State Budget lacks reform

While the 2005-06 Victorian Budget delivered this week was impressive in many ways, it is fundamentally flawed.

Politically, it was a brilliant Budget.  It delivered large, but not over-the-top, increases in spending in most areas.  And did so in an even-handed manner.

It provided near equal increases in funding for special needs to public and private schools, avoiding the ideological bias that undermined Mark Latham's campaign.

While the increases in spending are spread widely, they are largest in the areas of highest concern to the electorate, including health, education, the disabled and infrastructure.

The Budget also broke the prevailing norm against borrowing, and did it in the right way.  That is, the borrowings are to be made by government businesses to fund long-term investment in infrastructure such as water, ports and transport, and be repaid through user charges.

The Budget went some ways to addressing the Government's big-taxing ways by trimming back the growth in land taxes.

However, this is one area were the rhetoric is much greater than the reality.  The Government has in effect done nothing more than give back a bit of the bracket creep in land tax.

It is not surprising therefore that virtually all interest groups cheered the Budget.

Interest groups, at least the vocal ones, share one common objective -- to get more and easier money out of government for their supporters.  And in this Budget they were highly successful.

The reason for their success, however, lies not with them or even to a large extent the Bracks Government, but rather to a fast growing economy driven by reforms of the past.

While the interest groups have praised this Budget for repairing the damage of the Kennett years, in truth the Kennett years provided the capacity for this spending and on a sustainable basis.

This Budget has not prepared for the future beyond the next election.  It has not done what Kennett did, and that is to drive efficiency in government services.

While the Budget has pumped an extra $1.6 billion into human services, there is no effort to drive efficiency.

The Budget does recognise the growing problem of an ageing population, overlap and duplication between the state and federal governments, and the rising cost of health care.

However, it does nothing about them.  Instead, it uses the largesse generated by reforms of the past to compensate for them.

The spending is so large on health that it is creating shortages and driving up wages for doctors and nurses.

Aside from a commitment to reduce the monies spent on contractors and consultancies -- an important commitment -- there is no detectable commitment to drive value for money in the Budget.

In short, it is just tax and spend.  Pity our future generations.

ADVERTISEMENT