Peter Gutwein, Ministerial Statement: Update on Budget Savings

Madam Speaker, only a couple of weeks ago the 2014-15 Budget for Tasmania was unanimously endorsed by every single Member of Parliament both in this House and also in the Legislative Council.
The Budget is all about delivering our long-term plan for Tasmania. It delivers on all of our election commitments and provides much needed stimulus to the Tasmanian economy.

We are delivering on our election commitments. Funding is flowing for dozens of economic stimulus projects and we are investing significantly in areas like health, education, police and infrastructure.
However, the most important aspect is getting the State’s finances back on track and the Budget commences the process of fixing the financial challenge that the Liberals inherited from Labor and the Greens.

Over the past four years, the previous Government delivered deficit after deficit. The Budget was left in an unsustainable position.

As explained in the 2014-15 budget the previous government spent $751 million more than budgeted between 2011-12 and 2013-14 and put Tasmania on track for cumulative deficits of at least $1.1 billion and net debt rising to more than $400 Million in coming years.

Everyone knows that you cannot build a prosperous future if you continue to spend more than you earn and keep living on credit. Everyone knows that if the State continues to live beyond its means, it will force future generations to pick up the tab for the excesses of today.

Madam Speaker, what our State needs, and what the Liberals’ Budget delivers, is a balanced approach, one that is measured and responsible.

Our Budget contains a plan to nearly halve the cumulative deficit over the next four years and return the budget to surplus within six.

Rather than being hell-bent on rushing back to surplus, which could damage Tasmania’s fragile economic recovery, we have chosen to put the State’s finances back on track, but at the same time stimulating the economy, delivering on our commitments and investing in frontline services.

Madam Speaker, the response to the Budget has been on the whole very positive. The TCCI, the business community more broadly, farmers, developers, the tourism industry, local government groups, the hospitality industry and the community sector have expressed support for our Budget.

The Budget is supporting the recovery that we are seeing in the Tasmanian economy. Since the election:

• 1,900 new jobs have been created;
• Retail trade is up;
• The building and construction sector is recovering;
• Our economy is actually growing for the first time in years, and at a faster rate than some of the mainland states; and
• Importantly, business confidence is through the roof since the election.

One of the best ways that this Government can support business confidence, economic growth and job creation is by getting the budget back on track.

Madam Speaker, as I’ve said, it’s all about balance. Rushing to surplus would not be the right choice. But neither is allowing Government spending to continue to balloon out of control. Budget repair is a central feature of the 2014-15 Budget.

Madam Speaker, all of our election commitments that support our long term plan for Tasmania have been more than offset by savings across government, as we clearly identified before the election. Our election commitments actually make the budget bottom line better.

Madam Speaker let me be clear: our election commitments invest $400 million in growing our economy, creating jobs and investing in frontline services. We identified $993 million of savings and revenue measures in the Budget. Of these savings and revenue measures, of which the pay freeze is one, the vast majority, as I have explained previously, are aimed at fixing the budget and ensuring that the State’s financial position is strengthened.

Some have claimed that the pay freeze was about the funding of election commitments. As I have outlined, our election commitments were more than offset by savings. The pay freeze was about delivering much needed Budget repair. A repair job that still needs to be done so that future generations aren’t paying for the deficits of the previous Labor-Green Government.

Unfortunately, the unions, backed by Labor and the Greens, ran a campaign against the pay freeze. The pay freeze legislation was frustrated at a time when it is clear that fixing the budget mess is an urgent priority. As a result, the Government decided not to proceed with the bill.

Obviously, the pay freeze was a significant measure that would have eased the pressure on the Budget and helped departments to manage their costs.

The pay freeze had significant community support. We believe the pay freeze had significant public sector support. While we made a strong case for the pay freeze, it is unfortunate Labor, the Greens and the unions opposed the measure.

At the time when the pay freeze was first proposed we could not have been clearer: if it was not accepted, we would still have to find the savings it would have generated elsewhere in the Budget to fix the budget situation the Government inherited.

It was not a threat or an ultimatum. It simply reflected the reality that we can’t spend more than we earn, live off the credit card and expect the taxpayers of the future to foot the bill for unaffordable spending today.

We were also quite clear when we said that the savings needed to be made immediately.

