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Balancing the Books

Interview with Peter Lewis

Opposition Finance spokesman Lindsay Tanner on bringing a Labor agenda to managing the nation's finances.

	Lindsay Tanner

Is the challenge for a Labor Finance Minister different to that of a conservative Finance Minister?

It is different because Labor is essentially the party of "Active Government". Of using government to improve people's lives. And that means the onus on us is heavier to achieve better outcomes. The Liberals are essentially the negative party and their role I think is to unravel the things that Labor does. We, in a sense have a stronger onus on us in terms of managing the public sector to produce decent outcomes because we are the Party which says you can actually make people's lives better in areas like health, education and childcare, through collective provision.

I think the great lesson of the past 20 years of Labor Government at a State and Federal level, is that if you want to achieve the kind of outcomes that pretty well every Labor person is dedicated to - better schools, better universities, better opportunities for people, better public hospitals, stronger universal health coverage, better childcare opportunities - all of those things - a necessary precondition is sound budget and economic management. There is just simply no way around it. That is the ultimate pitfall for Labor Governments. Because as soon as you allow your fiscal position to deteriorate and as soon as soon as you start trying to patch up with bandaids an unsustainable position, then you are politically finished, and your ability to deliver things that you are committed to delivering is basically wiped out.

So, I think that is the great lesson over the last 20 years. That, therefore means that my responsibility will be a fairly important one in a government of making sure that the foundations are laid soundly and that we can deliver the improvements in people's lives that we believe are possible. And also, improve the overall position of the nation relative to the rest of the world, which clearly has an indirect impact on people's lives as well.

Without intelligent fiscal management then those things just simply won't be possible.

The Liberals have got much greater leeway than us. We are always marked down much more heavily for bad fiscal management than they are. In the current circumstances had a Labor Government produced the Budget that Costello has just produced, we would have been absolutely politically massacred. We would have had the markets selling the dollar down; we would have had a whole range of negative consequences. $20 billion has been shaved off the surpluses projected for the next three years compared with what was projected for those same budgets last year, and yet there has been barely a flicker of backlash to that. That is because there is an assumption there that Liberal governments are sound managers. But we, of course don't get the same leeway.

That means that our performance has to be better than theirs.

What is your main priorities in terms of handling your portfolio in the lead up to the election?

My first responsibility of course is to publicly advocate Labor's approach to the management of the Budget. There is a range of issues there. One of the things that is starting to become more significant is disclosure of information. Two big issues there. One is the increasing issues of the 'commercial-in-confidence' excuse for refusing to disclose information about government spending. The Auditor-General has just handed down a report criticising the Government about that.

We have adopted a pretty hardline position on that for when we are in government, following on in the footsteps of some State Labor Governments that have taken a pretty strong, open approach to publishing contracts on the Web and making sure that there is full public disclosure. That is an important issue.

Similarly, with the introduction of accrual accounting for the Budget, which is what we supported, they have managed to reduce the amount of information that is available in the Budget on detailed issues, which therefore makes it harder for particular groups of people in the community to understand what the government's plans are for the next few years.

There has been a range of reductions in available information there. So reversing that is pretty important, and focussing public opinion on some of those accountabilities is a pretty important responsibility for me. But I also have the much broader responsibility, and that is being part of the main economic team for Labor, and clearly my responsibilities there are focussed pretty heavily on fiscal policy and what our relative positioning would be with respect to the surplus. And also, I have got responsibility for asset sales - things like the sale of Sydney airport. Although the transport issues are obviously with the Shadow Minister for Transport, but the actual sale process and the detail of how that would unfold are my responsibility as well, so there are issues there.

Ultimately of course I play a role in the broad economic debates as well because of my portfolio.

One of your predecessors, Peter Walsh, was a Finance Minister who prided himself on his ability to say 'no' to all the hare-brained ideas that his colleagues came up with. Is that part and parcel of your job? How do you make that criteria of which program in potpourri of good well-intentioned programs are the ones to get the green light?

The Finance Minister plays a pretty fundamental role in that regard in Opposition as well. So that my role within the Opposition has been to try to prevent us from making promises that aren't funded, or haven't been assessed in relative terms in order of priority, compared with other schemes, and also to scrutinise commitments that people wish to make or indeed, responses to what the Government is doing. So there is that fundamentally negative role of the Finance Minister, or Shadow Finance Minister, which is extremely important, because you do need a Devil's Advocate in your decision making processes. It is quite easy to get carried away with particular proposals without having them properly assessed; without comparing them against all other available possible uses of a particular pool of money.

People in individual portfolios are understandably very heavily focussed on their own area, so that if somebody in the Education portfolio or the Community Services portfolio, or the Health portfolio, or the Transport portfolio comes up with a particular proposal, you can't expect them to be measuring that against an alternative use of the same money in another portfolio, over which in many instances they may have fairly limited knowledge of.

My job is to perform the gatekeeper role and to have a reasonable working knowledge across all the portfolios so that when we are making assessments about committing money, be it from Opposition - making promises about when we are in government - or actually spending it in government, there s some mechanism where we can actually say well, yes it would be good in isolation to spend $200 million on this program, however, if we are going to spend $200 million, then spending it on something over here, something different, is actually a much higher priority.

