Monthly Archives: May 2014

The Abbott Government’s 2014-2015 federal budget: comments on the policy process

The budget process is explained on pp 163-164 of the text book.  The Department of Finance (www.finance.gov.au/budget/budget-process) advises that  ‘the priority setting and Budget decision processes usually occur between September each year and the following May’.  The Equality Rights Alliance (www.equalityrightsalliance.org.au) describes the process in more detail:

May-November: interested groups should meet with ministers and the relevant program areas in government agencies ‘to talk through issues and possible solutions’ as a ‘way of refining Budget submission ideas and raising awareness of the issues involved’.

November-December: ‘the Treasurer issues a press release calling for pre-budget submissions from stakeholders’ which are ‘due in late January or early February’.

November-December: The Expenditure Review Committee (ERC), a sub-committee of cabinet (see p. 252 of the text book) meets and ‘ministers outline new proposals for their Departments which are then considered and lead to the formulation of priorities for the coming budget’.

Late February: ‘Based on the outcome of the ERC and pre-budget submissions, government agencies submit Portfolio Budget Submissions which outline the policy proposals the agencies want to be funded’.

March: ‘The ERC, looking at the Portfolio Budget Submissions, decides which policy proposals it will recommend to Cabinet for funding.  This is decided by looking at the government’s policy priorities’.

April: Budget Cabinet ‘discusses and endorses the recommendations of the ERC.  Public campaigns often peak during March-April to ensure their issues are front-of-mind for the ERC and Budget Cabinet’.

May: The government (Treasurer) presents the budget papers to the House of Representatives (see Hansard, House of Representatives, 13 May 2014, pp 15-16; http://www.aph.gov.au/Parliamentary_Business/Hansard/Hansreps_2011).

Lobbying the government

You can see from this description of the process that organized groups and other interested parties lodge their Budget submissions in January and February.  You can find examples as follows:

Australian Chamber of Commerce and Industry (ACCI), Pre-Budget Submission, January 2014 http://www.acci.asn.au

Australian Council of Social Services, Budget Priorities Statement – 2014-2015,  February 2014, http://www.acoss.org.au

Australian Conservation Foundation, Budget Submission, 31 January 2014, http://www.acfonline.org.au

Combined Pensioners and Superannuants Association of NSW Inc., Submission to the Federal Budget 2014-15, 13 February, http://www.cpsa.org.au

This is the formal process, but as you can see from the Equity Rights Alliance document above and from the interest group strategies outlined on pp. 373-374 of the text book, lobbying government is an ongoing activity.

The text book (p. 375) explains that group-government relationships may develop into ‘symbiotic relationships’.  A recent NSW ICAC inquiry, for example, focused attention on the close relationships that develop between ministers and lobbyists (see, http://www.abc.net.au/news/2014-04-21/matthewson-shine-a-light-on-shady-lobbying/5401058 where lobbyists are described as ‘door-openers, influence-wielders or policy shapers’). The article also points out ‘there are essentially three types of lobbyists: consultants, corporate and lobby groups’ where ‘the consultants work for lobbying firms, charging healthy retainers to keep clients informed about relevant issues and get meetings with politicians when the clients feel the need to be “influential”…and both consultant and corporate lobbyists tend to rely on political networks and influence to get their desired results’.  (Look at the blog of 9 February 2014, ‘Lobbyists and the Abbott Government’).

These networks are also facilitated when political parties hold functions, usually for a substantial fee, where attendees are given privileged access to ministers or shadow ministers.  (See, for example, http://www.canberratimes.com.au/federal-politics/political-news/pm-tony-abbott-defends-joe-hockeys-fundraising-activities-20140505-zr4p1.html and http://www.canberratimes.com.au/federal-politics/political-news/meet-bill-shorten-for-3300-8211-labor-offers-business-leaders-exclusive-access-20140505-zr4us.html).

