The same $80 billion of cuts to schools and hospitals – still in this budget. – Opposition Leader Bill Shorten, budget reply speech, May 5, 2016.
Among Labor’s most popular refrains is the claim that the government has cut $80 billion from schools and hospitals.
Is that true?
The source of the $80 billion figure
The Conversation asked the Labor campaign media team to provide evidence to support the assertion and did not receive a quotable reply about sources, but rather this statement from shadow education minister Kate Ellis:
Malcolm Turnbull is giving big business a tax cut at the same time as he rips $29 billion from Australia’s classrooms over the next decade. Malcolm Turnbull talks big on the economy and innovation – but this means nothing without investment in a strong education system.
Nevertheless, as outlined in this ABC FactCheck from 2014, the source of the $80 billion figure is former treasurer Joe Hockey’s 2014-15 federal budget.
There, on page seven, it says:
In this budget the Government is adopting sensible indexation arrangements for schools from 2018, and hospitals from 2017-18, and removing funding guarantees for public hospitals. These measures will achieve cumulative savings of over $80 billion by 2024-25.
The $80 billion figure has been appropriated by Labor for use in a key election campaign attack line – that there have been “$80 billion of cuts to schools and hospitals” – even though Labor never projected out spending as far as 2025 in their last budget of 2013.
Despite that, Labor clearly felt justified in claiming these as “cuts”, as these were the “savings” claimed by the government itself.
Of that $80 billion, about $30 billion was for schools and about $50 billion for hospitals. (The Parliamentary Budget Office projected the figure for hospitals would be closer to $57 billion).
Included in the 2014-15 budget is this chart:
As you can see, the line in that chart continues up – so it’s not that funding is now decreasing. It has not been decreasing.
It’s more that the funding is increasing more slowly than it would under Labor. To Labor, that’s a cut; to the Coalition, that’s not a cut, because funding is continuing to increase.
What’s new?
In recent months, the Turnbull government have made a couple of announcements regarding hospital and school funding in the period between 2017 and 2020.
First, at the Council of Australian Governments (COAG) meeting in April, Turnbull agreed with state premiers to increase hospital funding by $2.9 billion from July 2017 to June 2020, with growth in federal funding capped at 6.5%. The COAG agreement said a “longer term” hospital funding arrangement for 2020 onwards will be considered by COAG before September 2018.
Then, a few days before this year’s budget, the government announced a $1.2 billion increase in schools funding between 2018 and 2020.
So a small portion of the $80 billion worth of “savings” identified in the 2014-15 budget has been restored to the government’s spending plans.
That means future funding will continue to increase substantially faster than the 2014-15 budget planned for the period to 2020; but still not as fast as was promised under the previous Labor government.
Critically for the $80 billion figure, the Coalition’s plans for hospital and school funding post-2020 remain unclear, which is when the vast majority of the $80 billion of health and education savings were to be made.
Comparing the Coalition government plans with the previous Labor government’s plan
Under Coalition plans for hospital funding (agreed to at the 2016 COAG meeting), federal government spending on public hospitals will rise from $17.2 billion in 2015-16 to $21.1 billion in 2019-20. This represents growth in spending of $2.9 billion or 17% over four years.
Labor is yet to announce its 2016 health policy, but the previous Labor government’s plan indicated a rise in spending to around $26 billion in 2020. On this basis, the current government’s plans represent a 19% reduction in federal funding to public hospitals by 2020 compared to the previous Labor government’s funding plans.
Similarly, having previously planned to reduce growth in education spending by the order of $30 billion through to 2024-2025, the current government has committed to tip in an additional $1.2 billion over the 2018-20 period with no commitments beyond 2020.
In principle, school funding commitments have been reduced by $28.8 billion, though we might expect further growth commitments in future budgets.
Verdict
Labor’s claim that the Coalition has “cut” $80 billion from schools and hospitals is misleading. There has not been a cut from current levels of funding – it’s more that significant future funding promises made by the previous Labor government were “unpromised” by the Coalition in its 2014-15 budget.
And some of the “unpromised” future funding was put back in the 2016-17 budget. – Peter Sivey and Buly Cardak
Review
This is a sound analysis.
Between 2010 and 2013, then Prime Minister Julia Gillard, leading a minority government, ramped up the Commonwealth’s future funding commitments to health, education and national disability programs. She promised this money to the states and territories, in some cases if they put in some partially matching contributions. The generous Gillard funding did not commence when she made the announcements but would supposedly be delivered over a period of seven years from 2014-2020, and in some predictions out to 2024.
However, these bounteous projections were changed by Treasurer Joe Hockey in the Coalition’s 2014-15 budget by replacing the nominal increases with a more modest indexation of grants to the states. Since then, both the state and territory governments and the federal opposition have called these “cuts” of $80 billion.
The optimistic funding promises were never legislated (or appropriated) by parliament and although some were incorporated in Commonwealth-state agreements, they were, at best, nominal projections.
As the article above makes clear, the so-called “cuts” are not really cuts but simply changed promises (or promise reversals = perhaps “unpromises”) that in effect reduce the rate of growth of health and educational spending. – John Wanna