Wednesday, October 05, 2011

Labor takes aim at itself. The tragedy of its Parliamentary Budget Office.

Wednesday column

Never underestimate the ability of Labor to damage itself.

Never confuse the Australian Labor Party with the enlightenment philosopher Voltaire who while dying (according to Christopher Hitchens) was asked to renounce the devil.

“This is no time to be making enemies,” he is said to have murmured in reply.

Labor is facing political death and an unknowable number of years in opposition.

So what’s it about to do? Unfortunately for it, and for the political system, it is about to make life difficult for the opposition.

At issue are the rules that will surround the new $25 million Parliamentary Budget Office being set up at the insistence of the independents and the Greens as part of the price of putting Labor into government.

The PBO will grant to any elected political party and to any elected independent the sort of high quality economic and financial advice usually only available to the government.

Except during election campaigns. The Charter of Budget Honesty introduced by Treasurer Peter Costello in 1998 allows a flawed exception. The opposition can ask the departments of Treasury and Finance to cost its policies, but only once a campaign has started, only through the prime minister’s office, and not in confidence. As soon as the departments have completed costing an opposition policy they put it on their websites, whether or not the opposition even wants to proceed with it.

Oppositions face an unenviable choice. They can either submit their policies to the prime minister’s office ahead of announcing them (running the risk of alerting the prime minister)* or they can submit them afterwards (running the risk of the departments publishing numbers that make them or their policies look silly).

Faced with such an awful choice oppositions of both stripes have avoided the entire process.. either by not submitting their policies at all or by submitting them too late.

In 2007 Labor’s shadow treasurer Wayne Swan tried a variant. He announced his tax policy and submitted it for costing, punting Treasury would agree with his numbers. He was confident because he had made sure his policy was the same as the government’s (for all but one of tax rates) which the Treasury had already costed. He got his tick but he had to photocopy something Treasury had already costed in order to get it.

In 2010 Joe Hockey and Andrew Robb didn’t take the risk. They found an excuse to abandon Treasury and Finance and used instead two little-known Perth accountants. It must have been an excuse because they began negotiations with the Perth accountants months before the campaign and the events they said made them go private.

After the election as part of the negotiations with the independents Robb and Hockey did submit their policies to Treasury and were rewarded with findings they had double-counted income, measured the wrong time period in calculating income, spent more than the entire contents of some funds, counted as income the sale of an asset but not counted as lost income the dividends that would be lost, and so on.

They came across as a pair of bumbling incompetents. The two Perth accountants are the subject of a separate ethics and professional standards investigation by the Institute of Chartered Accountants. At issue is whether they allowed what was essentially an exercise in checking the maths to be presented as an audit or endorsement.

Private accountants should never again be put in that position. Shadow treasurers such as Wayne Swan should never again feel they have to photocopy a government policy rather than develop their own.

It is in all of our interests to give oppositions access to the same high quality costing process as governments. The access has to be confidential. Developing a policy is an iterative process. Ideally an opposition or a government comes up with idea, sketches it out, perhaps get surprised at how much it costs (or doesn’t cost) fine tunes it, sends it back for another costing and so on until the polciy and costing are final.

The new Parliamentary Budget Office will enable oppositions to do that. For the first time oppositions will be able to put up ideas to an official costing organisation in confidence and keep coming back until they get it right.

Except that they won’t, once the campaign starts. Unhelpfully, the provisions of the government’s bill remove confidentiality with the issue of writs. After the campaign starts (exactly the time oppositions might need to fine tune their policies) consultation becomes a one-shot game. An opposition can submit a policy to the PBO, but it won’t know what the PBO makes of it until just before the finding is published on the PBO website.

No opposition will take that risk, at least about something risky. Joe Hockey has already said he won’t use the process. Nor should he. It is loaded against the opposition.

It can easily be fixed. All that’s needed is an amendment that would allow confidential consultations during the campaign as well as during the rest of the year. It’d be in Labor’s interest as well as the Coalition’s. It’ll be in opposition soon enough. Swan, Hockey or whoever occupies the shadow treasurer’s chair could iterate with the PBO as much as they want until they get the policy right, knowing the PBO would release only the final costing and not embarrass them.

Hockey moved an amendment to that effect in the House of Representatives. It was defeated. But all is not lost. The Greens are prepared to save the day and negotiate on confidentiality in the Senate. Their only condition is that all parties putting themselves up for office be required to release official costings of all of policies worth more than $100 million, also a good idea.

There’s a chance sense will prevail. We have a rare opportunity to get things right, to set up a system that will work for both sides of politics forever. Labor shows every sign of shooting itself in the foot. I’m not confident Hockey won’t either. But we’re close, very close.

Published in today's SMH and Age

* Correction. I have discovered oppositions cannot submit their policies to the prime minister’s for costing ahead of announcing them. They can only submit after announcing. The system is even worse than I thought.

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