Dividend with a downside

As ‘Surplus Man’ Wayne Swan imposes more cost pressure on the public service, DON AITKIN sees the increasing reliance on the efficiency dividend as a mindless act of helplessness

TREASURER Wayne Swan is between a rock and a hard place. He has committed himself and the Government to a return to a Budget surplus next financial year.

How that was ever to occur, other than with some highly creative accounting, was never entirely clear to me.

Perhaps buoyed by getting a kind of International Treasurer’s Gong recently, Swan has nailed his flag to the mast, he has ordained spending cuts everywhere.

This strategy has two problems; the first is that neither he nor we have any idea of how bad things may get in Europe, and they could easily be bad enough to postpone indefinitely any Budget surplus in Australia.

And the second is that he has told the Commonwealth departments to add another 2.5 per cent to the efficiency dividends they are already finding to support the Treasurer’s bottom line.

The efficiency dividend has been working for 20 years now. In my opinion it is simply a pernicious piece of financial policy – and a clear sign that the government that uses it cannot establish any real priorities.

If you want a feeling for the way the efficiency dividend works, consider your working lunch. In the beginning you allocate so much for it, and work out how much you can spend on it each day, allowing one lunch out. After 20 years of efficiency dividends you will be reduced to taking bread and a smear of jam. Next year, jam on three days only.

Both from within and from outside the Australian government system, I can recall my own discoveries of activities that had long passed their original rationale, but were still being undertaken. “Why are we still doing this?” is not a question that seems to be asked very often.

If governments want to save money, they might more usefully start dispensing with some of the activities that the Commonwealth has acquired over the years.

What does the Gillard Government really want to focus on? It could list those activities, and then fund them. Now look at the others. Do they need to be funded at all? They all do? Really? And there is no money? Well, you’ll need to increase taxation. Oh, you can’t do that?

Why not? You don’t want to cut anything out because there’ll be an electoral backlash? That seems to be the core of the problem.

Well, I would have my own suggestions for activities that the Commonwealth might dispense with or close down, and so would most of us. And so would, I think, quite a few in government.

“Oh”, I hear you cry, but that would mean job losses! Of course. But the Government says it has less money for jobs, and although the Prime Minister has promised that there won’t be any sackings, the reality is that there won’t be any new appointments. And some services will be curtailed or cut. How is the public good advanced?

The efficiency dividend is a mindless act of helplessness. We can’t work out what to do, says the Government, so you people learn how to manage with less. After all, you’ve done it before, and you’re still here.

Two parliamentary enquiries in the past thought that while the efficiency dividend had done some good, it had to be used with restraint, and that small agencies in particular needed to be guarded against the death of a thousand cuts.

My view is that there should be a five-year moratorium on its use, and that if the Government feels it needs more money, and can’t see anything at all it should close down, then it should raise the level of taxation. We are, after all, at the bottom end of the OECD group in terms of our taxation levels.

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