MPs and bureaucrats told there is little wiggle room in the state’s finances to fund projects

Government insiders are concerned over the number of proposals denied funding because so much money is allocated to multi-billion dollar transport and health projects.

The Andrews government is facing a major budget crunch as its promises on health and transport come home, with ministers and staffers regularly knocked back over their key demands.

Victoria’s Treasury department has been taking submissions for the next state budget and a new crop of MPs and bureaucrats are being told there is little wiggle room in the state’s finances to fund projects in their electorates and policy areas.

Although haggling over funding is a normal part of the budget process, government insiders have expressed surprise internally about the amount of proposals rejected over spending concerns compared to previous years.

A key issue driving the clamp down is the amount of cash needed for commitments towards multi-billion dollar transport and health projects.

The amount of proposals rejected over spending concerns is higher than in previous years. Picture: NCA NewsWire

More payments are flowing as work ramps up on projects like the North East Link and Melbourne Airport Rail at the same time as ongoing work on the West Gate and Metro Tunnels.

Spending commitments on health have compounded the problem after both Labor and the Coalition competed on announcing major investments ahead of the 2022 election.

Funding for health projects has risen to $2.9bn a year and this is expected to rise as the state rolls out the litany of commitments pledged before and during the campaign.

In the last budget, the government anticipated it would spend $23bn on its building agenda in the 2023-24 financial year.

Works are ramping up on major projects including the Melbourne Airport Rail link.

This was nearly a third of the $81.9bn expected in revenue.

Adding to the crunch over the same period was $33bn in employee expenses and $3bn in interest payments made worse by regular rate hikes.

The government is also yet to announce its own wages cap after it announced it would review its 2 per cent limit amid surging inflation.

This figure is used as a key bargaining tool in negotiating pay deals and unions are expected to ask for significantly higher pay hikes to offset cost of living increases as high as 8 per cent.

A state government spokesman said the next budget would reflect the state’s current economic situation.

“We know that all Victorians are facing cost of living challenges including rising interest rates and inflation and the Victorian Government is also dealing with the current economic conditions,” he said.

Shadow Treasurer Brad Rowswell said the current financial position was deeply concerning.

“ As long as interest rates increase and Labor don’t have an obvious plan to pay off their debt, there’s no tax relief in sight for Victorians,” he said.

“There’s no apparent plan to grow the economic pie, just to tax, waste and increase debt.”

Setting up the State Electricity Commission is expected to require major cash injections but not until later in the Andrews government’s term.

However early funding is likely to be put aside for the SEC’s initial investments, including plans to decide on a first investment by the end of the year.