Wednesday, May 09, 2007

Honey pot double standards: Raiding the Future Fund

The Treasurer has laid himself open to charges of raiding his own Future Fund honey pot with his admission that he diverted $5 billion intended for it to set up his new Higher Education Endowment Fund.

His admission, delivered under questioning at his annual post-budget address to the Press Club yesterday blunts his attack on Labor’s Kevin Rudd for his plan to divert $2.7 billion of the Fund’s money.

Mr Costello warned that there were politicians who wanted to put their paws into the Future Fund honey pot. “If you start raiding it and taking money out of that Future Fund now, future generations will have to pay for it”...

The Future Fund was set up to accumulate the estimated $200 billion the Commonwealth will need to meet its superannuation liabilities by the middle of the century.

It announcing the Fund during the 2004 election campaign the Mr Costello said that he expected all of each year’s surplus to be deposited in it.

At the Press Club yesterday he conceded that this year, $5 billion of the surplus would be directed instead to the new Higher Education Endowment Fund. He defended the diversion saying that the Future Fund was “on track to meet its target” without the money.

Asked why he thought that the Fund could cope with losing $5 billion, but could not cope with losing $2.7 billion the Treasurer said that his $5 billion diversion was “not a raid on the Future Fund because we are taking nothing out of it.”

Labor’s Finance Spokesman Lindsay Tanner said the Treasurer’s defence of his $5 billion diversion destroyed his claim that Labor’s $2.7 diversion to establish a broadband service would destroy the Fund’s ability to meet its target.

“According to the Treasurer drawing down $2.7 billion of the fund is shameful economic vandalism, but taking $5 billion previously promised to the Fund is a visionary initiative,” he said.

As recently as March the Finance Minister Senator Nick Minchin confirmed that the $5 billion had been promised to the Fund saying that “certainly this year’s surplus and next year’s surplus will be going into the Future Fund”.

In truth the Fund is accumulating money faster than expected and does not need all of each year’s surplus in order to reach its goal. But the Treasurer’s admission that it can afford to do without $5 billion for the purpose of establishing an education endowment fund may be seen as a turning point in the debate about its use.

As he said at the Press Club yesterday, “the moment you open up that Fund for one so-called good purpose, politicians of Australia will find hundreds of good purposes. If you let a bear put its paw into a honey pot, the honey will diminish.”