Social policy and the budget under the Bracks government

The 1990s were a disappointing decade for Victorian social policy. The Kennett government's first term budget cuts and tax increases were regressive in their effects (Salvaris 1999; Hayward, 1996; 2000), and left some key parts of the Victorian public service inadequately resourced to do their job effectively (Victorian Auditor General 1996, 1998, 1999; Salvaris 1999; Harkness, 1999; Spaull 1999). The election of the Bracks Labar government in 1999 held out the promise of a new way, and the hope that the services that had been removed would be restored. The Bracks government's budget record so far has been patchy. Its first two budgets were treated coolly by the social sector, with most peak bodies expressing disappointment about the modest size of new spending initiatives and the regressive nature of the revenue take (see for example The Age, 3 May, 2000, p. 4)). The Australian Education Union (AEU) was particularly severe in its criticism, labelling Bracks second budget as 'the cruellest in a decade' (The Age, 23 May, 2001, p. 3). This year's budget received a very different reception, enjoying the praise of VCOSS, Trades Hall, disability groups, environmentalists, the Community and Public Sector Union and the AEU, who all scored it somewhere between seven and eight out of ten. (The Age, 8 May, 2002, pp. l0ll). That made it by far the best rated Victorian budget for more than a decade, if not longer. This was good news for a Labor government that has struggled to get the support it might have hoped for from the social sector. With an election about to be called, the social sector's change of heart couldn't have been better timed. However, budgets can be tricky, and the budget lockup is not the best of places to reach a verdict. There are two hours set aside to read and digest over 800 pages of information, not to mention thousands of numbers, some of which go back more than a decade. First impressions can often be misleading, and a very different picture can emerge with the benefit of the light shed by a more considered analysis. This is particularly so since the introduction of accrual accounting three years ago, a move hailed by the economic rationalists at the time as a great development in Australian public finance. Accrual accounting involves the application of private sector accounting principles to government. Whereas the accounts used to be prepared on a cash basis, they are now constructed to measure revenue and expenses as they arise rather than when money changes hands. Underpinning this shift is the assumption that private sector accounting standards are beyond question, an assumption which has been sorely tested in recent years. Rather than make public sector accounts more transparent, the opposite has occurred, and it has become increasingly difficult to interpret the generosity or otherwise of budgets. Take for example the most recent (2002/3) Victorian budget, which proudly included $680m of new initiatives. This is a gross figure, and does not take into account moneys redirected from other programs that are wound down or discontinued. When we adjust for this, the additional funding for programs is $480m. Of this, approximately $303m is for genuinely new social policy initiatives (compared to $386m gross). Included in this sum, however, is $50m for unfunded liabilities in public hospital superannuation schemes, which has no bearing whatsoever on service delivery. Another $70m is for wage raises to be paid to disability, ambulance, kindergarten, and other professionals as part of recently struck enterprise agreements. That leaves a net $260m for new initiatives, of which $100m will go straight into one program: demand management in public hospitals. So we must be careful. In this paper I offer an assessment of Labor's budgets on Victorian social policy. Has Victorian social policy benefited from Labor's budgets, and if so to what extent?