnership South Australian guidelines—the ones they previously said they would adhere to, and the ones the former Liberal government had adhered to—is that it was getting too hard for the government to pass the test, like the super schools. It was continuing to fail the test when you did draft calculations.
The Under Treasure has been steadfastly trying to deny that Treasury officers have done any calculations. I know that is not correct; I know that Treasury officers had done calculations under the old public sector comparator guidelines, and it is an issue that we will pursue. What they were finding on their rough calculations was that, as with the super schools, it was almost impossible for the arrangements to pass this test. They would therefore be stuck with having to go back to the traditional way of financing or, each time a deal was done, having to publicly justify why it did not pass the value for money test.
So what do you do? What you do—and there is now this agreement at the national level, and every government is obviously interested in this—is you change the guidelines. You make the test easier; you incorporate an additional or more generous component for a calculation of risk, which makes it an easier calculation for the private sector financing option to pass the test. Of course, as a state you also accept back increased risks or exposures, such as the risks I referred to earlier in terms of reducing the risk for the private sector investor and leaving additional components of risk with the public sector payers of the particular project.
This is an important issue, because it is being used by the government to justify this particular deal. The Budget and Finance Committee does have important work to do; no-one else is going to do this sort of work. It will require hard work, forensic questioning and persistence in terms of asking the questions of the Under Treasurer and Treasury officers, and of the Treasurer and government ultimately, and getting on the record the history of how this particular test has been changed, the impact of the changed test and how it has made it easier for the government to ensure that these PPPs are passing the test.
Why is it critical for the budget? It is critical for the budget because, if the government has to do it the traditional way (this is the hospital), then this year and over the next five years—and depending on whose figures you want to believe, whether it is the $1.8 billion figure that the government is talking about, which no-one really believes, or a figure somewhere in the low $2.1 or $2.2 billion, or as high as $2.7 billion—the government would have to find that amount of money to build the project and take it out of the next five or six years’ budgets.
As I said earlier, the budget is already in a power of trouble in terms of deficits, and debt in particular. If you have to add to it, over a period of five years, over $2 billion worth of borrowings and expenditure on budget, then those figures of the net operating balance and the net debt would increase, and they would increase significantly. The attraction for the government with the PPP for the hospital is that virtually nothing goes on the budget until 2016, long after the government probably expects to be booted out of office in 2014.
The first impact will probably be the first PPP payment in 2016-17 of about $400 million a year. Each year after that, for 30 years, an average payment of nearly $400 million will be made out of the budget to the private sector operators. So it is a critical issue for the health of the budget, it is a critical issue for transparency and accountability, and it is a critical issue in terms of judging the financial competence of the government as to whether or not it has been able manage this RAH PPP project efficiently and effectively on behalf of the taxpayers. It is critical that the Auditor-General applies the forensic capacity that is available to him in the audit office to this particular deal so that the details are exposed for all of us who are interested to see—members of parliament, economic commentators and members of the public.
I now turn to a number of specific issues in terms of budget cuts and measures and also examples of waste within the budget. The first one I want to refer to is a recommendation in the Sustainable Budget Commission draft report, on page 121, under the heading ‘Unroadworthy vehicle fines’. The measure states:
This measure proposes additional revenue of $7.9 million across the forward estimates due to the introduction of a fine for the detection of unroadworthy vehicles. DTEI proposes that this fine will accompany the issue of a standard defect notice which does not have a direct penalty.
This indicates that the budget impact in a financial year is estimated to be around about $2.5 million a year. So, this is an additional potential impost of $2.5 million.
I have been informed that there is a raging dispute going on within the government at the moment with government departments and agencies in relation to this issue. That dispute, essentially, involves DTEI bureaucrats but also South Australia Police and, obviously, bound up in this are Treasury officers as well.
I am told that the current arrangements in relation to defect notices are that, if you are pulled up in the street by a police officer with, for example, your tail lights out or bald tyres, or whatever it might happen to be—but let’s take the easiest one: one your tail lights are out—the police officer places a yellow sticker on your screen which is, in essence, a defect notice.