Limits to the influence of lobbyists on the 2014-15 Federal Budget

Government policy

The 2014-15 Federal Budget, the first for the Abbott government, was forged within the framework of the government’s determination to reduce government outlays.  This would have made it very difficult for any interest group or other interested parties to persuade the government to adopt new measures that would have added to budget expenditure.  The Abbott government’s determination to reduce the budget deficit, in fact saw it discard its election promises not to increase or introduce new taxes or cut health and education.  It proposed  a deficit levy (tax) of 2 per cent on taxpayers with a taxable income over $180,000, a $7 co-payment for visits to the GP and reduced payments to the states for health and education over the longer term.

Party ideology

Liberal Party ideology (see p.348 of the text book) is evident in the Abbott government’s approach to its first budget.  For example:

‘Our Economic Action Strategy is not about weakening government; it is about redefining the role of government’…

‘The age of entitlement is over.  It has to be replaced, not with an age of austerity, but with an age of opportunity’…

‘Rather than corporate welfare, the government’s focus will be on strengthening the overall business environment…the government will start by abolishing a range of industry assistance programs…we will refocus our effort on innovation and self-reliance’…

‘a smaller, less interfering government won’t need as many public servants’…

‘those who can work, should work’

(Budget speech, Hansard, House of Representatives, 13 May 2014, pp. 61-66).

Expert advice

The Abbott Government’s National Commission of Audit (NCOA) was established to advise the government on the role and scope of government and to address waste and mismanagement within the public sector.  This was an example of a government setting up an inquiry to deliver the type of policies it preferred (see blog, 19 March 2014 ‘The effectiveness of Senate Select Committee Reports: the National Commission of Audit and government policy’).  It is not surprising, therefore, that many of its recommendations were taken up by the government and included in the Budget (see National Commission of Audit Reports at http://www.ncoa.gov.au).  The government’s rhetoric in explaining its budget measures also adopted similar terms to those in the report.  For example, the section on Reforming the Federation included the statement ‘as far as practicable, each level of government should be sovereign in its own sphere’ (www.ncoa.gov.au/report/phase-one/part=b/6-10roles-responsibilities-and-duplication.html).  Education minister, Christopher Pyne, commenting on education funding arrangements, said ‘we want to treat the states like adult sovereign governments’ (ABC, 7.30 Report, 14 May 2014, http://www.abc.net.au).

The NCOA recommended ‘changes be made to improve targeting to those most in need by adding deemed income from tax-free superannuation to the definition of Adjusted Taxable Income used for determining eligibility for the Commonwealth Seniors Health Card’ (Recommendation 15, http://www.ncoa.gov.au/report/phase-one/recommendations.html).  This was included in the Budget statement as follows: ‘The Government will achieve savings of $20.9 million over five years by including untaxed superannuation income in the assessment of income to determine eligibility for the Commonwealth Seniors Health Card’ (www.budget.gov.au/2014-15/content/bp2/html/bp2_expense-21.htm).

However, not all recommendations from the NCOA were adopted by the government, including a recommendation to reform the federation by attacking vertical fiscal imbalance (for an explanation of what this means see p. 106 of the text book) by providing the states with access to the Commonwealth’s personal income tax base (www.ncoa.gov.au/report/docs/phase-one-report.pdf).  The NCOA’s recommendation for the introduction of a $15 co-payment for a visit to the doctor reduced to $7.50 after 15 visits was modified by the government to a co-payment of $7 per visit to a GP, diagnostic and pathology services.   Concessional patients and children under 16 years would only pay the fee for their first 10 visits (www.budget.gov.au/2014-15/content/pb2/html/bp2_expense-14.htm). The NCOA recommendation that eligibility for the age pension be increased incrementally to 70 by 2053 was adopted, but the recommendation to include the family home in the means test for the age pension was not taken up.  (Recommendation 13: Age Pension – tighter targeting of elibility, http://www.ncoa.gov.au/report/phase-one/recommendations.html).  These decisions were made by the government presumably because of potential negative electoral consequences.

Prime ministerial influence

The power of the prime minister and constraints on that power are discussed on pp 214-217 of the text book.

