Unborn are new forgotten ones

WHATEVER one thinks of the notion of corporate social responsibility, its canny advocates have ensured that corporations take account of stakeholders beyond traditional shareholders.

Here's another idea. What's good for the corporate goose is even better suited to the government gander. With the federal budget due next month and the next election less than four months away, what about we start a conversation about government social responsibility - where all politicians commit to acting responsibly towards a group of stakeholders who have become the new forgotten people of Australian politics.

Forgotten because, unlike the middle-class constituency Robert Menzies had in mind in 1942, these 21st-century stakeholders are not yet born. If government spending continues at current rates, future generations of Australians will be left paying the bill for today's Australians who have come to expect far too much from governments.

Far less fashionable and flighty than CSR, GSR provides a boringly constant reminder of fiscal responsibility that ought to form part of the daily business of government. It sets the boundaries for all politicians regardless of political stripes, every time they dream up an idea, draft up a policy and propose to dip into taxpayer-funded coffers to fund it. Being green doesn't mean getting a leave pass from fiscal accountability.

Whereas CSR has no shortage of advocates, unborn stakeholders have no voice of their own. This explains why GSR is so easily pushed aside by raw political imperatives and clueless politicians with no understanding of how to spend other people's money - let alone the money of future generations - wisely and responsibly.

Whereas CSR is especially chic in so-called progressive circles, GSR is barely mentioned. Indeed, the same political circles committed to finding new, exciting ways to use the word "social" - we now have a Minister for Social Inclusion - give scant attention to the grave social responsibilities of government not to spend the money of future taxpayers. Whereas these self-styled warriors of the social good chat frequently about social justice (even if a recent panel of experts failed to agree a precise definition), something simple like GSR eludes them. Whereas CSR is a deliberately vague notion carefully crafted to suit any group with a grievance, GSR, is - happily - a very stable idea.

A government committed to GSR must do three things. First, it must remember that when a government spends other people's money on other people, it is at the greatest risk of getting it wrong.

No apologies for repeating the four rules of spending according to economist Milton Friedman. First, if I spend my own money on myself I really care how much I spend and what I spend my money on. Second, if I spend my money on someone else, I still care how much I spend but what I buy becomes less important. Third, if I spend someone else's money on myself, I'll splash out big on something I really want. Finally, if I spend other people's money on other people, I am less concerned how much I spend and what I spend it on.

The Grattan Institute's new report - Budget Pressure on Australian Governments - provides textbook examples of Freidman's fourth rule of spending. Take education. The report found that "real spending on government schools rose by 50 per cent, but did little to improve outcomes". No wonder the polls haven't lifted since the Prime Minister's shiny announcement to spend $14.65 billion more on education over the next six years.

Former Future Fund chairman David Murray rang similar alarm bells last month on The Bolt Report. He said the blowout from a healthy $45bn surplus to net debt of around $160bn by the May budget is due to "spending during the (GFC that) was far too large, and spent on the wrong things, and spending has not been sufficiently well reined in since".

The second requirement of GSR is that a government must not pass the bill for today's spending on to tomorrow's taxpayers. Murray pointed to the dangerously high level of government expenditure - now at "36 per cent of GDP, which is at least 6 percentage points too high". When fixed costs - spending on health, education and welfare - rise from 20 per cent of government outlays to 58 per cent in 40 years, there is a real risk of structural deficits infecting Australia with the toxic European strain of debt disease. And yet the Gillard government is proposing an NDIS with a projected annual bill of $14bn.

Avoiding fiscal disaster requires honesty from both sides of politics. An NDIS ought to form part of our welfare system by cutting real spending elsewhere. Unfortunately, as Grattan director John Daley told The Australian, "Australian political culture has adopted as gospel that there must be 'no losers' from reform".

The report says that on current evidence, public spending across the federal and four largest state governments will exceed combined revenues by $60bn a year by the early 2020s. That means a combined deficit rising to an "alarming" 4 per cent of GDP by 2023.

The only way to stop shifting the bill to unborn Australians is to close the gap of 4 per cent of GDP. Daley says that means today's taxpayers "will have to be a loser and share the pain".

That brings us to the third element of GSR. Honesty. Tell voters the fiscal truth and they are more likely to understand the need for fiscal restraint. The Treasurer might want to spend a little extra time learning this element of GSR. His promise of a surplus last year, when all the evidence suggested it was a pipedream, has destroyed his credibility with voters.

That we need to suggest a new conversation about GSR tells you how far and how dangerously the Gillard government has drifted from its most basic responsibilities.

There is no such thing as public money. There is only taxpayer money. And spending the money of future taxpayers to fund services for current taxpayers is exceptionally reckless.