Hey, Big Spender

Four years of big spending by the Bracks Government is finally coming home to roost and we are going to pay.

Mr Bracks' decision to break a core commitment -- indeed a commitment crucial to their winning power -- and levy tolls on a Scoresby "freeway", is just the first of many taxes to come.  And it is a tax, not a levy.

While the Government blames the tax hike on the Commonwealth, the war in Iraq, Mother Nature, Mr Kennett and John Howard, the truth is that it is alone responsible.

The Bracks Government, since winning government in 1999, has been showered with money.  It inherited a massive $1.5 billion surplus.  On top of this, it has watched revenue flowing in at an unprecedented rate.  In 1999, Victorian Treasury forecasted, based on best estimates of inflation, economic growth and tax rates, that in 2002-2003, State Government revenue would total $21 billion.  The reality is much higher.  In its latest Mid-Term review, published in February of this year, the Government forecast total revenue of $25 billion, representing an unexpected windfall of $4 billion.

The Bracks Government has now spent the lot -- the whole $5.7 billion windfall.

How?  While some has been spent on capital, most has been spent on consumables.

Since 1999, the Bracks Government has increased recurrent spending above forecast spending by $6 billion, or by 29 per cent.  A large share of this expenditure has gone on higher wages (which have been growing by 5.5 per cent per year over the period) and more public servants.  The total wages bill is now over a $1.1 billion above forecast.  Public sector superannuation costs have also blown out by $700 million, largely due to plummeting equity markets.  Contracting-out of goods and services, of which the Labor Party was so critical in opposition, has grown by 23 per cent or $1.6 billion.  $1.4 billion has been added to recurrent grants paid to a raft of government and non-government agencies.

This growth does not include the huge increase in spending committed to in the last election.

Contrary to the Government's recent announcements, revenue has not stopped flowing.  Revenue is currently growing at a rate of 10 per cent per annum.  The housing boom continues;  the economic outlook is good and fines and other sin taxes are flowing like wine.

The problem is that expenditures are growing faster and at a rate of 11.8 per cent -- growth rates not experienced since the days of Cain and Kirner.

The Bracks Government is investing heavily in infrastructure, but again it is exhibiting a lack of financial control.  The blow-out in the Scoresby "freeway" is due to the construction of an unnecessary and costly tunnel.  Moreover, as the Cole Royal Commission recently outlined, the Government's sweet heart deals with construction union is adding around 30 per cent to construction costs and resulting in the loss of Commonwealth matching grants.

The Bracks Government has to date been able to act as a responsible Santa Claus.  The inheritance is now gone and its real nature will be exposed.  Is it "old tax-and-spend Labor" or "new, fiscally responsible Labor"?

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