The 2014 Victorian Budget was announced last week. Like its Commonwealth counterpart, both budgets have been preceded by extensive pre-release of information, and much speculation. In the lead up to Treasurer Joe Hockey's announcement of the national budget, Denis Fitzgerald (Executive Director, Catholic Social Services Victoria) takes stock of what is happening in Victoria:
State and Territory budgets in Australia have a significant impact on community wellbeing, but they tend to get drowned out by their larger Commonwealth counterpart.
The nature of the activities funded at each level is a factor in this - all households are directly affected by the big ticket Commonwealth items of income tax, pensions, superannuation, health and aged care funding. The national focus of much of our media also tends to emphasise these national programs.
Another reason for the focus on Commonwealth matters is the amounts involved – more than two thirds of general Government expenditure in Australia is made by the Commonwealth. Victorian Government expenditure is equivalent to around one sixth (13%) of Commonwealth outlays. The addition of tax expenditures exacerbates this imbalance – Victoria’s $5bn is equal to only 4% of the $120bn incurred at the Commonwealth level.
But state budgets are important to all Australians.
The way they raise funds and the way they spend them has a very significant impact on our society, and the wellbeing of many of our citizens.
In areas as important to the common good as housing and community development, transport and communications, public safety and education, expenditure in the Victorian budget are larger than Victoria’s share of commonwealth activity. The states levy most of the taxes on land, on gambling and on payroll – each of these areas has implications for society as a whole.
Most budget allocations change only gradually, so the focus at budget time is on the changes from year to year. The annual budget tells us a lot about the priorities of a Government. The nature of public finance in Australia means that most changes will be incremental, even when that is not sufficient to adequately address an issue. As a broad generalisation, the areas that receive additional funding are those that the Government considers important.
The recent Victorian budget focused on transport investment, but missed an opportunity to focus on the needs of those on the margins of our prospering society. An opportunity to redress this balance will be in the run-up to the November 2014 general election.
Investment programs dominate budget headlines
In its 6 May budget, the Victorian Government has allocated significant investment capital in transport infrastructure projects - $27 billion in total, to be financed in various ways, and to be developed over a number of years. This dominated media coverage of the budget.
This transport investment raises many issues: about competing transport priorities, effective consultation on the detail of the proposals; the role of private sector capital; etc. But, in general, additional transport capacity can be expected to be well received by the community, and many of the proposals will benefit public transport users, road freight operators and residents in traffic-clogged areas.
Transport and communications account for 80% of total budget investment, and 92% of newly announced projects.
The other side of this coin is that human capital and social infrastructure did not rank as highly.
Health was the next largest investment area, with projects announced or underway worth $2.2 billion. Largely hospital upgrades spread across Victoria are valued by local communities. So too are the $500 million in education projects – largely new schools – that were announced.
The justice sector is surprisingly prominent. Current and announced investment there amounts to $1.1 billion, equal to 4% of total investment. This raises very serious questions, which are taken up below.
Up to $1.7 billion in capital expenditure over the coming four years was provided for but has not yet been allocated. The budget priorities indicate that these funds will not go to housing.
Recurrent expenditure presents a better balance
There is some good news for more vulnerable Victorians, in that budget allocations for service delivery – the majority of budget outlays - have not been squeezed as much as had been feared by some.
Some Human Services programs received welcome funding increases that went beyond provision for inflation and population growth: mental health increase 3.7% in real terms; disability services 2.1%; child protection 2.6%; school education 0.9%. These are welcomed. VCOSS continues to do a great job in adding to budget transparency by calculating these real effective change measures. Even where these increases do not provide for the level of service that has been identified as needed to meet the standards that we have set ourselves as a society (such as in disability and child protection), they are moving in the right direction.
By contrast, there were important areas that went backwards in real terms: community and related health reduced by 6.9% in real terms; early childhood programs by 6.2%, housing assistance 6.9% and higher education and skills 8.8%
Primary, community and dental health-6.9%
Higher education and skills-8.8%
Within each of these headings there are complex programs.
For example, although public housing barely gets a mention in investment terms, and recurrent programs are down, housing and homelessness advocates have welcomed the budget commitment to continuing existing recurrent programs; and also the funding of a third ‘Youth Foyer’, to operate in Shepparton. At the same time, the lack of investment in this sector requires continued focus. There are around 85,000 social housing units in Victoria, and a waiting list of more than 34,000 families. Without further investment, these families are very unlikely to achieve the safe, secure and affordable housing that is necessary for their flourishing. This offers little hope to the 22,000 people homeless on any given night in Victoria, including more than 5,000 children.
All of these are all programs address disadvantage and help build productive lives. In their absence, the benefits of our continued economic growth will continue to accrue disproportionately to those who are already better off.
Prison expenditure is misguided
Very large increases in recurrent outlays for prisons services and community corrections also reflect negative developments for many who are already marginalised within our relatively wealthy Victoria.
Budget outlays for corrections programs increase by a massive 23%, to $1.1 billion. The budget papers indicate that average daily prisoner numbers are expected to increase to between 6,480 and 6,985 (equivalent to 10% and 18% increases) over the coming year, and that the average number of people under community corrections supervision will increase by 385 to 7,708, or 5%. All of this would be on top of an increase in prison numbers of 20% over the past 18 months.
Even more worrying is that the data in the budget papers seems inadequate. Last year’s budget underestimated the increase in prisoner numbers - the upper estimate then was more than 10% below what actually happened. And the estimated increase over the coming year in prisoner numbers and in community corrections offenders, totalling a maximum of 1,466, is equivalent to less than one third of the 5,000 annual suspended sentences that will no longer be an option to courts for any offences committed after 1 September 2014.
In an environment where most crime rates are falling, this represents a major blind spot for our political leadership. Increased funding for prisons, in keeping with climbing recidivism and pressure on social programs generally, is not the way to build a safer Victoria. As Julie Edwards of Jesuit Social Services expressed it in her comment on this budget: "If we want to create a safer community with less crime we must invest in programs that target the root causes of crime. This includes education, health and family services, as well as crime prevention and diversion programs in the criminal justice system."
A word on tax expenditures
Tax concessions are the benefits that are gained by granting reductions from normal taxation treatment by way of exemptions, reduced rates, thresholds etc. Tax concessions in the Victorian Budget total $4.90bn, a significant 13% increase over last year’s estimate. They would add a further 9.3% of the $52.9bn total revenue for the General Government Sector.
While 25% of these concessions accrue to charities, hospitals, sporting clubs and the like, the biggest single beneficiaries are that 70% of Victorian households that are home owners - $1.4bn is the cost of the land tax exemption for a principle place of residence. $73 million accrues to gambling clubs.
What a difference these amounts would make where it has been demonstrated that vulnerable Victorians would benefit from additional program outlays, including out of home care; drug rehabilitation; disability care; public housing; and early childhood programs.
Victorians go to the polls on Saturday 29 November this year. This presents a further opportunity for the voters and political parties to re-balance their commitment to the more vulnerable Victorians, in the interests of the community as a whole.
Posted by Pauline McLoughlin