The police officer has a couple of options. He or she can, firstly, issue you with an expiation notice at that time or can issue you with a caution. I am told that, if the police officer issues you with a caution, he or she must fill out a form which indicates that you have been cautioned. That way, I am told, police can monitor whether a person’s car has been cautioned three or four times in a six-month period, or whatever it might happen to be.
The police officer has that option or discretion at that stage to issue an expiation notice and a fine or just a caution without a fine. The yellow sticker goes on the window, and the person is told, ‘You have to fix this and then go to a police station and have the defect notice removed.’ If you do that for a tail light, for example, you just jam in a globe and you fix it. You go down to your local police station, they remove the defect notice and you make a small payment, I am told (I think it is about $20) as an admin fee, at that time.
I am told that what is occurring at the moment (and I refer to that Sustainable Budget Commission recommendation) is that the government is looking at a significant increase, in essence, for the management of this process of defect notices; that is, DTEI is seeking to take away from police their discretion in that there would be an expiation notice issued in virtually all circumstances rather than, in many cases, the caution. Clearly, that increases the revenue flow to government because, currently, the police officer has the discretion to issue a caution, and many of them do.
Then when the car owner goes to have the defect notice removed, there is to be a significant increase in the level of the payment the car owner has to pay. As I said, at the moment, it might be $20 or so. The original suggestion was that, for a small defect, it goes up over $100, I think, to about $125. So, you go to your local police station, you might have already been pinged for your expiation notice for having your tail-light out and then you might be pinged for the removal of the defect sticker at the local station, maybe with another payment of up to $125. I am told that with the original proposal for the more serious defects—a suspension problem or something where you have to go down to Regency Park—the removal of the defect might be as high as up to $250, which was deemed to be a major defect as opposed to a minor defect.
In my discussions with people who are actively engaged in this at the moment—a couple of whistleblowers—I am told in the latest discussions that those particular numbers, other options, have been reduced to about $50 in the first instance in relation to removing the sticker at the police station, and maybe $100 or a bit above that in removing it from your windscreen down at Regency Park. I am told that a submission has been considered by cabinet in the last fortnight, and the furious debate continues between police in particular and transport bureaucrats in relation to this proposal.
Police are furious that the discretion of the police officer is being either removed or significantly reduced under these particular proposals. They believe they will be the ones at the forefront attracting the ire and anger of car owners, when in the past they might have issued a caution, whereas under these proposed arrangements that discretion would either be removed or significantly reduced. This is and will be a significant issue.
There has been a lot of discussion already on talk-back radio about this particular issue. As I said, the debate is raging within the bureaucracy at the moment. It is taking on a life of its own in the community in terms of this particular debate. One can trace it back now to this recommendation in the Sustainable Budget Commission, and the government needs to come clean and be accountable in relation to what would appear again to be another revenue-raising grab initiative by the government on, in this case, car owners.
No-one of course supports somebody clearly driving an unroadworthy vehicle on a continuous basis, but there are any number of occasions when your tail-light might be out when you do not realise it, and in those circumstances a caution with not significant costs for fixing the problem is the sensible way of policing it. Massive increases in fines, penalties and admin payments for those sort of circumstances will not only cause grief for the police officers and the image of the police force but also cause further grief for a government and its ministers who sadly are blissfully unaware of the impact of many of the decisions they take.
We discussed earlier ministers in this government being blissfully unaware of the impact and ramifications of decisions they take. Sadly, in the budget issues we see exactly the same, and this issue of defect notices is just one further example where, in this case, minister Conlon, and a distracted minister for police, Mr Foley, are blissfully unaware of what is going on at the pointy end of decisions that their bureaucrats and others are recommending to be taken.
We have seen, through the work of the Budget and Finance Committee, and in other forums as well, many examples of waste and financial incompetence by the government. There are too many to list, but I want to raise just a handful to highlight, because we often get the question from the Hon. Mr Holloway and others: what would you do and what would you do differently? We can highlight in many cases the problems of this government where it could be done and done better.
