Beware the promises not properly costed
"Once upon a time, a long time ago, there was a promising Liberal politician called Peter Shack. Shack was health spokesman under the then Coalition leader, Andrew Peacock, and in that role he promised a lot.
He spent most of 1989 promising he was working on a health policy that would save money by changing the Medicare system. Specifically, he promised his new policy would be revenue neutral and leave no one worse off.
Embarrassingly, in January 1990, just two months before Peacock faced the prime minister, Bob Hawke, at an election, Shack was forced to admit he couldn't make the sums add up, alongside everything else the Coalition had committed to, and he wouldn't be able to deliver the policy. The Liberals went to the election with a ''set of principles'' rather than an actual policy on health.
Advertisement: Story continues below Shack's experience suggests an important lesson about the dangers of promising big things before you know how a policy platform fits together.
Whether it's a lesson that has been learnt by today's Coalition we won't know for a while. Quite rightly, the Liberal and National parties are reserving their right to deliver full and costed policies close to the next election.
But they are already promising quite a lot.
There's the paid parental leave scheme, which (once you factor in the business levy designed to pay for it, and the company tax cut designed to avoid a backlash over the business levy, and the abolition of the less expensive Labor scheme which would be wound in to the more generous Coalition offering) would cost a bit more than $2 billion a year.
There's the direct action plan to address climate change which would cost $3.2 billion in the first four years. (Most observers think the Coalition will need a lot more to reach its 5 per cent emissions reduction target but Tony Abbott has insisted he will not be spending any more, which raises big questions about his climate policy but provides certainty for his financial commitment.)
There's the abolition of the mining tax, at a cost of $11 billion. And there's $420 million in additional mental health promises.
And now we know the Coalition will also be promising income tax cuts of as-yet-undetermined generosity on top of all of this. We also know that to be even a tiny bit generous, tax cuts cost a lot.
For example, the Howard government's 2003 tax cuts derided by then minister Amanda Vanstone for being just enough to buy ''a sandwich and a milkshake'' cost $10.6 billion over four years. Given that Abbott says his cuts will ''restore hope'' to Australian families, they could hardly be smaller than that.
Unlike the Howard years there are not fat surpluses from which to fund said tax cuts, and the Coalition has of course promised to achieve surpluses as least as big as those forecast by Labor. The Coalition cannot, as it did last year, plan to raid the infrastructure investment funds set up under the Howard government because they were pretty much cleaned out in the deal that delivered Julia Gillard minority government.
Taken together, all of this obviously means the Coalition is very unlikely to be able to afford in the short or medium term other very sensible ideas such as Malcolm Turnbull's plan for a sovereign wealth fund.
It also means that, before it even begins paying for any other policy (and it claims to have 40 of them already in the can), the Coalition has to find more than $30 billion in savings.
It says it did find $50 billion in savings at the last election but Treasury said $11 billion of those were not valid and the Coalition has accused the government of snitching and implementing another $13 billion of its savings since the election.
And while fiscal prudence is always advisable, in the current economic and political climate there are some limits on where savings can be made.
Industry assistance programs are often a shadow treasurer's first port of call and, indeed, the Coalition has relied on them in the past - most recently with a $500 million proposed cut to core car industry funding announced in January as part of savings that could have done away with the need for the government's flood levy.
But with Abbott promising to be the champion of every blue-collar job and the future of Australian manufacturing in general, big cuts to industry programs could appear a little inconsistent.
Training programs, which took a haircut in the Coalition's proposed savings at the last election, are tough things to cut when business is starting to once again complain about serious labour shortages.
The first home owner's grant is another potential saving that often catches the cost-cutter's eye but, with a soft housing market, that also becomes politically difficult.
The Coalition says it will find savings through ''hard decisions'' and on the ABC's Q&A last Monday night the shadow treasurer, Joe Hockey, said one such decision was making 12,000 public servants redundant over the first two years of a Coalition government, citing the ''fact'' that the public service has grown by 20,000 since Labor was elected as evidence that such cuts are necessary.
But the next day the ACT Liberal senator, Gary Humphries, insisted the Coalition policy was not to sack anyone but to achieve the 12,000 reduction over time by not replacing public servants as they retired.
And the public service unions clarified that the 20,000 figure included big rises in the numbers in the Australian Defence Force and the army reserve, and that the rise in public servants of almost 14,000 since 2006 represented a slower rate of growth than the increase in the public they serve.
None of this means that savings can't, or shouldn't, be found. However, it does mean Hockey and the finance spokesman, Andrew Robb, are facing some decisions almost as ''tough'' as those that confronted Shack all those years ago
Read more: http://www.smh.com.au/opinion/politics/beware-the-promises-not-properly-costed-20110701-1gv3q.html#ixzz1RyMqsE2U"
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