Cabinet papers 1996-97: Costello’s Charter of Budget Honesty had to beat public service opposition

The Coalition government stared down public service opposition to its Charter of Budget Honesty.

Peter Costello delivers his first budget in August 1996.

The Coalition government stared down opposition from the public service to its Charter of Budget Honesty, aimed at helping long-term policymaking.

Treasurer Peter Costello’s August 1996 cabinet submission delivering on an election commitment to legislate “fiscal responsibility” was not agreed before it was formally presented to ministers as several departments had raised significant concerns.

The Department of Prime Minister and Cabinet suggested the charter could be “effectively implemented without recourse to legislation”, ran the risk of amendment in the Senate and advised that it was “undesirable and unnecessary” to legislate provisions for the costing of election policies. The department also thought it “possible” the legislation could be enforceable in court.

The Department of Finance, while also not opposed to the general concept of the charter, queried how “accurately” it could produce a pre-election economic and fiscal outlook statement with Treasury just 10 days after an election was called.

The Attorney-General’s Department also suggested it was “not legally necessary” to legislate the charter and doubted the benefit of a Fiscal Responsibility Act as there would be no “sanctions for non-compliance” and it could be repealed if a government did not follow it.

In an exclusive interview, Mr Costello told The Australian there was “enormous” opposition from the public service to introducing a new fiscal policy setting and reporting framework but the cabinet viewed it as a clear election commitment.

“The Charter of Budget Honesty, frankly, has been one of the best pieces of public interest legislation introduced in this country in the past 20 years,” Mr Costello said. “There was enormous bureaucratic opposition — absolutely. Don’t think the bureaucrats are in favour of a balanced budget. Why would they be in favour of a balanced budget? They like having more money to spend.”

Mr Costello’s submission said the objective of the charter was “to produce better fiscal outcomes” by “putting in place institutional arrangements to improve the discipline, transparency and accountability applying to the conduct of fiscal policy”.

He warned that legislating fiscal responsibility was not enough: “Responsible fiscal policy ultimately depends on government resolve and action … This cannot be achieved by legislation alone, but legislation can help in ensuring that fiscal policy actions and their effects are transparent and that governments are properly held to account for their decisions.”

“I see it as part of a big structural reform which says ‘We’re going to get off this cycle of an incoming government claiming it was misled (about the budget)’,” Mr Costello said.

“You will recall that Hawke and Keating had done that after their election against Fraser. You’d recall that we had done this after our election from Keating. We said ‘This is going to end so we can fight all of our elections on agreed figures’.”