Government's Pea And Thimble Trick On The Defence Budget

Chris Evans - Shadow Minister for Primary Industries and Resources

Media Statement - 13 May 2002

The Howard Government has failed to fully deliver on its commitment to fund the White Paper and does not appear to have spent what money Defence was allocated in 2001-02.

The Government is trying the old pea and thimble trick, hoping to con the public into thinking it has spent $507m when only $246m has been allocated for the White Paper in 2001-02.

The $246m that was allocated appears to have just been added to the Defence bank account and remains unspent, rather being used to build the future capability of the Defence Forces as intended.

The Howard Government has broken its commitment to invest in the future capability of our Defence Forces.

The Minister this morning repeated the spurious claim that Defence needs hundreds of millions of dollars in cash to pay its weekly debts. This is despite the fact that in 2000-01 Defence held just $58m in cash at the end of the year.

The Budget papers set out the annual cash flows within the Department; they are not week-by-week accounts. According to the Government's figures through 2001-02 Defence received $255m in cash that was not spent and remained in the bank at the end of the year.

The Budget papers confirm that this money remains unspent in future years and actually grows to almost $600m by 2004-05. That is $600m in cash sitting in Defence's bank account.

The Minister then tried to say that Defence's budget was unpredictable when compared to other Department's, yet the single biggest cost item is $5.6 billion for employee costs, which are entirely predictable.

The Department of Family and Community Services (FaCS), which administers $56 billion of income support payments, will have just $4 million in cash at the end of 2001-02. FaCS administers payments to millions of recipients, with each payment subject to an income test and possible variation every fortnight.

Similarly the Department of Health, which administers $29 billion, will have cash of $45m at the end of 2001-02. It would be difficult to argue that the Health budget is any less uncertain than that of Defence in light of the UMP crisis.

See attached explanation of the shortfall.

While Defence funding for 2001-02 has increased significantly since the White Paper was released in December 2000, most of the additional funding is for unrelated items, including supplementation for the drop in the Australian dollar ($441m), new operations ($339m) and increased security post September 11 ($68m).

White Paper funding

The Budget paper released just prior to the White Paper projected that the total income for the Department in 2001-02 would be $17,933m.

The latest Budget paper, released in February this year, has the total income for Defence in 2001-02 at $19,070m.

This brings the net difference between the pre-White Paper projection and the latest estimate to $1137m.

The Government's own Budget papers set out exactly what this additional funding in 2001-02 is for (see page 78 in 2001-02 Portfolio Budget Statement and pages 52-53 in 2001-02 Portfolio Additional Statement):

Initiatives announced in the 2001-02 Budget	Impact on original projection
Foreign exchange movements and price growth not in original projection - due to collapse of the Australia $	+$441m
Contribution to war on terrorism and operation to deter unauthorised boat arrivals	+$339m
Increased domestic security post September 11	+$68m
Net yearly adjustments between 2000-01 and 2001-02	+$167m
Savings from East Timor retained by Defence	+$100m
Total of other small adjustments	+$75m
Delayed capital projects	-$60m
Reduction to capital use charge - notional return to Government	-$239m
TOTAL	+$891m
Net difference between original projection and current budget	+$1137m

According to the Government's own Budget papers an additional $891m has been provided in relation to the above initiatives, leaving just $246m in additional funding.

Yet the Government claimed that in addition to all the above items it also committed $507m for the implementation of the White Paper.

That leaves the Government short by $261m in its commitment to the White Paper in 2001-02.