Peter Martin Economics: Costings. Swan chucks Hockey a time bomb

Friday, February 22, 2013

Costings. Swan chucks Hockey a time bomb

Wayne Swan, just now:

I’m proud that we have established the Parliamentary Budget Office and today I’m announcing we’ll enhance its capacity to ensure budget transparency from all sides of politics, with additional funding to the PBO. This will enhance the capacity for costings to be prepared in the lead up to the election, removing any excuse for policies to be released like thought balloons rather than rigorously costed policies. Transparency would be further enhanced if the PBO were to prepare a post-election audit of all political parties, publishing full costings of their election commitments and their budget bottom line 30 days after an election. We will introduce legislation for consideration by the Parliament to enable this reform. This will remove the capacity of any political party to try to mislead the Australian people and punish those that do. It will avoid a situation we saw last election, where the Liberal Party thought they could con the Australian people. As a result of the reforms I am announcing their $11 billion black hole in the budget bottom line would have been uncovered regardless of the election outcome.

Here's why it's a time bomb

During the 2010 campaign both Labor and the Coalition withheld the release of their costings until days before the vote, denying Treasury the opportunity to check their calculations. When Treasury checked after the vote during negotiations over which party would form government it found errors in the in the Coalition costings it said amounted to $3.5 billion. Among the errors were double-counting, purporting to spend money from funds already allocated and booking as a benefit interest saved from a privatisation without booking as a cost dividends that would be lost.

The two Perth accountants who signed off on the Coalition’s policies were later fined and found to have breached professional standards by the Institute of Chartered Accountants.

Shadow Treasurer Joe Hockey had referred to their work as an audit, saying they had certified “in law that our numbers are accurate”.

In fact they had agreed with the Coalition to produce work primarily "not of an audit nature". They were to merely "review the arithmetic accuracy of the Liberal Party of Australia's costing estimates".

The 2010 election was unusual because Treasury was called in while the independents decided which party to support. In a more normal election the victor could avoid embarrassment by instructing the Treasury not to cost what it had promised in the campaign.

The legislation proposed by Mr Swan would force both sides of politics to be more careful in their costings, knowing they could be embarassed weeks after taking office.