Cock-ups, conspiracies and creative accounting

MARGARET Thatcher's long-time press secretary-turned academic Bernard Ingham used to say that when faced with a choice between conspiracy and cock-up, the latter was invariably the better explanation for most events.

In the current political debate surrounding Labor's planned return to surplus, conspiracies abound that it won't happen, that the books are being cooked and that with enough digging the "truth" will come out. Namely, that the 2012-13 return to surplus - if the forecasts are accurate - will be only an artificial one.

This is understandable, given the great political importance that has been placed on the return to surplus timetable. Julia Gillard likes to spruik the idea that it is an economic - not political - goal, but as one minister told me, if the government doesn't achieve the surplus target, it falls.

Since then, numerous other challenges that could result in the government falling have entered the political lexicon, serving only to further emphasise the importance of the surplus promise.

One conspiracy that emerged this week in a news article I wrote is the idea that Labor is using the Future Fund set up by former treasurer Peter Costello to help its budget bottom line look a little better.

Finance Minister Penny Wong took exception to the terminology - the claim that Labor was "withdrawing" hundreds of millions of dollars from the fund to prop up its budget bottom line - because responsibility for the funds remains with the Future Fund, not the government. The fact remains that money that is part of the Future Fund is being used to make Labor's budget bottom line look better than it is.

If the Future Fund sells non-financial assets, say to the tune of $250 million, as is about to occur, the year in which it does so makes the budget position on the books look $250m better. To your average voter, something about that just isn't right.

However, this situation is more cock-up than conspiracy, because it turns out that the $250m boost to the budget bottom line caused by Future Fund asset sales that I reported on Monday is occurring in the 2011-12 financial year (with a forecast deficit of $22bn), not the all-important 2012-13 return-to-surplus year.

This creates a "who cares" attitude to a piece of accounting, which frankly should be adjusted so that there is no overlap between Future Fund assets and the government's budget bottom line.

I can certainly understand Wong's desire to highlight the distinction between withdrawals and a quirk of accounting, which makes the government's fiscal management look better than it actually is. She put out a strongly worded press release on Monday denying Labor was withdrawing from the Future Fund.

I can also understand cynicism on the part of the opposition after Wong's head of department, David Tune, answered a question on notice about what accounted for a jump in sales of non-financial assets in the return to surplus year to $4.9bn, more than even the surplus itself. He said it included "the expected sale of assets from the Future Fund".

Why wouldn't a partisan political opponent be cynical? But Tune was actually referring to the 2011-12 financial year and the $250m mentioned earlier, removing the need for cynicism surrounding what Labor might be doing to help it get back to surplus, so far as the Future Fund is concerned. Cock-up, not conspiracy.

In fairness to the head of department, the question was a little nebulous: it was unclear as to exactly which year or years Tune was being asked to account for sales of non-financial assets in the budget. He was simply doing what any good public servant should: being thorough in his answer, providing full details across the ambit of what he had been asked about.

The opposition won't give up its pursuit of what Labor might be doing to help achieve its budget surplus in 2012-13. And I am sure creative accounting is going on, across a range of areas. As one former insider told me: "We did it, they are doing it, everyone does it."

With comments like that, is it any wonder conspiracy theories abound?