Monday, October 15, 2007

Labor's ultimate spending promise: zero net new spending.

"Mr Tanner promised that Labor would release a final reconciliation in the last week of the campaign showing that every one of its spending promises had paid for by an offsetting spending cut.

He believed that it would be an Australian first."


Labor has kicked off the election campaign with perhaps the boldest promise ever – that the net cost of all of its spending promises will be zero.

A Canberra Times tally of the spending commitments made by both sides of politics since the May Budget shows Labor promising to spend somewhat more than the Coalition – a total of $10.1 billion over four years, compared to the government’s $9.9 billion.

It suggests each party has been promising $60 million a day...

But Labor’s Finance spokesman Lindsay Tanner said yesterday the figures prepared by the Canberra Times and other leading news organisations included double counting.

Seat-by-seat commitments on roads and water, such as the 6.6 million pledged to fix Braidwood’s sewage system, did not represent extra spending, but merely added detailed to larger spending commitments already announced.

As well, many of Labor’s promises were for spending outside the four-year forward estimates period within which spending was traditionally assessed.

Much of it would be back loaded. Labor’s promises of part-time educators in childcare centres and tax incentives for low-cost rent would cost more in later years than earlier ones as the programs ramped up.

And a good deal of Labor’s commitments involved using existing government programs, the status of which was continually changing.

“This stuff morphs and wobbles all over the place all of the time. Without reading the eight pages of bumph on each announcement and keeping track of what’s happening to government programs, it is very hard to work out,” he said.

Mr Tanner promised that Labor would release a final reconciliation in the last week of the campaign showing that every one of its spending promises had paid for by an offsetting spending cut.

He believed that it would be an Australian first.

Mr Tanner has already announced $3.3 billion of spending cuts hitting agencies including the National Capital Authority, the Department of Employment and Workplace Relations, Digital Australia, and Invest Australia.

In an interview with the Australian Financial Review this month he signaled that the next round of promised spending cuts to be announced during the campaign would be deeper, asking rhetorically “What have we got a Department of Communications for?”

Mr Tanner told the Canberra Times that Labor had decided to completely offset the cost of its spending promises with spending cuts in order to move the focus of the political debate away from the size of the budget surplus toward the quality of the surplus.

Labor’s commitment to offset the cost of all of its spending promises did not apply to its taxation promises.

It the Coalition promised unfunded tax cuts Labor reserved the right to do so as well.

How much each side has available for tax cuts will be made clear in the Pre-election Economic and Fiscal Outlook due to be released by the departments of Treasury and Finance on or before Saturday October 27, ten days after writs are issued for the election on October 17.

Both Labor and the Coalition are committed to maintaining a budget surplus of 1 per cent of GDP each year, around $10 billion, leaving any extra revenue above that forecast by PEFO available for tax cuts.

From the issuing of writs on Wednesday Labor will have the option of submitting its spending promises to the departments of Treasury and Finance for costing in accordance with the Charter of Budget Honesty.

The Finance Minister Senator Minchin last week challenged Labor to do so, saying his own summation of Labor’s spending promises came to $17 billion.

Mr Tanner said Labor would make an announcement about whether it would accept the offer “early in the campaign”.

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