Plagiarism and the grand hoax

 

I can’t recall such a high reading.

Mr Hodgman’s Fiscal Strategy for the Future appended to his Roadmap to Recovery and Growth when subjected to a plagiarism check almost resulted in system failure, worse than Geiger counters at Fukushima.

Mr Hodgman’s colleague Mr Groom lavished praise on his leader, saying it ”has been described as the most comprehensive response to the budget in Tasmanian history”.

The most comprehensive cut and paste in Tasmanian history perhaps?

The same five principles, almost to the last word, five of the six medium term objectives almost identical down to the last punctuation mark, as those contained in a draft Report of the Independent Review of State finances prepared for the Victorian Government in April 2011.

For example the Liberals’ first principle was to “manage the State’s finances responsibly for the well being of all Tasmanians”.

The Victorian review’s first principle was “Victoria’s State finances will be managed responsibly to enhance the well-being of Victorians”.

This phrase was repeated by many of the Libs as they all sang from the same plagiarised songbook, the Deputy Chorister Mr Rockcliff for example saying “the Tasmanian Liberals are committed to growing and managing the state’s finances responsibly for the wellbeing of all Tasmanians”.

And so with all the other principles.

OK you say, principles are motherhood statements anyway so what’s the problem with sharing motherhood statements?

Alright then.

Let’s look at the medium term objectives.

One objective of the Libs is identical down to the last word: “Over 5 year rolling periods, the net infrastructure investment will be at least equal to 0.5% of the historical 5 year average of Gross State Product”.

So what? So the objectives are the same in two States? So?

The Review report was an Interim report only. The final report has been handed to the Victorian Government but not publicly released at this stage.

However the recent Victorian Budget in April 2012, as detailed in Budget Paper no. 2 titled Strategy and Outlook on page 7 refers to the average level of infrastructure spending being in excess of “the level advised by the Independent Review of State Finances, 1.3% of GSP”.

Whoops. Mr Hodgman forgot to review his cut and paste. His Roadmap to Recovery & Growth still has a goal of 0.5% of GSP.

With Gross State Product being approximately $24 billion pa, 0.5% equates to $120 million pa, about what we spent during the glory days of Angus Bethune as Premier.

Applying the Victorian target means $312 million of infrastructure spending per annum.

Plagiarism is bad enough but not understanding what is being cut and pasted is worse, especially when it is being used a part of an Opposition Plan to rescue a State precariously close to the precipice, a State now being publicly ridiculed by leading national business commentators such as Alan Kohler, (A Greek tragecy Tasmania can relate to).

This is an Opposition led by the longest current serving Australian Opposition leader, who has had ample time to prepare a reform strategy to right all the wrongs that he continually identifies, yet who seems determined to extend his losing streak by once again snatching defeat from the jaws of victory.

OK so there may be problems with one objective? How about the others?

A further objective of the Libs was identical to another of the Review’s objectives, essentially that the net operating balance be sufficient to fund infrastructure spending.

This sensibly implies there should be enough profits to provide for spending on new capital.

The Review is critical of measures of net operating balance which include one-off capital grants saying they “overstate the underlying position of the General Government sector’s finances”.

The Review then “recalculated the net operating balance of Victoria’s General Government sector by excluding one-off revenue associated with Commonwealth-funded capital programs to measure the net operating balance on an underlying basis”.

Did Mr Hodgman follow suit?

Unfortunately not.

He may not have understood what he’d plagiarised.

Mr Hodgman didn’t even bother to test whether his four year Plan would meet the objectives he’d cut and pasted from the draft Victorian report.

The Plan failed to even come close to meeting the objective relating to the level of net operating balance, even without an adjustment to reflect the more meaningful underlying figure.

The Libs’ Plan produced an average annual net operating balance NOB of $71 million insufficient even to cover low ball infrastructure spending of $120 million pa, let alone what is needed of $300 million pa.

When adjusted to reflect the underlying net operating balance as per their mentors’ Report the NOB figure was minus $10 million pa.

A Road to Recovery?

Maybe a dirt track to Administration?

What really is the point of establishing objectives and then producing a Plan that doesn’t come within cooee of meeting those objectives?

Does one revisit the objectives? Or revise the Plan? Or don’t bother with either?

I guess it doesn’t matter if you’re about to do a Stephen Bradbury at the next election?

The Government’s whole strategy is largely dependent on meeting Budgets, in particular hoping that revenues from the Australian Government will eventuate.

