How Much Does Budget Honesty Cost?

In place of transparency and accountability around spending commitments, this election season has been characterised by mudslinging around budget honesty. Adam Stebbing explains why this is a problem

In refusing to submit its policies to the Treasury for “costing”, the Coalition’s snub of the Charter of Budget Honesty is but the latest episode in a series of heated exchanges between the major political parties about the accuracy of the estimates that the other has provided for its election promises. Unfortunately, this attention on costings has too often deteriorated into mere political posturing and point scoring, rather than enhancing the transparency and accountability of the substantial spending commitments made during election campaigns.

Established by the Howard government in 1998, the Charter of Budget Honesty gave both major political parties the option of submitting their policies to the Departments of Treasury and Finance for costing during the “caretaker period” of the election campaign. However, while the Charter improved on the previous arrangements to some extent, its provision for costings is highly skewed against the party in opposition.

Shortly after the 2004 federal election, Ross Gittins noted that this costings provision impeded the opposition because shadow ministers are not able to receive confidential policy advice from senior bureaucrats or their departments. In stark contrast, the government of the day does have access to such policy advice and can commission modelling up to the point that it calls the election. Because of this access to the agencies that calculate the estimates, the government is in a much better position to produce costings closer to the official projections than the opposition — which during an election campaign can make it look like the superior economic manager.

Little has changed since 2004. Now in government, Labor has not redressed the disadvantage that it experienced when it came to submitting the costings for its policies in the elections of 2001 and 2004. And, now in opposition, the Coalition has suddenly become aware of how the official costing process benefits the government, first delaying before refusing to submit its policies to either of the financial departments.

Aware of the imbalance, it is thus not surprising that when the major parties are in opposition that they tend to wait until the last minute to submit their policies for costings, if they submit them at all. This can then have the flow on effect of reducing the number of policies scrutinised by government departments, for if the opposition does not submit its policies until late in the campaign there is then little pressure for the government to do so.

The upshot of this is that the spending promises made by both major parties escape the scrutiny they deserve. The details as to how Labor calculated that its proposed Epping to Parramatta rail link for Western Sydney would cost $2.6 billion (including $2.1 billion of Federal funding) have not been forthcoming. Similarly, the Coalition has provided little detail of how the $8.8 billion estimate for the parental leave scheme was derived. This is not to mention the barrage of claims and counter-claims that each side has made about the ‘savings’ measures announced by its opponent.

The lack of scrutiny that large spending promises receive reduces the transparency and thus the accountability of both the election campaign and the public policy of the elected government. For voters to make informed decisions about the economic and policy credentials of the political parties in government and opposition, it is necessary for both to submit their policies to an independent agency for costing and for the outcomes of this exercise to be made publicly available. Because the current system disadvantages the opposition, it is unlikely to produce this and is in need of reform.

Governments who desire to improve the election campaign’s transparency and accountability have a range of reform options at their disposal.

A relatively low cost reform suggested by Gittins would be to level the playing field by providing the opposition with access to senior bureaucrats and government departments.

Alternatively, the government could take up the suggestion made by Malcolm Turnbull when he was opposition leader to establish an independent parliamentary budget office along the lines of the US Congressional Budget Office. Technically, this parliamentary office remains Coalition policy, but it has not featured prominently in the recent skirmishes over costings.

At the end of the day, it is yet to be seen whether either major party has the courage to sacrifice the advantage it enjoys when in government with reform to enhance the fairness, transparency and accountability of the election campaign. Time will tell, but the recent squabbling over costings is far from promising.