Federal election 2016: Swan, Labor favour claim of full funding

It’s fully funded. This is one of the greatest hoaxes perpetrated by politicians to trick the voting public into thinking that more free stuff can be handed out by the government and still be affordable.

This con game was much favoured by Labor treasurer Wayne Swan. But its popularity shows no sign of waning on the Labor side.

You will even hear Prime Minister Malcolm Turnbull talk about programs being fully funded.

Here’s the thing: unless there is a secure legislated trust arrangement in which revenues and ­expenses are attached to a particular program, the idea of anything being fully funded is just a fraud, particularly in the context of endless budget deficits, rosy scenarios of uninterrupted economic growth and ludicrous 10-year projections.

For the vast bulk of government spending, there is no basis, either technical or in terms of common sense, that can justify a claim that a particular program is fully funded. Expenses are simply drawn from the consolidated fund and revenues are deposited in that fund.

Even more deceitful is the practice of counting the “savings” of not proceeding with a budget measure, be it a tax cut or spending initiative, and adding this sum to the spurious calculations that supposedly demonstrate that something is fully funded.

It’s a bit like me deciding not to purchase an expensive pair of shoes that I had planned to buy, counting this as saving and then spending the money on an expensive handbag.

Evidently, I should take comfort from the fact that my expensive handbag is fully funded.

So picture the scene. It is May 14, 2013. I have been sitting in the windowless budget lockup room for hours. My head is resting uncomfortably on the keyboard in front of me because there is no ­alternative.

Several pieces of paper are shoved in my direction. They purport to provide evidence that the National Disability Funding Scheme is fully funded until 2023-24.

There’s the increase in the Medicare levy — which is at least real additional money — restrictions on the private health insurance rebate, superannuation changes, (the ill-fated) changes to fringe benefits, the increase in the tobacco excise and changes to import processing charges.

There are charts going out years, all the time showing the additional expenses associated with the rollout of the NDIS are lower than the sum of all these revenue and savings measures.

But here’s the thing, the budget papers are telling me to expect a hefty deficit in the coming financial year and in the year after.

And let’s face it, the projections of small surpluses in 2015-16 and 2016-17 in that budget are both wishful and fanciful.

Reality has confirmed this.

Notwithstanding the budget being heavily in the red, we were being told that one component of spending — the NDIS — was fully funded. Wayne Swan and his sidekick, Jenny Macklin, were surely having a lend. It’s a bit like saying I have the cost of your medications covered, but there is no money for food.

But rather than learn the lessons of those fiscally irresponsible years, Labor under Bill Shorten has actually doubled down on the practice. The NDIS is fully funded, the Gonski school spending is fully funded, health and hospital spending is fully funded. Let’s get real, this stuff is the mother of all fiscal fiddles.

What I particularly love is the double counting in all the exercises: the additional tobacco excise revenue is going to fully fund the NDIS but it is also going to fully fund the Gonski spending. (Note that shadow education spokeswoman, Kate Ellis, was heard to yell out “tobacco” when the government queried the claim that Labor’s massive increase in school spending is fully funded.)

And let’s not forget that Labor has over-estimated the likely revenues (over 10 years, of course) of the higher tobacco excise rates by about $20 billion. Mind you, the presentation of 10-year figures is a complete fudge, designed to obfuscate rather than clarify.

You only have to look at the budget papers (Statement 7, Budget Paper No. 1) to realise that there are massive errors attached to the projections on revenue even for next year, let alone years away.

Take 2017-18, which is not very far off — revenue as a percentage of GDP could be anywhere between 17¾ per cent and 23¾ per cent, according to Treasury. This is plus or minus $90bn.

And yet we are expected to believe revenue projections 10 years out. No one is that gullible. In all of Labor’s funding plans, it is only by looking over the horizon and making up figures for a 10-year period that the fictitious claim can be made that Labor’s excessive spending plans are fully funded.

The one hope of the side at this stage is Human Services Minister, Christian Porter. He was never having a bar of those bits of paper pushed in my direction in the 2013 budget. He acknowledges that NDIS is not fully funded, but he is at least making a half-decent attempt to do something about it.

It is noted in the budget papers, “by 2019-20, the accumulated Disability Care Australia Fund (which has housed the revenue from the higher Medicare levy) will be fully drawn down.

“This combined with the increase in NDIS spending means that there will be a $4.4bn shortfall to be funded from general budget revenue or borrowings [in that year]. This shortfall continues in each year beyond 2019-20.”

In other words, the NDIS was never fully funded; Swan and Macklin were just trying to pull the wool over our eyes.

A NDIS Savings Fund is to be created and all underspending on the NDIS, as well as savings achieved elsewhere in the welfare space, will be held in this fund. It’s just a pity that more politicians don’t follow Porter’s approach.

And, by the way, don’t promise something that cannot be delivered in a truly fiscally responsible way. The cumulative total of budget deficits since 2008-09 is $355bn.

To offer new spending on the basis that is fully funded is both deceitful and reckless — a point that applies to both sides of politics.