And also, putting people to the test, because in politics people often make assumptions which are widely shared, which are not necessarily automatically true.

The other thing that I am very keen to do in office, that is associated with this, is to improve the degree of benchmarking of public sector spending. At the moment there is this huge tendency within the public sector that has been there forever, to assume that if you spend $50 million on something, you are by definition getting $50 million worth of value, when in fact in many instances you might be misdirecting the spending. You might have only been getting a limited amount of value, and it might be much better directed somewhere else. So one of the key things that I would be very keen to do as Finance Minister will be to improve the level of benchmarking and continuous assessment of how much impact spending is actually having.

If we decide we want to spend an additional $100 million on aboriginal health, for example, which is the sort of issue that governments of both persuasions are often confronting, I think we need to have some sense that it is actually going to produce $100 million worth improvement where we are spending it. There is a much greater need for - aboriginal health is just a random example - labour market programs - there is a whole array of expenditure where I think all too often governments of both persuasions have tended to assume that the headline of what we are spending equals outcomes, when it doesn't necessarily equal outcomes.

Just on pre-election promises. What percentage of proposals slip through your net?

Well, that process actually isn't over, so you couldn't actually put a percentage on it, and it is a bit of a false comparison in a sense because there are some proposals that have no costs or a very, very limited cost, but are worthwhile doing and that you judge according to other things. There are other proposals that are expensive, so it is a bit hard to take that percentage of numbers of proposals. It doesn't tell you very much.

But inevitably I think in most areas we will see a fairly limited number of major initiatives. Not just because there is not that much money to play with, but also because it is important to have a sense of priority and to be actually able to say to people, well, here is where it really matters. These are the best ideas. These are the best approaches to producing some improvements in Health, in Education, or whatever. I don't think we will see a huge list of initiatives - there will be a relatively concentrated list of specifics that are designed to produce outcomes.

Does that make it difficult with that sort of policy - lazy charge that has been levelled against you by the Howard Government, and the fact that there doesn't seem to be a whole lot of money in the kitty to actually come up with something that looks like a platform of an alternative government?

I think this situation is a problem for whoever is in Opposition to a degree, ever since "Fight Back". Because inevitably what happens is that if you come forward 18 months before an election with this vast number of detailed of initiatives with costings and whatever, then after the initial positive response then the fact that it is going to be all in one direction, and circumstances change - budgetary circumstances change - incumbent governments can do the things that you were thinking of doing. There are a number of initiatives that the government has in this Budget that are basically a direct steal from things we have advocated and things we had under consideration for our set of commitments. For example, the superannuation being included in the income assets test for people over 55 who are applying for unemployment benefits, which they introduced in 1996 - now they have just removed that. So there are a lot of practical difficulties in bobbing up 18 months before an election with a whole set of detailed promises.

Secondly, there is a tendency in the media to report sweeping, big positive things once, and then ignore them forever after because they are not new anymore. So, you haven't seen much in the media in spite of Kim's best efforts, about the Medicare Alliance, since National Conference last year, because there is a mentality in the press gallery in particular that that had been reported and is now old news, when in fact it is a centrepiece commitment. Ultimately, they will have to report it, once we get into the heat of an election campaign.

So, there are some practical reasons why it is not particularly smart to be putting forward your wares out there on display early on. However, clearly there is a balancing factor. You need to build some momentum, and the closer you get to an actual election campaign, the more people have to have a sense of differentiation. What are the positive things that you, as a political party, are intending to initiate that will improve their lives in circumstances in this country.

And we are doing that bit by bit, and Kim announced a few more initiatives in the course of the Budget Reply Speech the other night. So, we have got quite an amount of initiatives out in the public domain. There will be more to come and obviously there will be some that will be announced during the election campaign. So there is just a gradual process of putting these into place, while at the same time maintaining a degree of flexibility to make sure that by the time we get to the election we haven't boxed ourselves in to, for example, a set of fiscal unsustainable commitments.

The last thing I want to see happen is for us to put ourselves in a position where we get all these wonderful promises that can't be delivered. And that, I think, is another great lesson that we need to learn from the last 20 years of Labor's experience State and Federally.

It is critical that we don't artificially inflate expectations and then find ourselves in a position we can't deliver. That is what has happened with John Howard. That is why he has got One Nation, because he allowed people to think that all of the change that had occurred in the previous 10 or 15 years in Australia was all Paul Keating's fault, and that all you had to do was take away this nasty Labor government and you would be nicely back to the 1960s . That didn't happen and what you got was massive disillusionment.

So, it is also important that when we do finally go to an election, we will set a policy direction that will be deliverable, and that we are not going to promise the earth, and three weeks later turn around and announce, sorry we can't do what we promised. We cannot afford to do that sort of thing.

Speaking of costings, I'll ask the 14 year old schoolboy question. You have got a rapidly shrinking surplus; you've got a commitment to roll back the GST; and a commitment to the Knowledge Nation. Where is the money going to come from?