It does however have a couple of cards to play but they’re paper entries only that won’t boost sustainability.

The Government appears to have omitted some Australian Government capital grants from the final 2 years of the Forward Estimates because the next round of the 5 year agreements for road and rail infrastructure funding haven’t been finalised as yet. The grants will be known before the next State election and will be included to help boost Net Operating Balance notwithstanding they are capital grants.

The Premier is believed to have already drafted her campaign speech….. despite further hits to GST revenues…...blah blah….. the Net Operating Balance has taken less of a hit….blah blah…....due to astute management by the Government ......blah blah.

The initial Lib reaction to the Government’s Budget showing cash surpluses in the three years of Forward Estimates predicated on rosy GST receipts in excess of Australian Government predictions was that it was a ‘con’.

Whilst they didn’t retract this claim, Mr Hodgman failed to mention it in his Budget reply. To maintain the claim would have meant his hastily prepared Plan based on plagiarised objectives was erected on a foundation of falsehood.

The odds of meeting Budget outcomes over the forward estimates period is about the same as being selected as No.1 draft pick in the NBA when only 4’ 6’’.

It won’t happen.

If there is one lesson that we should have learned from the GFC and its aftermath, it is that we should not be lulled into rosy predictions of future revenue and spend as if it was already in the bank, as did the last Premier, particularly as we have virtually discarded the possibility of actively raising more of our own.

Another objective of the Roadmap is to extinguish the unfunded superannuation liability by 2035, coincidentally the same as one of the Review’s objectives for Victoria.

To get Victoria’s unfunded liability into perspective, compared to Tasmania, its Gross State product is 12 times larger, its Budget 10 times yet the unfunded liability is only about 5 times larger.

Yet the Libs have the same target for extinguishment of unfunded liabilities?

Our State Government has at last sensibly recognised that the internal borrowing of the amounts set aside as part of its plan to extinguish the unfunded superannuation liability won’t ever be repaid.

The internal debt has been written off or forgiven, and in future superannuation benefit payments for members of the unfunded scheme will simply be paid from operating cash flow.

The Libs still wish to maintain the pretence that the Superannuation Provision Account (SPA) can be revived with the aim of setting aside enough by 2035 to extinguish the liability plus pay all emerging benefits over the next 23 years plus repay the $862 million missing from Special Deposit and Trust Fund accounts as at 30th June 2013 which will occur under both the Government’s Budget and Mr Hodgman’s Roadmap.

There is only a remote possibility of this occurring.

Certainly over the first four years of Mr Hodgman’s Plan the best that can be achieved is to restore missing Trust Funds and that will only occur if revenue projections which the Libs clearly mistrust judging by the recent Estimates Hearings, come to pass.

The missing SPA funds have been a little difficult for the Libs to understand.

Take this example of Mr Gutwein in a preamble to a question to the former head of Treasury in December 2010

“If I could, Minister, address this to the chairman then, who obviously has a lot of experience in this area. The State Government have obviously taken steps with the SPA to look at what it can do to fund the unfunded obligation in regard to the RBF at a State government level…............it appears to me, using broad numbers, that we have around a $4 billion unfunded RBF amount at a State government level and then we have the SPA which offsets that and we are planning to pay the whole thing out in 2035? The SPA at about $1.5 billion is roughly 35 to 40 per cent of the total unfunded component…........... Just looking at the SPA and the way that the Government and Treasury have been managing the RBF, they, even with a significantly unfunded portion at the moment, are planning to nail it by 2035.”

Mr Gutwein was clearly happy with the way the Government and Treasury were running matters and believed the cash was still in the SPA.

But the Treasurer had already issued figures showing the SPA account of $1,364 million had all been used by Governments over the years for other purposes.

For the previous two years Government figures showed truckloads of cash leaving the barn. Didn’t Mr Gutwein notice?

Or did he simply believe as the Government said, the situation was temporary and the trucks would return with their original loads intact in no time at all.

Interestingly in the Leg Co Estimates Hearings this year it was revealed that amounts set aside in the SPA for the purpose of extinguishing unfunded superannuation was really a charade.

At all times the Treasurer was able to unilaterally alter the purpose of the SPA, something the Government will do prior to 30th June before closing the account.

But for all those years when funds set aside were immediately internally borrowed for other purposes, the Government maintained the charade that it was setting aside funds for extinguishment of future superannuation liabilities when really it was just setting aside cash for a rainy day, nominally allocated to particular accounts, but able to be used wherever it chose.

