Costing the promises: what is a Parliamentary Budget Office?

Shadow Treasurer Joe Hockey wants the Opposition’s policies privately costed. AAP

Costing the promises: what is a Parliamentary Budget Office?

Shadow Treasurer Joe Hockey wants the Opposition’s policies privately costed. AAP

Federal parliament has begun debating the merits of a new independent unit which would cost election promises and policies for all parliamentarians.

But one of the more controversial aspects of the Gillard Government’s bill for a Parliamentary Budget Office (PBO) - making all costings immediately public - is being hotly contested, with Shadow Treasurer Joe Hockey introducing a private members’ bill to keep costings secret during the election period.

Mr Hockey has said the Opposition would not use the PBO unless the rules were changed.

So what is all the fuss about? And what difference would the PBO make anyway?

Long time coming

The Gillard Government has been under increasing pressure to make good on its promise to establish a PBO.

The idea has been around for many years as one of a bunch of reforms routinely advocated by champions of a stronger parliament.

It has also been just as routinely ignored by governments.

That the PBO is now on the agenda is entirely due to the accident of a hung parliament.

To seek a majority, the major party leaders were forced into offering inducements to minor parties and independents, Rob Oakeshott and Tony Windsor.

High on the latter’s shopping lists were a number of measures that would help to reduce the executive’s stranglehold over Parliament and allow more leverage to parliamentary minnows such as themselves.

A Joint Select Committee reported in favour of a PBO in March and the government promptly accepted its recommendations.

It agreed to set up a PBO to “assist Parliament with its scrutiny of the budget and fiscal policy”.

The Office would be headed by an independent Parliamentary Budget Officer with a budget of $25 million over four years.

On 22 August, the government introduced a bill ‘to establish the Parliamentary Office’, thus keeping to the spirit of its earlier commitment to establish the office by this September.

A budget office was part of the government’s deal with Independents, Rob Oakeshott and Tony Windsor. AAP

Here to help

The role envisaged for the office is primarily to assist Parliament in its existing functions.

It will provide expert analysis of the full budget cycle, fiscal policy and the financial implications of proposals.

It will assist parliamentary committees in their scrutinising and advising functions. It will be available to non-government parties and individual parliamentarians to cost policy proposals, both before and during election campaigns.

Currently the Australian Treasury can only cost policies for the two major parties during the election period, excluding minor parties and individual MPs.

Wisely, the Select Committee advised against a major role in economic forecasting for the PBO, noting the amount of resources needed to duplicate Treasury in this area.

This will disappoint those looking for alternative, contestable forecasts as provided in the United States by the Congressional Budget Office.

Isn’t that what Treasury is for?

A number of other OECD countries have their own versions of an expert economic body independent of the executive or Treasury and responsible directly to the legislature.

In each case, the motive has been the same: to counter perceived dominance of the executive in economic expertise.

Every government has one or more large departments, such as our Treasury and Department of Finance, which perform the dual role of advising the government on budget matters and reporting objectively on the country’s economic performance.

Inevitably, suspicions arise that the published forecasts and other data are being tailored to suit the partisan needs of the government.

Oppositions, minor parties and individual MPs, however, lack the resources and expertise to effectively challenge the government’s findings.

While the party in power can call on all the resources of the economic departments to help develop and cost its policy proposals, oppositions have little such assistance and have difficulty presenting plausible alternative policies to the electorate.

Costing election promises

The PBO would change this. The Select Committee recommended that the PBO undertake election costings for minor parties and independents as well as for major parties, but recognised that this would require some coordination with Treasury and Finance to avoid duplication.

It avoided the more drastic, but cleaner, solution of following the Netherlands where the function of pre-election costings is allocated exclusively to their equivalent of a PBO.

The Bill also allows for the PBO to do election costings on request and the explanatory memorandum indicates that the Opposition will use this procedure rather than the current costing by Treasury and Finance.

At present, the Charter of Budget Honesty Act 1998 allows Treasury and Finance to cost the policy proposals of the major parties during the period of caretaker government leading up to an election.

The provision was intended to reduce the advantages of incumbency by allowing Opposition access to expert costings of their policies.

However, the system has not worked well, as oppositions have insufficient time to develop their polices for costing.

They have tended instead to delay submissions to reduce the negative consequences of published costings.

The PBO could improve debate - but it won’t be for the fainthearted. AAP

Secret or out in the open?

Current Parliamentary debate has focused on whether the PBO’s reports should be made publicly available.

Publication of all PBO reports would meet the demands of transparency and accountability which the PBO is intended to serve.

But parliamentarians who request a costing report on one of their own proposals may wish to keep the report confidential while they improve the policy in the light of expert comments.

Confidentiality during policy development is essential to good policy-making.

The government’s bill has come down on the side of full publication of all reports made at the PBO’s own initiative.

But where the advice has been sought by individual members or senators, publication requires the consent of the members or senators concerned.

The Opposition is now trying to push for confidentiality during the election period.

How these details are finally settled will affect how the PBO eventually performs in practice.

The PBO’s rights to information

Another controversial topic has been access to government-held information.

Should the PBO have the right to access all relevant information so that it can accurately undertake its role of costing policy proposals, not only during elections but also between elections?

If the right of access is granted, where does that leave public servants who are obliged to protect government confidentiality unless overruled by Freedom of Information (FOI) requirements?

If access is limited to what would be available under FOI, can the PBO still do its job effectively?

The solution offered in the Bill is for the PBO to have access to confidential information but on condition that it does not publish it.

Political headache

Also important will be conventions adopted by the Parliamentary Budget Officer to navigate the political minefield that the office will find itself in.

Some supporters of the PBO initiative clearly hope that it will facilitate more rational and balanced parliamentary debate on policy issues.

Others also see it as part of a new paradigm of parliamentary deliberation in which members of all parties as well as independents will be able to engage constructively in non-partisan debate.

Certainly, the PBO should be able to help keep the Treasury honest by providing an alternative source of economic analysis. It will also lend much needed expert assistance to parliamentary committees and opposition parties.

But it will probably do little to lower the temperature of parliamentary debate or to combat the oversimplified sloganeering that passes for policy discussion among politicians.

We should not be misled by the temporary accident of a minority government into thinking that Australians crave an end to adversarial politics.

The lack of a single party majority may have produced a PBO as a useful by-product for the longer term. But most people clearly see minority government as an aberration.

Oppositions will use and abuse

After the next election we seem set to return to old-fashioned two-party competition.

Oppositions will use the PBO as a new weapon in their constant campaign to undermine the government, just as they have used other parliamentary innovations, such as the system of Senate estimates committees.

On the whole, if the government’s weaknesses are ruthlessly exposed, we all benefit. But the process will not for the faint-hearted.

If the PBO were already up and running now, we can imagine the Opposition wanting it to report, say, on modelling for the carbon tax, costings for the National Broadband Network (NBN) and the true cost of the Malaysian solution.

In such an environment, providing economic advice that is “independent, non-partisan and policy neutral” (in the Government’s words) will call not just for economic expertise but also for supreme political tact.

Prime Minister Julia Gillard and her colleagues, however, should bear in mind that after 2013, if not before, they almost certainly face a long period in the political wilderness.

A strong and well-resourced PBO might turn out to be their saviour as they try to rebuild policy credibility from the opposition benches.