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Mr MIKE BAIRD (Manly) [4.55 p.m.]: I lead for the Opposition in this debate on the Appropriation (Budget Variations) Bill 2010. It is hard not to reflect with some disappointment on the debate we have just concluded in which the Government refused to establish an independent process to take the politics out of costing for community benefit. The Government has rolled over, broken promises and not honoured verbal agreements without a care in the world. It is now asking us to pass this bill. That demonstrates the culture at the core of this State Labor Government. One does not think of this Government when mention is made of fiscal discipline, integrity, honour and basic principles of good faith. This bill is yet another example of the Government's overspending, and not by a small amount. It has blown the budget by $1.48 billion. Every dollar counts as we emerge from the global financial crisis. This Government's $1.48 billion budget blowout is yet another demonstration of its fiscal management skills.
By pursuing such large amounts through this process the Government will be able to continue to spend without the appropriate scrutiny and transparency that is part of the budget process. That is the critical point. Of course, no-one argues that unforeseen circumstances arise that may require additional commitments to be made. However, this Government regularly uses the budget variations process to massage the annual budget. The picture that it presents in the budget is not a true representation of its financial situation. If the allocations in this bill had been included in last year's budget it would not have a projected a $1 billion deficit; it would have been $2 billion or more. The Government has understated the true figures, it has been caught out and the public is onto its game.
The purpose of this bill is to seek additional funds for recurrent services and capital works for 2008-10. I raised concerns with regard to the 2008-09 budget and it is beyond belief that the Government is still trying to tidy it up. This legislation seeks additional funds for recurrent services and capital works for 2008-09 and 2009-10. For the 2009-10 year it seeks a Treasurer's Advance of $347,162,000, funds for recurrent services amounting to $79,720,000 and additional recurrent services amounting to $695 million. For the 2008-09 year—that is, in addition to the amount allocated in last year's budget—the bill seeks a Treasurer's Advance of $222,488,000 and funds for recurrent services amounting to $136,400,000. The total additional amount sought for 2008-10 is $1,480,770,000. That is close enough to $1.5 billion without appropriate scrutiny and transparency.
In the November 2009 half yearly budget review, the Treasurer said the deficit would be around a billion dollars at the halfway mark. We are not sure what the final budget day figure will be, but revenue has increased and so has as spending. That has been a long-running trend . The Premier said the figures at the half-year budget review showed the Government had acted responsibly and prudently in cushioning the effect of the global economic crisis, but the truth is really the opposite. The Government is using this bill in an attempt to hide the real deficit by seeking and regularly using additional funds outside the budget process without the usual transparency and scrutiny given to budgets. This bill confirms that the real deficit that should have been reported on budget day is well in excess of that $2 billion.
I will go through every item listed in this bill. Members of the Coalition will talk to portfolio-related items and will scrutinise some of those payments. The Nepean Hospital upgrade is a good example. Schedule 1 to the bill shows the Government needed an additional $29 million for the Nepean Hospital redevelopment. There are two parts to this. Either the Government did not know about this redevelopment—obviously it did—or it is an additional cost blowout. Neither of those scenarios provides any comfort. Putting together a budget and not knowing there is a capital item worth close to $30 million or that there has been a $30 million blowout is an example of costs continuing to blow and no-one being held to account.
The Parliamentary Secretary or the Minister in reply can tell us about those funds. The Minister for Health talked about this redevelopment back in 1997, so why was it not included in the budget? Again it comes back to some of the costing processes we proposed. Rather than having an independent oversight of costings, was this amount shaved for budget purposes—that is, was the Government trying to inflate the bottom line so as not give the true scope of the deficit or, as the project has gone on, have there been overruns? Either way, the true state of New South Wales finances has not been revealed. If it were revealed today it would show that the State Labor Government has a culture of going about its business with a rampant lack of financial discipline.