The problem has been the outdated Financial Management system has allowed appropriation of $2 billion more than there was cash available. Cash has always been scarce, it is just shuffled about to provide funds for the most pressing need.

But why appropriate so much in the first place?

The ludicrous system culminated with SPA having a nominal balance of over $1.5 billion but no cash.

The crucial issue of Financial Management reform has not as yet provoked the Libs into showing concern or suggesting a remedy.

They may be searching for a policy to plagiarise?

The final realisation that all the SPA cash has been spent on Mr Gutwein’s watch has provoked an angry reaction if this year’s Estimate Hearings are a guide.

To Ms Giddings he said: ”You are a hypocrite out of your depth….....Treasurer, you are a joke”.

Talk about the kettle being called black by a sooty pot!

Talking loud and often, expressing outrage and indignation premised on the mistaken belief that it may be judged as wisdom and understanding, won’t hide the reality that Mr Gutwein didn’t understand what was happening until the barn was empty.

It would be unfair to suggest that Mr Gutwein was the only person who displayed less than exemplary behaviour at Estimates.

Mr Best for instance by some process of convoluted logic of which he alone is capable, managed to squeeze in a few questions to the Treasurer on the matter of the Libs funding of a four lane Midlands Highway, when the matter at hand was the Government’s Budget.

The Dorothy Dixer designed to ridicule the Libs, if nothing else indirectly helped Ms Giddings prosecute her case as to why parliamentarians’ salaries should be capped.

For everyone who wondered as to Mr Best’s exact role as Parliamentary Secretary, the picture was, at least, a little clearer.

Mr Hodgman has indicated his Fiscal Strategy for the Future will be enshrined in statute, so confident is he of his cut and paste ability. The Charter of Budget Responsibility Act will be amended. It is not known whether the Act will undergo a name change.

The Appendix to the Roadmap included an Income Statement. Mr Hodgman shuffled a few figures so that he was able to claim my-bottom-line-is-better-than–yours, little more than a schoolyard game of one upmanship, with the improvement of $3 million pa being completely dwarfed by annual outlays of $5 billion.

It is totally meaningless.

One third of the savings comes from reducing contingencies.

Take the case of the Treasurer’s Reserve. It has a balance of $20 million pa which the Libs will reduce by 50%. But there have been years, 2009 and 2010, if Treasury’s Annual Reports are to be believed, when none was spent. So it’s really a Claytons saving.

Then there’s the $110 million appropriation to FT. The Libs claim a growing forest industry will ensure FT will not need any assistance, is airheaded nonsense, which ignores the reality that FT is still bleeding cash as Mr Gutwein learned at Estimates. It has pawned its motor vehicle fleet, sold its softwoods, is stuck with cash negative hardwood plantations for a few years at least, has community service obligations to fund, and even a return of some native forest harvesting will contribute little to revenue compared to the halcyon days of woodchipping.

There is also the possibility that cash will be needed to help meet the superannuation obligations for separated employees which at last count stood at $122 million?

In the cold light of day the appropriation does have a prudent basis and for the Libs to pretend that FT will not need any more Government funds in the future is unrealistically silly.

The balance of the adjustments suggested by the Libs is structured in such a way to ensure outlays equals revenue, without any change to fiscal outcomes.

The Libs don’t even bother to mention transactions that fall outside the Net Operating Balance calculation, minor matters like what is their proposed outlay on new capital and infrastructure?

Is it only going to be $120 million?

Further analysis of the Libs’ Alternative Income statement line by line is a little pointless when the whole Plan is obviously little more than a cut paste and reshuffle by persons largely ignorant of finance economics and accounting who are prepared to perpetrate a grand hoax on the people of Tasmania by plagiarising a plan which is dependent on assumptions they clearly do not accept, and prepared in response to a Budget hiding an unsustainable situation which will only go away in the unlikely event of a large increase in our share of GST.

Mr McKim continued his detached disinterest in mundane money matters like the State’s immediate fiscal position preferring instead a distraction in the form of the Well Being Index. It was almost a de facto acknowledgement that we are in trouble, but all we need to do to face the challenges of reduced revenue is to realign our expectations, to remeasure and reweight outputs with a new Index.

It’s difficult to escape an eery feeling of a tacit conspiracy between all political parties, a conspiracy which ignores the evidence, in a manner similar to climate denialists, that our State Government, from a fiscal viewpoint, is non-viable in its current form.

One thing for sure is…...what can’t last forever won’t.