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Thursday, July 14, 2016

The three simple tweaks that would tell us the truth

What if budgets, and candidates for office, told the truth?

All it would need is a few simple changes to the law. Each is within reach. Nick Xenophon and the rest of the Senate crossbench have been handed an unparalleled opportunity to remake the budget and political process while their bargaining power is at its peak. Malcolm Turnbull probably wouldn't even mind. Like his predecessors, he himself would like things to work better, but left to himself he'll never get around to it.

Here's what Nick and his colleagues should ask for:

1. A Parliamentary Budget Office that can tell the truth

Right now, for the most part, it is gagged. If (say) Labor asks it to cost an election policy, it will produce a document of up to 20 pages setting out the specific proposal it costed, the reasons why it arrived at the figure it did, and a reliability score on a six-point scale from "very low" (black) to "high" (green). But in the election just pastpassedLabor hung on to every one. We were left to guess the means by which the PBO arrived at the figure Labor said it had and how reliable the PBO thought it was.

The law doesn't allow the PBO to release its costing documents itself, no matter how much it is verballed. It is able to correct the record if a party says it has come up with one figure when it has come up with another, but that's as far as the law enables it to go. It is perfectly open to the political party that requested the costing to release it, and the Greens routinely do. But Labor, and before it the Coalition, has taken the tactical decision not to. They don't want to give the other side something to attack.

In the 2013 election it reached farcical proportions. Labor had serious doubts about the Coalition's proposal to save $5.2 billion over four years by letting go of 12,000 public servants. It couldn't see how the numbers added up. They added up because the Coalition planned to start the cuts immediately rather than later as the Labor had assumed, but Labor didn't know that. So it launched its attacks in the dark. As they intensified and as the Coalition stonewalled, it showed selected journalists a copy of the PBO report. They could glance at it but couldn't copy it in case it fell into Labor hands.

The Parliamentary Budget Office costs $20 million per election cycle. Yet its work is regarded as private property even after the policies it has costed are publicly announced and the PBO's figure is quoted. That's until 30 days after the election has produced a prime minister. Yes. Bizarrely, the PBO is required to publish its policy costing documents after the election is over, when it's too late for them to make any difference. The Governor General commissioned the prime minister on Monday, meaning we won't be able to properly examine what we were promised until August 10.

In NSW an improved version of the Commonwealth legislation requires the Parliamentary Budget Officer to publicly release a costing document "when the parliamentary leader who requested the costing notifies the Officer that the policy has been publicly announced". The requirement in no way restricts the ability of political parties to consult privately with the Office about potential policies that may never see the light of day. But as soon as a final policy is put before us with a price tag, we've a right to know exactly what that policy is and what the price tag means.

It's hard to see the prime minister objecting to such a requirement, unless he is planning to be in opposition. It requires more from the opposition than from the government. The government tends not to use of the PBO, relying on the public service up until the election is called.

2. A zombie-free budget

We were told that the May budget marginally improved the financial outlook. What we weren't told, explicitly, is that $8 billion of the measures in it were so-called "zombies", left over from the 2014 and 2015 budgets. If they couldn't get through in 2014 and 2015, it's a fair bet they won't get through in 2016. The ratings agencies think so. An honest budget would exclude those savings from the bottom line, allowing them to be treated as a bonus in the unlikely event that they ever eventuated. A simple change to the rules would allow only new measures to be counted toward the surplus or deficit, weakening the published budget position but making it more credible.

3. A split budget

Right now investment in projects such as railways and hospitals is treated the same in the budget as day-to-day spending on things such as salaries. But it's not. Wisely chosen investment projects are worth borrowing to fund, but day-to-day salaries are not. An honest budget would split recurrent spending from investment spending, making sure the first was usually in balance and the other usually in deficit. The change would make the published budget position look better than it does now and would probably please the ratings agencies because it set out the truth.

Xenophon and the crossbenchers should ask for each of these changes and also for proper cost benefit analyses ahead of any major new infrastructure projects, tax changes or trade deals. It's not much to ask, but it might turn out to be the most valuable thing they achieve.

In The Age and Sydney Morning Herald