Unfunded superannuation is particularly interesting. I ask the Parliamentary Secretary to confirm this point. Schedule 1 to the bill reveals that the Government has put $510 million into the pooled fund superannuation scheme. My understanding is that that money is part of the proceeds from the Lotteries sale. I seek confirmation from the Government in that regard. It is important that the Government make contributions towards its unfunded superannuation liability and its ongoing obligations, but the heart of the matter is the way the Government goes about its business. It has ignored unfunded superannuation. Until recently, when it changed its accounting standards, the Government happily used different accounting standards that understated the true extent of its liability, which meant that it was not addressing the problems of tomorrow. That is a classic example of the way in which this State Labor Government goes about its business—forget about tomorrow; spend the money today, and the problems of tomorrow can be dealt with by the next generation.
Time has caught up with the Government. If this $510 million that has gone into the superannuation scheme has come from the sale of New South Wales Lotteries, that means they are selling capital assets and putting the proceeds into current needs or operating budgets. That is against basic good management practice. The Government can explain what it has done and whether that is the case. There is no doubt that unfunded superannuation is a beacon that shines a light on the State's mismanaged finances, which stands in stark contrast to the Federal Government's and Peter Costello's management of superannuation. They identified the problems in relation to unfunded superannuation liabilities very early and used ongoing budgets to build a fund to match them. Rather than just leave them, they undertook fiscally responsible actions to address them. Either way, this State Labor Government has failed the State in relation to its superannuation.
As outlined in the Premier's favourite book Unlocking Land Values to Finance Urban Infrastructure, which is a fascinating read and which she identified recently in an interview, it is contrary to general principles for the Government to take proceeds from the Lotteries sale and put them into capital expenditure. Not all of us would call that our favourite book, but she certainly did. It talks about land sales, but you can replicate land sales with capital sales because it is the same principle. The book warns governments against putting proceeds from land sales or capital sales into operating budgets. The Premier obviously did not get to that part of her favourite book. The public sector can say no, proceeds from the Lotteries sale have been put elsewhere but my understanding is that that is what they have been used for. Again, putting the proceeds of capital sales into recurrent or operating budgets is not sound financial management. If the Premier, the Treasurer or the Parliamentary Secretary can answer that question we will be the happier for it. We look forward to it.
The lack of financial discipline remains a chronic problem. All of the items in the bill require questioning, but I will leave it to other members to go through them line by line. Last year the Government spent beyond its budget in the vicinity of about $1.4 billion, and that cannot be blamed on the global financial crisis. For 15 years Labor has been spending well beyond its means. The 2006 Stokes and Vertigan New South Wales Audit of Expenditure and Assets Report commissioned by the Government, found that the Government has been running at about 1 per cent expense growth over revenue growth: It does not have the capacity to operate within itself. An appropriation bill again demonstrates the lack of financial discipline of this State Labor Government. The Auditor General's report reveals last financial year the Treasurer blew his own expenses by nearly $2 billion, including half a billion dollars he blew in a couple of weeks. If the Treasurer cannot control his own expenses what hope does he have of controlling the overall expenses of this State Labor Government?
In answers that we have submitted Ministers have admitted that they do not check their budgets monthly; that is outsourced to the Department of Premier and Cabinet. How can Ministers be held to account and take control of their own budgets if they are not even checking them or if they are not provided with a budget on an ongoing basis? It is not surprising that we are faced with an appropriation amount that gets up to $1.5 billion hiding more than $2 billion in deficit that should have been reported on budget day. Former New South Wales Treasury Chief Economist, Robert Carling, has been a long-term critic of this practice. He told the Australian:
Some of the things they've done are unfortunate in themselves. They've relied too much on tax increases and revenue raising, and not enough on reducing recurrent expenditure.
Yet again we see that example in this bill. The bill also exposes the Government's wrong priorities. I cannot stress this point enough. At the time of the last budget we were looking to the State Labor Government to provide some form of stimulus by doing something other than relying on the money Kevin gave us. Kevin's money was the Government's tick for its stimulus package, but in reality it did nothing. In the budget the Treasurer proudly introduced the New South Wales Housing Construction Acceleration Plan to much fanfare. It was worth about $64 million and described by the Premier and the Treasurer as a major economic stimulus.
