KEY POINTS:
Nasty surprises for incoming prime ministers were meant to be eliminated by Ruth Richardson's 1994 Fiscal Responsibility Act. The legislation obliged Governments to throw open the books before an election, exposing the Treasury's best estimates and forecasts. The praiseworthiness of such transparency was quickly recognised at home and
abroad. But, unfortunately, the law's good intention has not been accompanied by scrupulous observance of its spirit and thrust. The latest transgressor is Labour's ACC spokesman, David Parker, who insists former Cabinet ministers were not obliged to reveal a $1 billion hole in the Accident Compensation Corporation budget before the election.
Mr Parker was responding to the ministerial inquiry ordered by Prime Minister John Key after ACC officials told him that the corporation needed a $297 million injection this financial year and similar amounts in the next two years to cover cost blow-outs and poor projections.
Mr Key said the previous Government knew about the shortfall, and it should have been disclosed in the Treasury's pre-election fiscal update. Officials had flagged concerns with former ACC Minister Maryan Street as far back as May, he said, while at first advising her not to disclose the problem because they were not certain of the cost.
Mr Parker, for his part, said Maryan Street denied knowing details of the shortfall until October, when she immediately told the Finance Minister at the time, Michael Cullen, and the Treasury. That happened after the Treasury had prepared its pre-election fiscal update. While this meant no specifics of the ACC's problem could be included in that document, Mr Parker did not explain why these could not have been revealed to the public once they were known.
This, of course, should have been the case. The spirit of the fiscal responsibility law demands as much. An addendum could have been attached to the pre-election update or a public statement about the ACC budget released. Even before then, a fiscal risk flag could have been placed on the pre-election update, as is customary for unquantified sums in pre-Budget documents.
Openness was particularly desirable given the worsening economic climate. The incoming government was braced for deteriorating Budget deficits. Life would be tough enough without a billion-dollar shock.
And if, as Mr Parker suggested, the problem in ACC's non-earners account was minor because it equated to only 6 per cent of the corporation's budget, it could surely have been explained as such by Maryan Street without occasioning great alarm.
Of course, it suits an incoming government to make great play of any inherited shock.
Mr Parker need only cast his mind back to 1999 when Dr Cullen found "radioactive skeletons in the cupboard". The outgoing government had, he said, indulged in "unrealistic and unsustainable" spending reductions, which meant $200 million would have to be trimmed from planned spending in his first Budget.
Dr Cullen was seeking to dampen expectations of spending largesse. In far more difficult circumstances, the Key Government might want to do the same. But even if it is seeking to extract every ounce of advantage from the ACC's woes, that does not excuse the crude politicking inherent in the previous Government's decision to keep the shortfall under wraps, or the lame explanation now offered by Mr Parker.
The fiscal responsibility law has succeeded in implanting a much-needed discipline on spending. Yet nasty surprises seem forever to be part of the landscape. Removing them would, it seems, require a wholesale change of the political mindset.