Thursday, August 19, 2010

"Costings". Is that all there is?

The Coalition's twelve pages of costings - said to save the budget $11.5 billion - are not costings in the traditional sense.

Whereas the costings of the 51 Coalition policies prepared by the departments of Treasury and Finance before the Coalition walked away detail the assumptions used and the means by which the numbers were arrived at, the figures in the Coalition's document are just that - one line of figures for each policy without explanations as to how the figures were derived.

Instead the document is covered by a one-page note from the Perth-based accountancy firm WHK Horwath which says it "is satisfied that based on the assumptions provided, costed commitments and savings have been accurately prepared in all material respects".

Which is encouraging up to a point. That point is that Coalition has not seen fit to air those costings - as it would have had to if it submitted them to Treasury and Finance in accordance with the Charter of Budget Honesty - and that Horwath has not done so either.

We are asked to take both Horwath and the Coalition on trust. Then known as Hendry, Rae and Court, Horwath had as its founding partner in 1938 Charles Court, later to become Sir Charles Court, the long-serving Liberal premier of Western Australia and father of Richard Court, the Liberal premier from 1993 to 2001... Horwath principal Geoff Kidd told The Age last night Sir Charles kept an office in the firm after he retired from politics and maintained an active interest in its work.

Horwath costed the policies of the Western Australian Liberal Party during its successful run for office in 2008 and the South Australian Liberals in their unsuccessful tilt at government in March this year.

It began work on the federal Coalition's costings in mid-June, well before its leader Tony Abbott announced last week he was abandoing Treasury and Finance and would instead have his policies costed by "a respected, reputable, well known accounting firm".

Horwath says it charged market rates and did not so much cost the Coalition's policies as satisfy itself that given "the assumptions provided," the Coalition's costings made sense.

The limited information made available by the Coalition indicates that it used used different assumptions from those that would have been used by the Treasury.

For instance its one-line estimate of the saving in interest payments from not building the national broadband network adds up to $2.4 billion. The leaked Treasury document that apparently convinced the Coalition last week to abandon the process put the figure at $1.6 billion - $800 million less. The Coalition has gone ahead with the bigger savings figure without explanation.

And some of the assumptions defy credulity. We are asked to believe that after a two years of freeze in public service recruitment, it'll up the efficiency dividend asked of each department from Labor's 1.25 per cent to 2 per cent, making hiring difficult even after the freeze is lifted.

As the Coalition sees it

. Labor's first surplus doubled to $6.2 billion

. Net debt to peak two years earlier and $15 billion lower

. $10.5 billion in mining tax revenue surrendered

. Offsetting savings of $22 billion give net budget improvement of $11.5 billion

. No detail as to how figures arrived at

. Figures certified by WHK Horwath as accurate "based on the assumptions provided"

Costings document, August 18, 2010

Published in today's SMH

Related Posts

. Coalition costings

. Stand by for Coalition costings

. Coaliton "too dim" to stop its own rules being used against it