Premier Daniel Andrews facing a year of tough calls on spending
Premier Daniel Andrews is facing his toughest year yet with a string of issues putting big pressure on the government’s Budget outlook, writes Tom Minear.
Opinion
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Even before half the state caught fire, this year was always going to be Daniel Andrews’ toughest yet. Sure, he’s hit plenty of speed bumps before, but 2020 will be different.
After five years of wheeling and dealing to deliver the vision he promised to Victorians, the Premier now faces a deeper challenge: sustaining his successes and building them into a legacy.
That can’t happen without tough choices, choices which will upset some of Dan’s fans.
Up until now, this Labor government has taken a pragmatic and at times brutal view of those who have won or lost as a result if its decisions.
It has gambled — with nous and some luck — that it can ride out the anger of timber workers, foreign property investors, CFA volunteers and coal miners.
This year, the odds have shifted and Andrews’ team will have to confront the perception — if not the reality — that they are putting more Victorians in the “loser” category.
That’s because they can no longer afford to keep spending. Treasurer Tim Pallas laid the groundwork for a more austere approach in last year’s Budget when he announced a “comprehensive program of departmental expenditure base reviews”.
That’s a diplomatic way of saying the government had decided to investigate where and how taxpayers’ money was being wasted.
Since coming to power, Labor has increased the public sector wages bill by 40 per cent and while few would quibble with the need for more police, paramedics and teachers, not all the spending paid for frontline services. Why, for example, are taxpayers funding a Victorian Fisheries Authority podcast? Is that really the business of government?
The findings of the base reviews, designed to save $1.8 billion over four years, will be revealed in the next couple of months.
Pallas says he wants to avoid job losses and the Community and Public Sector Union has worked on a skills exchange to move workers into areas of need.
But there is frustration and concern in the public service. Workers on contracts are being left in limbo, forcing them to go elsewhere for permanent positions, and hiring freezes are in place. Even optimistic Labor figures concede it will be hard to come up with $1.8 billion in savings without job cuts.
And Pallas is staring down the CPSU’s 50,000 members, who want more than 2 per cent annual pay rises. When the wages policy was announced early last year, cynics — and Liberals — thought the government would quickly capitulate and deliver far more generous wage boosts.
Instead, Pallas and Andrews have held firm. The usually not-so-militant Police Association had to get officers scrawling campaign slogans on their cars last year before they got a new pay deal.
As the Herald Sun revealed last week, the Victorian Ambulance Union is bracing for its own industrial battle. Who would have seen that coming in 2014, when Andrews proudly ended the Liberal “war” on paramedics? Or even in 2018, when a former ambulance union boss became a Labor MP?
Paramedics and public servants are Labor’s people. They’ve had a great run for five years but now the government isn’t letting them get their way. How they respond will play a big role in shaping Andrews’ fortunes this year.
Another key challenge keeping Labor’s leaders awake is the structure of a new levy designed to raise up to $1 billion a year to pay for generational mental health reforms.
Few would argue with the need to improve a system that has failed hundreds of thousands of Victorians. That said, no matter how good the cause, voters generally do not like paying more tax and this is likely to set most of us back hundreds of dollars a year.
The government is experimenting with ways to share the burden, but it doesn’t have the luxury of piggybacking on to the federal income tax system, which can means-test fees and charges.
Unlike Andrews’ other new taxes, which have been cleverly concealed in Uber trip fares and online bets, the mental health levy will be a clear financial hit felt by millions of Victorians.
Victoria’s $1 billion surplus was crunched to $618 million last month amid softening national economic conditions and a timid property market. Now, in the wake of the bushfires, ministers with spending requests in their portfolios are being told not to bother. That has heightened concerns that Pallas’s efforts to paper over budget issues are no longer sustainable.
Andrews said last week that this year’s surplus was still secure and that Labor had kept the budget in the black every year so it could respond to crises like the bushfires.
The government has rolled out a string of emergency measures, but it is yet to make a long-term recovery investment like Premier Gladys Berejiklian’s $1 billion, two-year commitment in New South Wales.
Meanwhile, it will likely have to come up with a significant amount of cash to resolve cost disputes on the Metro Tunnel and West Gate Tunnel projects and big investments are needed to kickstart work on North East Link, Suburban Rail Loop and airport rail.
All of this means difficult budgetary choices and Andrews will have to burn some of the political capital he has spent five years building up.
The question is whether he can keep enough up his sleeve to get through to the 2022 election.
Tom Minear is state politics editor