The 2014-15 federal budget illustrates how electoral concerns emanating from within  Coalition ranks caused prime minister Tony Abbott to amend his strongly-held commitment to his pre-election policy for a government funded paid parental leave scheme which he had consistently remained determined to introduce even in the context of budget cutbacks to other programs.  His policy was to provide 26 weeks of pay at the primary carer’s replacement wage including superannuation capped at incomes of $150,000.  it is not surprising, therefore, that the NCOA’s recommendation that the wage replacement cap be set at Average Weekly Earnings was rejected (www.ncoa.gov.au/report/docs/phase-one-report/pdf, p. 120).

When it became evident that the federal budget would include a deficit levy on high income earners, co-payments for visits to doctors and harsher means testing for family payments, concerns were raised from within the Coalition parliamentary party and the business community that it was inappropriate to introduce a paid parental leave scheme described as ‘excessively generous at a time when the government is championing fiscal sensibility’ and a group of Liberal and Nationals senators were ‘reportedly expected to vote against the scheme’ in the parliament (Collins, B. 2014, ‘businessinsider,com.au/briefing, 29 April, http://www.businessinsider.com.au/senators-from-tony-abbotts-own-party-could-crush-his-flagship-paid-parental-leave-scheme-201404).  NSW Nationals senator, John Williams, for example, said ‘I’ve made no secret about whether we can afford the paid parental leave scheme proposed by the prime minister.  I have serious concerns about it’.  Some Liberal MPs considered the government was setting up an unwinnable argument with the voters’ if it stayed with the paid parental scheme while proceeding with the proposed deficit levy.  One Liberal MP was reported as commenting ‘there’s a real sense that the PM needs to be also sharing in the budget pain by dropping his beloved PPL scheme’ (Kenny, M. 29 April 2014, http://www.smh.com.au/federal-politics/political-news/nervous-liberal-mps-beg-prime-minister-tony-abbott-to-rethink-paid-parental-leave-scheme-20140428-zr0vo.html).

There was some justification for electoral nervousness within Coalition ranks.  For example, a Sydney Morning Herald poll taken on 25 April asking the question: ‘Should paid parental leave be cut to help budget?’ drew an overwhelming ‘Yes’ vote of 93 per cent (www.smh.com.au/polls/federal-politics/political-news/should-paid-parental-leave-be-cut-to-help-budget-20140424-375gz.html).   A Morgan poll taken in the middle of April found Labor leading the Coalition 52 to 48 per cent on a two-party preferred basis (www.roymorgan.com/morganpoll/federal-voting/2pp-voting-intention-trend-1901-2014).

The prime minister did not drop the scheme but in response to this considerable disquiet from within the Coalition, he did reduce the threshold from $150,000 to $100,000.  His change of heart was also considered ‘partly one of pragmatism’ because without the support of the Greens the scheme would have had difficulty passing the Senate.  Nationals MP and Parliamentary Secretary for Defence Darren Chester, a critic of the scheme, said: ‘I don’t think it’s embarrassing when a prime minister or a treasurer or any other minister considers public opinion, looks at the state of the parliament and decides whether or not they can get a policy through’ (Griffiths, M. 30 April 2014, http://www.abc.net.au/news/2014-04-30/tony-abbott-reduces-maximum-ppl-payment/5419878).  Another factor is likely to have been the point made in the text book (p. 221) that the influence of a prime minister is ‘accepted by their party only so long as they are ‘winners’ or potential winners in the electoral stakes.

Conclusion

As you can see from the above, you can gain an understanding of the various elements of the policy processes involved in shaping the Abbott government’s 2014-2015 federal budget from the text book.  This includes the role of the public service (Chapter 5), the input from external advisory bodies (Chapter 7), the strategies of interest groups involved in the lobbying process (Chapter 11), party ideology (Chapter 10), the influence of the prime minister and constraints on that power (Chapter 6) and external pressures such as political polling (Chapter 12).  Earlier blogs on this web site also discuss the political context associated with government decision-making.
Dr Gwyn Singleton

21 May 2014

 

 

 

 

 

 

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