Treasurer Joe Hockey with the Mid-Year Economic and Fiscal Outlook at the National Press Club in Canberra in December. Photo: Andrew Meares
The 2014-15 federal budget is significantly more important to the standing of this government than past budgets were to its predecessors. By using a record number of processes, reviews and white papers as the basis for its policy agenda and legitimacy, the budget is an important proxy for the integrity of all the other review-style processes underway and the government’s broader agenda.
A budget with accurate economic forecasts, transparent assumptions and well-considered measures will signal credibility and build public trust in the government’s reviews and agenda. A budget with contested economic statistics and forecasts, dubious assumptions and ad-hoc measures will do the opposite.
Fortunately the pre-election fiscal outlook (PEFO) and public economic forecasts by other institutions allow easy assessment of the budget’s fiscal and economic claims and whether anyone is "cooking the books". However, the National Commission of Audit’s release and its possible prominence in the budget raise other concerns about the processes through which public policies are being designed and implemented. The "independence" and "expertise" of such panels are easily assessed by looking at their qualifications and who they represent. How these political processes interact with traditionally "purer" public sector ones is more difficult to scrutinise and hold the government to account on.
Like most before it, the Liberal-National government has repeatedly committed to incrementalism, doing what it promised, and following good process, to the extent that it has been labelled a “process addiction”, with up to 100 reviews currently under review. Good public-sector processes usually lead to things being done better: better advice, better decisions, better policies, better programs and better outcomes for society. Bad process is, at best, none other than inefficiency, waste, and “red tape”. At worst, bad process can also be used to mislead the public and provide a veil of legitimacy for rent-seekers.
Amidst all these white papers and reviews, the most sacred Australian government process is the budget. With the relatively high costs of pursuing freedom of information provisions, the budget is the best proxy available to evaluate the credibility and integrity of all these reviews and the bases for this government’s agenda. It’s also a rather conservative proxy as the Australian Public Service is a known stickler for process and the whole-of-government budget process should be less susceptible to political capture.
Although often referred to elusively in media conferences by the Treasurer, Finance Minister and other government representatives, not much is known about the budget process outside of government. The Department of Finance and the Treasury websites give away little. Fortunately a gem of a paper from the OECD back in 2008, titled “Budgeting in Australia”, provides a useful introduction.
The Expenditure Review Committee of Cabinet (ERC) was tasked with making the most of the government’s expenditure decisions in the budget process. “Professional civil servant” views were provided to ERC to inform their decisions and these were not necessarily the views of their ministers.
Being forced to hear such advice is unambiguously a good thing, regardless of whether it is acted upon. After all the ERC meetings, the complete set of ERC decisions were discussed by the full cabinet in April at “Budget Cabinet”, with supporting, impartial public service advice from all different departments and agencies on the competing proposals. From the perspective of good public administration, the importance of “Budget Cabinet” is a clear contrast to what comes after: the “ad hoc revenue committee” and the “hunting licence”, which was “issued to senior ministers to settle final details of the budget”. An excerpt from the OECD paper:
“In recent years – up to the 2007/08 budget – the “hunting licence” has involved senior ministers deciding on major tax cuts, tax expenditures and other “big ticket” expenditure items in light of the latest surplus estimates. These initiatives are developed in close confidence and are often used as the main headlines of the budget. In recent years, the proposals agreed in this stage, at the end of the budget preparation process, have been very substantial – in fact, similar in size to those approved during the entire ERC process. However, this was not the case in the 2008/09 budget and it remains to be seen whether the hunting licence will become part of the new government’s budget processes.”
The dates above imply that the “hunting licence” and “ad-hoc revenue committee” may have been bipartisan processes and standard practice up to at least 2008.
But some things are very different about the 2014-15 Budget.
The National Commission of Audit was symbolically released to the public on May Day 2014, less than a fortnight from budget night. It is reported to have remained a "secret" to Treasury until late as mid-April. While such commissions are a common feature of new conservative governments, whether this particular one is just a staging exercise or whether the government has actually outsourced its key policies to unelected comrades will be determined on budget night.
If the budget turns out to be Tony Shepherd's Christmas wish-list granted early, we have much larger governance problems on our hands. We could then be forgiven for questioning the motives, integrity and public value of the dozens of other sector-specific reviews underway, for example on agriculture, northern Australia, renewables, defence and industry.
If processes remain similar to those described in the 2008 OECD paper, good process would involve all significant budget measures taken from the audit commission being considered by “Budget Cabinet” and making the most of the public service’s review processes and expertise. With Cabinet meeting less than a week out from budget night, the entire 2014-15 budget and the wishes of the audit commission may have been subject to the usual public sector review. The “hunting licence” and “ad-hoc revenue committee” may be relics of the past. If this is so, the government deserves to be commended and has laid a firm foundation to move forward.
However, if signature items such as the “debt levy” are only being agreed in principle with details being withheld from ministers, this appears unlikely. If major budget decisions are still being made this late in the game or have escaped the rigorous Cabinet process, the public’s trust in the dozens of other reviews now underway and, ultimately, the government’s entire agenda, is at serious risk.
Ryan Edwards is a PhD candidate in economics in the Arndt-Corden Department of Economics of the Crawford School of Public Policy. His research focuses on the human development dynamics associated with natural resources, mining and structural change.