Government Falls at Biggest Hurdle

The Budget has achieved most of it key targets.  A surplus is expectedthis years and in each of the next four years.  Debt levels, though higher, are within budget.  Importantly, overall spending has been restrained and not too far ahead of target.

The Government's overall approach is both sensible and laudable.  It has cut spending on advertising and consultants;  reduced administration cost through amalgamation of departments;  cut back some defunct programmes and now plans to reorient procurement decisions more towards achieving value for money and less for helping local industry.  The last initiative is expected to save $100 million per year.

It has also concentrated spending on the priority areas of health, education, disability services and public safety and on the delivery of services.

Despite these achievements, it has failed the big test.

The Government has done nothing to fix the haemorrhaging in the health system -- aside from throwing more money at it and promising to undertake another high level study.  Health spending is set to increase by a massive 9.6 per cent next year.

As a result of its failure to address health spending, the Government has been forced to raise taxes again, with tax hikes totalling $787 million over four years as announced in the Budget.  The problem is that state governments have very limited powers to tax as a result of the great tax shuffle that gave rise to the GST.  Moreover, the taxing powers they do have are narrowly based, volatile and inequitable.  The Gallop Government has resorted to increasing stamp duties on house sales and insurance bills -- both of which are already past their peak -- and to raising its tax take on water authorities (and therefore water consumers).

The Budget does highlight the need for reform of state-federal relations.  Cost shifting by the Commonwealth does undermine expenditure control in State hospitals.  While the GST did give the states' a new growth tax, under the existing sharing arrangements the growth in revenue goes to the non-growing states, such as Tasmania and South Australia and not to growing WA.

Nonetheless, the WA Government's woes in health are largely under its control.  The Budget does announce a new high level committee to address the problem.

It had better be successful, for there is little fat left elsewhere and the tax take in WA is already high.

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