Wednesday, February 06, 2008

Tanner's Axe. How he'll wield it

The Finance Minister Lindsay Tanner yesterday declined to rule out forced redundancies while unveiling a two-stage razor gang process beginning with immediate cuts of more than $640,000.

Update: The complete savings list is here.

A total of 13 programs announced by the previous government in the lead up to the November election will be axed, among them extra funding for the Human Rights and Equal Opportunity Commission, an Innovation Ambassador Programme, and grants to Chamber Music Australia, the Rugby League Hall of Fame and the Australian National Rugby Academy.

A further 30 of the Howard Government's pre-election commitments will be wound back, among them an ethanol production subsidy, infrastructure related to Canberra's Griffin Legacy and government advertising promoting drought assistance, childcare reforms, on-line safety, and simplified superannuation.

The savings will amount to $243,000 this financial year and $642,900 by 2010-11.

The Minster expects the first stage of the razor gang exercise to be completed for the May budget to save $3 billion to $4 billion.

It will be followed by a second “intensive program-by-program review of government spending and tax concessions”... be completed by the end of the year.

“The first stage will focus on things where it is possible to make quick decisions. The second stage will be to dig deeper. There will be more red pen marks, thicker folders,” the Minister told the National Press Club yesterday.

“If we tried to cram in all of the detailed structural analysis between now and May the risk of missing good opportunities, the risk of making mistakes, the risk of not producing optimal outcomes would be high.”

Mr Tanner said his department suggested the two-stage process in its its first briefing to him just days after the election.

“I think it's important to emphasise that the department that I have inherited is outstanding,” he said.

“I have been absolutely rapt at the quality of the work that I have received and the dedication. There's an awful lot of hard work going on in the bureaucracy in Canberra with all that's happening at the moment.”

But he said that it was essential that taxpayers got value for money.

“A tax dollar is a dollar that a family can’t spend on petrol, schoolbooks, groceries or holidays,” the Minister said.

“There is a great lesson burned into the soul of the Australian Labor Party over twenty years. It is that you have to manage the economy well. If you don't you lose.”

When announcing the one-off additional two per cent efficiency dividend applying to most government departments just before the election Mr Tanner said that while he was unable to guarantee it would not lead to forced redundancies, he believed that it would not.

At the Press Club yesterday he said he stood by that position and that it would also apply to the first round of razor gang cuts to be announced in the budget.

“I would expect that natural attrition and turnover would enable agencies to absorb any reductions in their head counts. There will be increases in other areas because we have election commitments to follow through, so to some degree there will be swings and roundabouts.”

But the Minister said there would “be instances where individual agencies, particularly smaller agencies will find it difficult to absorb people no longer needed because they won't have enough turnover to enable them to redeploy internally.”

“Myself and John Faulkner as the Minister for the public service believe that ordinary growth and ordinary redeployment opportunities will enable us to absorb those difficulties without involuntary redundancies of any consequence.”

The National Secretary of the Community and Public Sector Union Stephen Jones said he was encouraged by the comments and encouraged that so far the razor gang appeared to be targeting programs, not people.

But he wanted remind Mr Tanner and Mr Rudd that public sector workers were “ordinary working Australians with families, grocery bills and mortgages”.

There was concern and disquiet across the public service about the potential cuts, particularly in the smaller agencies with less capacity to absorb cuts and redeploy staff internally.

Mr Tanner also promised yesterday that all spending decisions would be taken through the annual budget process unless there was “a genuine and urgent need” for decisions at another time”.

The Expenditure Review Committee would meet year-round meaning that never again would a program like the previous government's $10 billion water plan get approved without proper scrutiny by Treasury or Finance and without consideration by Cabinet.

In addition public sector purchasing would be recentralised.

“The Liberals treated departments and agencies as individual private companies with the government as a kind of giant holding company. Agencies were effectively bidding against each other without adequate advice or support,” the Minister said.