Shared Services is an unmitigated disaster. All who have been exposed to Shared Services now realise that it is an unmitigated disaster. We have seen that the new governments in Queensland and Western Australia, at considerable expense to taxpayers, are unwinding their shared services initiatives or putting them on ice and not further expanding them. We have seen, in recent evidence to the Budget and Finance Committee, that a $60 million cost of implementation of this project has now blown out by more than 100 per cent—by $68 million.
Brett Rowse and Damian Bourke told the Budget and Finance Committee at its last meeting that the $60 million cost was now $128 million—a mere $68 million blowout on a $60 million budget—not a bad effort when one looks at the implementation cost of any project. The Auditor-General has already reported that the actual savings from this shared services project are nowhere near the claimed level of $60 million.
What is blissfully unreported, because I guess it is a difficult issue, is that even the claimed savings of about $30 million a year that they have achieved have nothing to do with the shared services project. Shared services was essentially about payment of accounts across government departments, managing payrolls in bulk in one centre and reducing costs. The major part of this $30 million claimed saving was the Future ICT project, which was a centralised arrangement in relation to information and communication technology purchases across the board.
That was something which was going on separately to Shared Services but is now being lumped in with the claimed shared services savings to try and give them at least some degree of credibility. Sadly, the Auditor-General has not drawn the public’s attention to this particular deceit by the government. We took evidence from the health department a couple of years ago and they said, ‘Look, Treasury told us that we are saving $5 million from Future ICT and they just reduced our budget by $5 million and said, “There’s your saving.”
‘When we reported to them, and then to the Budget and Finance Committee, that it was actually costing $50 million more over a period of four years—not a saving, but Future ICT was going to cost the health department more money rather than saving it—Treasury said, “Too bad. We’ve made the saving. We are reporting that to the Auditor-General. The fact that it is actually going to be an increased cost is something you have to manage within your budget anyway.”‘ So far, this fraud on taxpayers has been perpetuated and continues to be reported as a claimed saving under shared services, when clearly it is not.
The latest fraud masquerading as a shared services saving is procurement reform. Every agency, even going back to the former Liberal government, has been making changes—modest for some and significant for others—in terms of procurement reform. This is rationalising the number of suppliers, rationalising the number of warehouses; all these sorts of things are being tackled by various departments and agencies.
This was going on long before shared services, and Shared Services now does have some role in relation to this, but the savings from procurement reform, warehouse reform and so on, are separate to the original notion of shared services. Nevertheless, those savings are now being incorporated into the claimed shared services savings—as I said, another fraud being perpetrated on the people of South Australia through that particular claim.
We can pick out one or two of the agencies—starting at the top, the Department for Premier and Cabinet—to see rotting from the very top in terms of wasting public money. We found, with the Premier’s own department, that his own CEOs had wasted $246,000 on remodelling the chief executive officer’s office. One chief executive wanted to have an open plan office and spent a bucketload of money; the next chief executive came in and said, ‘No, I don’t like that. I’m now going to go back to the old way,’ and spent a bucketload of money.
Altogether, they spent a quarter of a million dollars returning it to virtually the same state it was in three years ago. It just went full cycle, and a quarter of a million dollars of taxpayer’s money was spent under the nose of the Premier.
The Boston Consulting Group was paid half a million dollars for a consultancy on megatrends without advertising and without going to competitive tender. When we asked the former chief executive officer of the department how on earth you can go to a $500,000 consultancy without advertising and competitive tendering, he said he knew them to be a specialist group in this area and they had given a special cut-price deal.
We said, ‘Well, how do you know that a lot of other reputable companies wouldn’t have given you a cut-price deal as well if you didn’t go to competitive tender?’ There was no answer to that at the Budget and Finance Committee. It was just a lazy $500,000 going to the Boston Consulting Group for this consultancy without any pretext of advertising or competitive tendering.