The ultimate response to this of course is that none of this is going to happen the day after the election, and Kim has always made it plain that the fiscal circumstances will have a big role in determining how quickly these things are done. We still haven't made final decisions about the shape of these initiatives - the magnitude of them - and in some cases those final decisions won't be made until close to the election, because then we are absolutely certain about what the fiscal circumstances actually are.

But I think it is also important to understand that people I don't think trust large sums of moneys. So in the areas like "Knowledge Nation" and improving the health system, what matters most is ideas. New ways of doing things. Yes, money is required. We will not be able to build a knowledge nation on zero dollars. But we don't need to have some vast program with billions of dollars attached to it either.

If we do advocate something of that kind the community's response will be predominantly one of concern that this will be unsustainable. It will blow the budget. It will increase interest rates.

So the real premium in these areas is on the quality of our years of being able to improve the use of existing expenditure and get maximum value out of relatively modest amounts of additional expenditure. That is where the ultimate answer lies. That we don't need to spend large additional sums of money, and it would be dangerous to promise to spend large additional sums of money. The real question is: Can we get substantially better value out of existing expenditure, and limited additional expenditure. I think we can do that.

And with the GST -although we would like to obviously do all the things to make it fairer and simpler as soon as possible, that process will clearly be in accordance with overall fiscal circumstances. Now, I have no doubt that we will make some substantial and very worthwhile changes to the GST, but it will all be in the framework of fiscal responsibility. It has to be. There is simply no alternative.

There is also a perception out there that the GST is going to realise a lot more money than anyone really expected so far. Surely that gives you a bit of flexibility in your position?

The evidence is actually a bit mixed on that. The initial figures that we have now got suggests that that is probably not the case. There is no big additional GST dividend. The government has hinted that there is a GST dividend on the income tax side of things. They thought they would gain a windfall from the informal economy - the people who are not paying any tax - but they haven't actually substantiated that and it is very hard to tell to what extent that is true or whether it is other factors that have produced a bit of a boost in income tax receipts over the past year or so.

We can't rely on any assumptions about the GST. Keep in mind of course, that given a few years, the effect of the GST -- but within a few years we get to a point where all the GST goes to the State and it doesn't matter from the point of view of the federal government fiscal position, whether GST is over-stated or under-stated.

What matters that the federal government is committed to deliver catch-up funding because the initial receipts from the GST over the first few years are calculated to be lower than otherwise would have been the case from the old system of financial assistance schemes. Therefore the Commonwealth has to maintain payments to the States, and of course if the GST revenue is higher than projected, then the fill-in payments that the Commonwealth has to pay are reduced accordingly. Now there was some indication of that in the mid-year economic and fiscal outlook papers in November last year. They were reduced, but that may have simply been because of higher than expected rates of growth.

So, I think the answer to your question is that there is not any evidence that that will be an increase in GST revenues of such a magnitude that it will make a big difference to an incoming Labor government's position

In terms of the "Knowledge Nation", you are from a trade union background yourself. How well do you think this concept is resonating amongst Labor's internal base?

I think there is a sense in the community, pretty much right across the board, that investment in education, in schools, in TAFE, in university, in these sorts of developments, is increasingly important for Australia's future.

Different kinds of people have got different levels of interest on that, so if you are talking to someone who is a research scientist, well they are almost inevitably going to say it is the most important thing in the world and everything else pales into insignificance.

Amongst blue collar workers you may get a lesser degree of interest in terms of some cases, but I think it is still pretty well understood that our level of skill and our level of knowledge, and our level of innovation, are fundamental to our economic future, including the areas like fairly traditional manufacturing.

So, I don't think there is strong resistance to the agenda from the point of view of people saying this is wrong, or this is bad. There is no group in the community that is homogenous either. There are some blue-collar workers whose work is relatively knowledge-based in terms of manufacturing, who will see the practical outcome in their day to day work experiences, or in the skilled area or the R&D area. So, I don't think there is a uniform view of it, but one thing that I do think is extremely important is that we need to ensure that the strategy is broadly based, and it should involve TAFEs as well as universities.

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  Issue 98 contents

»	Twenty Grand � The Cost of a Life in 2001
»	Compo Protest Virtually Ignored
»	Workers Tell Jodie: It's a Bit Rich
»	Disbelief at Dubai in the Sky
»	Wage Rise For Two Million Workers
»	Casuals Win Parental Leave Rights
»	Egan Budget Welcomed � But Social Audit Still on Agenda
»	Bad Rosters �Like Being Drunk�
»	Nurses Act on Ward Rage
»	Council Workers Brace for Border Skirmish
»	Meatworkers Win in Federal Court
»	Hotel Bosses Linked to Tobacco Industry
»	Workers Demand Treaty With Indigenous Australia
»	Activists Notebook

»	The Soapbox
»	The Locker Room
»	Trades Hall
»	Tool Shed

»	Pop and Politics - Where's Billy??
»	Satire is not Serious
»	Toasting May Day
»	WorkCover - Questions for NRMA

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