Joe Hockey and Tony Abbott shouldn't take all the blame for the low
quality of the measures in the budget. I suspect they're victims of poor
advice from the econocrats of Treasury and Finance.
Gary Banks,
former boss of the Productivity Commission, says the public service's
role is to inform policy choices. If so, it did an unimpressive job of
informing an inexperienced government on the best way to exploit the
unique political opportunity offered by the Coalition's very first
budget.
We can never know exactly what advice passed between the
bureaucrats and their masters, but it would be an unusual budget whose
measures didn't arise from options provided by the presumed experts.
And
a comment by Laura Tingle of The Australian Financial Review offers a
clue: "Former Labor ministers were genuinely surprised after the May 13
budget that the new government had simply picked up the same raw policy
proposals the public service had been serving up for years and included
them in the budget ... It seemed no one in the new government ...
recognised these as policy chestnuts from the bureaucracy's bottom
drawer."
If that's right, it's an indictment of the bureaucrats'
intellectual laziness and lack of expertise. It's the 21st century, but
these people have sat for decades learning nothing but "here's where you
could cut, minister".
A huge proportion of the spending on two of
the nation's biggest and fastest-growing industries, education and
health - industries whose performance has major implications for
productivity and social wellbeing - passes through the federal budget,
but all the budget bureaucrats have to offer is a list of things you
could chop.
Since the budget measures focused almost exclusively
on the spending side, and since those measures had the smell of the
bookkeeper rather than the economist (economists are trained to think
about subsequent, not just immediate, effects), I suspect it's Finance
more than Treasury that's responsible for such a dismal performance.
What
we needed were sophisticated initiatives aimed at raising the
efficiency with which public services are delivered to the public.
What
does the empirical literature and the experience of other governments
tell us about what works and what doesn't? If Finance and Treasury
aren't expert on this, why aren't they?
What we got instead were
crude spending cuts - or, more often, cost-shifting. A high proportion
of the savings will come merely from shunting more of the cost of
education and health onto graduates, patients and the states. How much
thought went into cooking that up?
The right answer to the growing
cost of the Pharmaceutical Benefits Scheme, for instance, is to drive
harder bargains on generics with the big foreign drug companies (which
pose as Medicines Australia) and the chemists, and to force harder
choices on the medicos who advise on which new drugs should be listed by
giving them an annual spending cap.
So what did we get? A
$5-a-pop increase in the already high general patient co-payment which,
in any case, is indexed, with a smaller rise for pensioners. Could
laying it on so thick discourage people from filling their
prescriptions, thus worsening their health and eventually adding to
public spending on healthcare?
Who knows? Who cares? No one in the
budget bureaucracy, it seems. If the measure makes things worse rather
than better, worry about that in a later budget. "I know, minister,
let's whack up patient co-payments again. Tell 'em health costs are
unsustainable."
It's a similar story with Medicare. Health
economists have devised various ways of achieving greater efficiency,
particularly in hospitals, but who's bothered about that? Why tax your
brains when you could just chop spending on preventive health programs,
slash grants to the states and introduce a $7 co-payment for GP visits
and tests?
The co-payment will shift costs to the states and add
to ill health and costs down the track, but who's worried? It will be
costly to administer, but less so when we advise ministers to whack it
up again in a few years' time because health costs are still rising
"unsustainably".
But the most mindless false economy is surely the
now 2.5 per cent annual "efficiency dividend" cut imposed on the
budgets of government departments. Treasury complains it's had to cut
staff numbers by one-third just since 2011. Finance must be suffering,
too.
Wouldn't it be ironic if the budget bureaucrats were among
the chief victims of their failure to give the pollies better advice on
spending control? By now, of course, this would be their chief excuse
for continuing bad advice. "We don't have the resources, minister."