We have smaller examples just to show that it is not just in the millions and the hundreds of thousands that this department and government departments are wasting money. The Department of Premier and Cabinet spent $40,000 on the cost of a master’s degree program at a Melbourne university for a public servant in the CEO’s office—the total cost of the course.
In some cases, employers will contribute to the cost of professional development or further course development. The person who undertakes it makes some contribution to it, not just the taxpayers, but, in this case, we the taxpayers spent $40,000 to send a person to a Melbourne university for a master’s degree program with no contribution from that individual, and of course, no commitment—no bond, as you would call it—to lock that person into the public sector for any period of time to see some sort of return on the investment that the taxpayers were making.
In essence, we could spend the $40,000 and soon afterwards that officer—heaven forbid, he or she took a package and was helped to leave—could leave and go off to the private sector or somewhere else and seek other employment with a master’s degree paid for by the taxpayers of South Australia. We are still trying to find the cost of a new ministerial office for minister Portolesi to try to find out what the costs are.
We are still paying $23,000 a year for Mr Rann’s friend Bob Ellis supposedly for speech-writing purposes, yet those payments were not revealed in the department’s annual report. Why weren’t they revealed in the annual report? We still don’t know. It is not as if the Premier does not have a speechwriter. He already has a full-time speechwriter earning almost $100,000 a year on his staff, yet we are still paying his mate Bob Ellis up to $23,000 a year supposedly for speech-writing purposes.
There are innumerable examples of waste right across the board in small projects and in big projects within all government departments and agencies. I refer to the South Australian police department. Evidence given to the committee by the business services director, Denis Patriarca, revealed that hundreds of officers have been underpaid workers compensation payments over a number of years. He confirmed that SAPOL had budgeted up to $1 million to meet the total cost of the underpayments.
However, even though it was not revealed in the SAPOL annual report, SAPOL revealed to the committee that the consultants Deloittes were paid $227,000 in the period leading up to 30 June 2010 to help sort out the mess. Eight months later in February 2011, Deloittes was still working with SAPOL to fix the bungle. When one looks at that, given that they earned $227,000 in the period up to 30 June and they were still working eight months later, it is possible that the total payments to Deloittes to help fix up this bungle would be about $400,000 or more, and we have obviously asked the question.
The question we put to the Minister for Police and to SAPOL is: why couldn’t SAPOL fix up this bungle themselves rather than spending $400,000 on expensive consultants such as Deloittes to calculate and organise the payment of underpaid workers compensation?
Surely, that is not beyond the capacity of the South Australian police force. Surely, if they have made a mistake of about $1 million in terms of underpaying workers compensation, we do not then have to spend another $400,000 on consultants to try to work out the extent of the problem and how we are going to go about fixing it.
The final broad area I touch on in terms of waste and, I guess, examples of financial incompetence, is brought to mind by a headline today of Adelaidenow which refers to the potential for compensation payments to Marathon Resources for the government’s Arkaroola decision.
It was not that long ago that the government had to pay, I think it was—I do not have the figures with me—up to $10 million or so, and I stand to be corrected on that figure, as compensation for the prisons.
The Hon. T.J. Stephens interjecting:
The Hon. R.I. LUCAS: The Hon. Mr Stephens says it was about that number, about $10 million. Because of an incompetent management process, because of incompetent decision-making by ministers, the Treasurer and the government, we ended up with an exposure—the government said it did not have any legal exposure but in the end it needed to make these payments ex gratia to the bidders as compensation for the mess that had been devised by the government, or imposed on them by the government.
So, the taxpayers of South Australia not only did not get the new prison that they had been promised, they ended up paying almost $10 million in compensation because the government had stuffed up. Now the headline in Adelaidenow is, ‘Taxpayers could pay $15m to Marathon Resources for mining ban at Arkaroola’.
I hasten to say that I am not aware whether that particular sum is correct, but clearly we are talking about many millions of dollars. Clearly, Adelaidenow would not be making the number of $15 million up, someone from within government has suggested a particular number to them.