We are now over a quarter of the way through the financial year and we must achieve the savings targets outlined in the Budget.

Some have said that we should spend months in protracted negotiations about a pay freeze with no guarantees of even achieving an outcome. As a Government, we acted responsibly and beginning in June, four months ago, we engaged with the unions. We explained the severity of the financial challenges facing Tasmania and we invited the unions to provide suggestions for reining in spending.
The unions have had their opportunity to provide input. The time for negotiations has passed. It is now time to get on with the job.

We must fix the budget and repair the State’s finances and we will not be dissuaded by anyone or any lobby group.

Madam Speaker, I note that Unions Tasmania has indicated it is now preparing a proposal to present to Government.

We have said all along that we want the unions to put forward savings options.

If the unions are prepared to put forward savings options in the form of a pay freeze that is genuine and without condition, we will accept those savings. These savings will directly and proportionately be used to limit the 500 job losses and help us achieve $50 million per year in savings.

We are not interested in receiving ‘straw man’ proposals that are burdened with unacceptable caveats and couldn’t possibly be agreed to by any responsible government. And again, I iterate that this will not be a negotiation.

The ball, so to speak, is in the unions’ court and I want to make it clear that they only have one shot at this.

If the unions’ proposal is unacceptable, we will make the savings elsewhere.

Madam Speaker, to that end, I have met with Ministers to discuss progress to date on achieving the $564 million of agency savings separate to the pay freeze and also the strategies that they will implement to deliver the additional savings that the pay freeze would have provided.

I want to now provide an update on where this process is at.

In relation to the $564 million worth of non-pay freeze-related savings that are detailed in Chapter 4 of Budget Paper 1, I can inform the House that progress is well underway and the savings measures are on track to be achieved.

In order to deliver these saving initiatives, departmental heads have been given the full toolkit of options to work with including Targeted Voluntary Redundancies, Workplace Renewal Incentive Programs, strict internal vacancy control and inter and intra agency transfers. Of course, as we have previously stated, forced redundancies are not on the table and I take this opportunity to once again rule them out.

In the three weeks since the Budget passed, a number of departments have initiated an expression of interest process for Workforce Renewal Incentives and Voluntary Redundancies. Combined with strict vacancy control, we believe that these options will result in significant savings and we will vigorously pursue them.

I can inform the House that as at today, across government nearly 550 public servants have lodged an expression of interest for either the voluntary redundancy or workforce renewal programs.

458 expressions of interest have been received for the Workforce Renewal Incentive Program. 78 expressions of interest have been received for the Voluntary Redundancy program and 11 applications have been received expressing an interest to participate in either program.

I would anticipate that those numbers are likely to rise, given that workforce renewal and voluntary redundancy programs are, in a number of departments, still open.

It should be noted that not all applications to these programs will be accepted, but as the Government needs to achieve savings equivalent to 361 FTEs this financial year, we are on track to make these savings with minimal disruption to the services that are provided by Government.

However, this only deals with achieving the $564 million of non-pay freeze-related savings.

Madam Speaker, the pay freeze would have generated $50 million of savings a year and saved 500 jobs. In the absence of the pay freeze we will still need to achieve those savings and I now want to update the House on the process to achieve these savings.

In the last few weeks, meetings have been held with Ministers and their departmental heads to discuss the challenge that we face.

I have made it clear to Ministers that where possible savings that impact on frontline services are to be avoided.

However, as we have said publicly, given the quantum of the savings needed in the absence of a pay freeze, that may not be possible.

We will need to make some tough decisions and we will not shy away from that responsibility.

The Government is reviewing programs and functions that we simply cannot continue to justify resourcing under the current budget constraints and in the absence of the pay freeze.

Madam Speaker, it is important that Tasmanians understand that we take the job of reining in spending seriously and that we will deliver.

Some of the decisions that we are considering may not be popular in the short-term, but by acting now we will avoid the need for more severe reductions in future years.

Cabinet will make its final decision on the programs and functions to be discontinued over the course of the next two weeks.

I want to conclude by saying that we will achieve our budget targets.

We will fix the budget challenge.

It is a commitment we made to the people of Tasmania and we will repay their trust.
Peter Gutwein, Treasurer