Monday, August 19, 2013

Costings. Who'd want to be Hockey?

At last, the Coalition is set to produce a set of policy costings we can believe.

After its bizarre experiment three years ago hiring a little-known bunch of Perth accountants to “cost or “audit” its policies using rules that prevented them from doing either, it will submit its policies to three of the toughest most independent-minded economic and bureaucratic brains in the country.

Former Treasury official Geoff Carmody, former Queensland auditor-general Len Scanlan and the former head of the Prime Minister’s department Peter Shergold are anything but pushovers.

Carmody in particular wears the scars of having repeatedly told both sides of politics truths they don’t want to hear. As co-founder and longtime head of Access Economics, he has assessed policies for leaders from Hewson to Beasley and from Latham to Howard. In 25 years of dealing with Carmody I have never known him to tell people anything but what he thought, especially where it was what they didn’t want to hear.

The trio have been working with Hockey for months. Hockey says they will sign off on a public list of his costings a week or so before the election.

Contrast that to 2010. The agreement between the Liberal Party and the two Perth accountants specifically blocked them from making “any assessment or comment on the reasonableness or otherwise of the assumptions”. They were to carry out procedures primarily “not of an audit nature”.

How did it happen? The costings rules are rigged against whoever is in opposition - both sets of rules, those introduced by Coalition's Peter Costello as part of the Charter of Budget Honesty, and the new set introduced by Labor in setting up the Parliamentary Budget Office.

Costello’s rules allow the opposition to ask treasury to cost its policies, but only after the campaign has started and only after they have publicly released them. Treasury then publishes the outcome on its website, exposing the opposition to humiliation from which it can’t escape.

Faced with such a scenario oppositions of both colours have balked and either not submitted their policies or submitted them too late to be costed.

Hockey found things doubly difficult in 2010. Access Economics had decided it no longer wanted to cost opposition policies. Hockey believed the government had lent on each of the big four accountancy firms. Each denied the charge, although each said it refused to do political work for oppositions as a matter of course.

It left Hockey with few places to turn.

The Perth office of Horwath had costed policies for the Western Australian Liberals. But it was a firm of accountants. It no expertise in economics. It agreed to primarily review the “arithmetic accuracy” of the Coalition’s costings - to check the adding up.

Treasury later found a raft of errors including double counting. The accountants were fined for breaching professional standards by allowing their work to be misrepresented as an audit.

Labor’s new rules were supposed to end the circus. They allow the Parliamentary Budget Office to cost whatever the opposition wants in confidence, but with a catch. Those costings requested after the campaign begins have to use the old Costello rules - they have to go straight up on the web, exposing the opposition to ridicule.

Hockey is right not to cop it. Proper costing is an back-and-forth process. A party asks what something would cost, finds out, and then varies it to get something cheaper. Both sides of politics have shamefully skewed the rules against the opposition. It would be a mark of Hockey’s maturity as Treasurer - if he gets there - if he ended the farce and genuinely levelled the playing field.

In  The Sydney Morning Herald and The Age

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