Despite this the Treasurer said he was shutting down the program in December. He seemed to be overruled by the new Premier. We are not sure what happened but the Government had spent only $12 million out of $64 million as part of its stimulus response. The Coalition said that the stimulus response should be extended and the Government did that. Around March the Treasurer said about $21 million had been spent on its major economic stimulus program. One should not forget the economic forecasts and challenges faced during the global financial crisis. For the Government to put such little effort into a major economic stimulus program shows that the State Labor Government is trying to pretend it is doing something when in fact it is doing very little; indeed it is doing much less than it said it was doing. The bill shows that an extra $2.1 million was spent on advertising for the Government's Housing Plan, such as a letter on the letterhead of the New South Wales Office of State Revenue from the Premier that was purported to be a serious policy response. Half a page of the letter was taken up by a photograph of the Premier—it is almost beyond words. The letter states:
Dear Property Buyer,
Congratulations on your recent property purchase. I am pleased the New South Wales Government has been able to help you through your 50 per cent stamp duty discount The important measure is just one of the ways the New South Wales Government is stimulating the New South Wales housing construction sector, supporting jobs and growing the State's $380 billion economy.
The letter contains no details, other than the ways in which the Government is helping and a nice glossy photograph of the Premier. Residents who received the letter thought they were getting a parking ticket, but when they opened the envelope they saw a picture of a smiling Premier. This is an example of how our stimulus money is being spent. This bill was introduced because the Government has overspent on these types of campaigns. How is that in the interests of the people of New South Wales? They can get a photograph of the Premier from her website if they really want one. Why is the Premier's photograph on every one of these letters? Why is stimulus money being used to advertise the Government?
The community regards the State Government with cynicism because it has no financial discipline. It is all about the Government. The stimulus package was not aimed at turning the economy around. The Government made it look like it was trying to do something by sending out a nice glossy photograph, which was a big component of the cost overrun, and we are all supposed to stand and clap. But the truth is we are not clapping. This mail-out is an insight into the culture that is rampant in the Government's financial approach. After 15 years New South Wales taxpayers have had enough.
Other examples of the Government's lack of financial discipline will be revealed in the months to come, including the sale of electricity assets that is underway. Approximately $200 million has already been spent on that sale. The market—bidders, experts and many within government and the public service—has rejected that model. But for some reason the Government is pursuing the sale. No firm timetable has been given as to when the sale will proceed, but up to $200 million has been paid to consultants on that transaction—a transaction that has no support and that will not deliver the necessary reform. In many respects it will leave the State with many of the current risks. I turn now to the CBD on which around $500 million has been wasted. A tenant who received $20,000 compensation as part of the CBD metro project said:
This Government couldn't run a bath. No truer words have been said. Another tenant said:
If I ran my business the way they do, I'd be sacked.
These tenants have received a cheque, but they say it was inflated and did not reflect the compensation that was due. The whole process has been flawed from beginning to end. I understand that the cost is $1 billion, and it has gone well north of that. Someone said that they would not be surprised if, in due course, the amount of money wasted on the CBD metro is so significant that a royal commission is set up to look into what took place and what is being paid out. Such an investigation would be a drag on the State finances for years to come. They are sobering words. It is an example of the way that the State Labor Government deals with money, expenses and due process. It is happy to roll over. I understand that the conservative figure for the project now sits at about $1 billion. The Auditor-General in Total State Sector Accounts for 2008-09 probably summed it up best when he said:
Significant and consistent overruns of budgeted expenditure have occurred at a number of large agencies. Action needs to be taken to better understand and manage these variances.
That advice should be heeded by the entire State Labor Government. The Treasurer should pick up on those words and instil some form of discipline across a Government that is running out of control, is not being held to account for waste—its deficit is much larger than is actually reported or its surplus is much smaller than is reported—and yet again, as we see with this appropriation bill, is happy to mask the truth by playing the appropriation game: stick it in the back pocket, come into Parliament, well outside the light of budget day and try to pretend all is right. Well, it is not. This is yet another example of how the State Government has lost the trust of the community of New South Wales.
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