Those of us who suspected the federal government’s grand Murray-Darling basin rescue plan was policy on the run had our suspicions confirmed in Senate Estimates hearings last night, when the government’s Senate Leader, Nick Minchin, confirmed that the $10 billion package did not go to Cabinet for approval before it was announced. Further evidence provided this morning indicates that the Department of Finance was informed about the expenditure package just two days before it was announced, and they will cost the plan once the states agree to it.
Senator Minchin suggests that it amounts to “one billion dollars a year, which is less than half a per cent of Commonwealth Government expenditure” and says “let’s keep it in perspective.” I’m sure lots of people on public housing or dental care waiting lists or carers without adequate support or those with disabilities or sole parents who have had their already meagre incomes cut by the government as a ‘work incentive’ will also keep this in perspective and recognise that those funds just aren’t available.
Regardless of the merits of the Murray-Darling proposal, this incident shows two things. Firstly, in an election year, a billion dollars is not particularly significant to the government when there’s political problems to be fixed or votes to be bought. Secondly, it is a reminder that many funding promises that involve amounts of money spread over a range of years are close to meaningless, as they are regularly modified in subsequent years – sometimes by spreading the money out over a greater number of years, and sometimes by reducing it as a result of ‘shortfalls’ in spending. Many funding promises have lots of pledges to spend ‘up to‘ a certain amount, fully anticipating that actual expenditure will fall well short. The initial big announcement sounds like there is a lot of money, but often it can include ‘old’ money taken from existing programs, or be contingent on contributions from elsewhere.
I can recall examples of being burnt by this not long after I entered the Senate. In 1999, the Australian Democrats negotiated a commitment from the government to spend $400 million over 4 years on a greenhouse gas abatement program. This ended up being spread over more than double that, dramatically reducing its impact – not to mention that some of it was spent on things like flying bureaucrats around to try to spike Kyoto Protocol negotiations. There was also a promise to spend up to $264 million on a grant scheme for off-grid electricity users to convert from diesel to renewable energy systems, to assist the uptake of renewable remote area power systems. The “up to” factor meant that actual spending on this fell well short of what was pledged. Apart from the tragedy of missed opportunities in these cases, it means one has to fight harder to maintain advances. It also means being wiser, and some later achievements have not been so easily undermined.
For example, even though the government’s National Plan for Water Security categorically states “the government will invest $10 billion over 10 years”. But in spelling out the funding, it contains the following commitments:
- the Commonwealth Government will invest up to $3 billion over 10 years to address over-allocation in the MDB;
- The Commonwealth Government will invest up to $500 million in practical projects to improve the efficiency and effectiveness of river operations and storages in the MDB;
- We are prepared to invest up to $3 billion in buying back water entitlements and assisting irrigators in the unviable or inefficient parts of schemes to exit the industry.
Leaving aside the fact that a funding promise over 10 years will almost inevitably be varied along the way, $6.5 billion of the $10 billion comes under the ‘up to’ qualification. This means eventual funding may be well less than this, and there is no guarantee that the unspent funds will go into other aspects of water security. This is not always a bad thing, as you don’t want to spend money on something that doesn’t present decent value just so you can you’ve spent it. But it is worth being aware that the headline funding figure is very rubbery at best.
It is unfortunate that, when the real figures subsequently come to light, the level of attention paid is always a small fraction of the headlines derived from the initial announcement. This practice is not new to the current government, but the necessary qualifications on the announcing statements are rarely made clear. It means one has to take all government funding packages with a large helping of salt whenever they are announced.