This particular story quotes ‘Turbo Tom’ Koutsantonis, the mineral resources minister, as agreeing that he had had a meeting with the Marathon Resources people, I think it was today, and he concedes:
…we’re working towards a settlement…In the interests of fairness, we will look at their costs incurred in exploration and look at that.
I notice he is very generous with taxpayers’ money in paying compensation. He still has not paid me my $50 for welshing on a bet 10 years ago.
The Hon. J.S.L. Dawkins: He’s got a fair bit of form in that area.
The Hon. R.I. LUCAS: He has a bit of form in that area, but he is generous with the taxpayers’ money. So, we are clearly looking at another example of a significant compensation payment because this government had a flawed process where, for whatever reason, over a period of time it allowed Marathon Resources to continue to believe that it could go ahead and mine and so it continued to explore that area. We know that the government—
The Hon. P. Holloway interjecting:
The Hon. R.I. LUCAS: Well, you have actually been in government for almost 10 years now, so I do not think the former failed mines minister, the Hon. Mr Holloway, ought to squeak too loudly on this particular issue. The soon to be retired former minister should not continually interject out of order.
We have a situation where the government, for 10 years, has continued to encourage Marathon Resources to explore and led it to believe that at the end of that—
The Hon. P. Holloway interjecting:
The Hon. R.I. LUCAS: Well, you do not explore unless you are going to do something with it. I do not know anybody who spends money on exploring if they do not think they are going to get something at the end of it. Just the knowledge is not of much value in the marketplace. My experience, limited as it is, is that if you cannot actually mine it, then it is not worth too much in the marketplace. If you know it is underground then not too many people would give you money if you cannot get it out. That is my limited experience of the market. I am not sure whether the Hon. Mr Holloway knows—
The Hon. T.J. Stephens: A mining legend.
The Hon. R.I. LUCAS: —as the mining legend, I am reminded—much more about this particular industry than I do, but that is my limited experience. My experience is that it really only has a bit of value if you can actually get it out. If you know about it, if you can look at it or if you know it is there somewhere, I am not sure there is much value in that.
The Hon. P. Holloway interjecting:
The Hon. R.I. LUCAS: Have a look at that now. We also know that the government paid money to it under the PACE scheme. The government will not tell us how much—
The Hon. P. Holloway interjecting:
The Hon. R.I. LUCAS: Don’t shake your head, Paul, because—
The Hon. P. Holloway: That was somewhere else, I think.
The Hon. R.I. LUCAS: Well, we know Marathon Resources—
The Hon. P. Holloway interjecting:
The Hon. R.I. LUCAS: The Budget and Finance Committee—
The Hon. P. Holloway interjecting:
The Hon. R.I. LUCAS: Why don’t you kick him out, Mr President. Ask him to leave, thank you. He is interjecting out of order. I would have been finished hours ago if it had not been for the Hon. Mr Holloway’s persistent and virulent interjections.
The Budget and Finance Committee was told that Marathon Resources received a PACE grant. As the Hon. Mr Holloway infers, we do not know what Marathon used that for—whether it was for that particular lease in that area, or elsewhere. We also do not know, because the government will not tell us, exactly how much Marathon Resources was given under the PACE grant. We do know that Marathon was given money but we do not know how much.
So, we have a situation here where this company has been encouraged to continue to explore—it has been given money by the government to continue to explore potentially in this area, or perhaps in other areas as well, I am not sure—and the government makes a decision in the end which we are now told could cost us up to $50 million in compensation. It could cost us up to $50 million because of the flawed decision-making process that this government has gone through.
It is but one further example of the financial incompetence—on which I am sure you would agree with me—that has been seen from virtually every minister in this government and the government as a whole.
I indicate my support for the second reading of the Appropriation Bill and highlight the fact that, hopefully, the Auditor-General will pursue some of these issues with some vigour in the future. Hopefully, the Budget and Finance Committee will continue its task of highlighting some of the waste and inefficiency of this government and its ministers.