Monday, August 10, 2020

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Home Issue 26 Territorians need truth on economy and government finances

Territorians need truth on economy and government finances

COMMENT by Professor DON FULLER

Part 6 in this series

 

In May 2020 it was reported that the Gunner Government had refused to provide Territorians with a clear picture of the books prior to the election and that this went against their “promise”.

 

While the Gunner Government caved into the pressure, it had first refused to provide budget information before the August election.

 

The Budget had been delayed until at least November. However, the Government refused to release a pre-election outlook.

 

This meant that it would be the first time in NT’s history that voters would go to election without knowledge about the state of the books. The Gunner Government had argued this was not possible due to the impact of the coronavirus.

 

However Tasmania, a relatively small jurisdiction like the NT, managed to release a detailed fiscal outlook during May, 2020. While it acknowledged the volatile conditions it was still able to provide Tasmanians with a view on the challenges confronting them.

 

Recently, the Gunner government agreed following substantial pressure, to provide Territorians with a “rough guide” of the Budget situation – whatever this may mean.

 

John Langalount, the Head of the Review into NT Budget repair found that NT Budgets had been treated more like “rough guides”, rather than serious financial plans.

 

Territorians have now been informed by their Chief Minister to expect another “rough guide” for a fiscal outlook!

 

The democratic principles of accountability and transparency are to be again dragged bucking and kicking  to the starting gates – with the jockey riding on instructions that ‘rough enough will be good enough!’

 

A business plan? What’s that?

 

The Gunner Government has been prepared to support major project developments without the need for a professional business case to provide accountability and transparency for taxpayers.

 

Unplanned developments have the potential to have major negative on-going implications for the Territory Budget and community.

 

A striking example of this lack of openness and accountability has occurred with the CDU – Darwin CBD development.

 

A recent excellent Letter to the Editor of the NT News captured the major problems that can be expected.

 

They include the poor underlying performance of CDU itself – reduced courses, reduced student numbers, staff made redundant and plummeting staff morale – and the poor financial track record of both proponents – CDU has recently recorded massive losses while the NT Government has declared a financial crisis.

 

In addition to these and other excellent points made by the letter-writer, the Gunner Government in concert with CDU has shown insufficient concern as to the significant and problematic implications of such a development on CDU campuses located in other important NT regional centres including Alice Springs, Katherine and Tennant Creek.

 

Regardless of the clear opposition to this project on the basis that there are far more productive and less risky projects that deserve public support, the Gunner Government is determined not to listen to advice and to plod on regardless.

 

Principles of good governance require that Government is responsive to community input and suggestions and actively encourages such input. Good Governments are also good at communicating with the community.

 

The Gunner Government receives a fail for their ability to understand and adhere to these important principles of good governance.

 

The case for a cost-benefit analysis

 

The State Square redevelopment has been similarly shambolic.

 

As pointed out by Christopher Walsh in The Independent, the Gunner Government has been unable to explain why it spent tens of millions of taxpayer dollars on the State Square redevelopment before a proper business plan was in place.

 

Infrastructure Minister, Eva Lawler suggested the reasons for the Project were “broader than just dollars” – “this is about the greatness”. 

 

However, Government expenditure particularly of this magnitude needs to be justified by a properly constructed cost-benefit analysis.

 

Such analysis should be an important part of the business plan. This cost-benefit analysis by its very nature takes into account both financial and non-financial factors in evaluating whether the project should proceed against competing project uses for what should be scarce government funding.

 

That no such cost-benefit analysis was undertaken is an unacceptable approach to dealing with large amounts of public funding within modern democratic governments and successful economies.

 

Instead it leads to the complete Budget mess of the kind the Territory is now experiencing. Such a naïve, unsophisticated and unprofessional approach to the expenditure of public funds acts as a major disincentive to private investors seeking to commence business operations in the Territory.

 

It leads to a serious lack of confidence in the professionalism and competence of Government in the Territory and serves to substantially increase business risk.

 

Before developing a business case for its “critical” State Square project, the Government paid $1.5 million to demolish the Chan Building, built a $20 million underground carpark, paid for a $500,000 “masterplan”, and has awarded tenders to contractors for a variety of associated works since 2018.

 

Unplanned and unbudgeted expenditure has been the hallmark of the Gunner Government.

 

However taxpayers’ expect Governments to be careful with their money and follow similar disciplined financial processes as those expected within commercial businesses.

 

Commercial businesses would rapidly go bankrupt if they operated in the same mode as the Gunner Government.

 

Many have been worried that it is only a question of time before this Government suffers a similar fate to a South American dictatorship and effectively goes bankrupt, requiring a complete take-over by the Commonwealth.

 

 

Related reading:

For a local example, see Gallery business case: still no answers to the big questions by Kieran Finnane

 

 

 

Previously in this series:

 

Part 5: The grandstand and grandstanding

 

Part 4: With Gunner, great advice is of little use

 

Part 3: Gunner’s rule: Economic cracks widen, accountability vanishes

 

Part 2: Not much left of Gunner’s lofty promises

 

Part 1: Gunner Government: Budget misuse and democracy collide

 

 

 

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