Mr PALLAS (Tarneit) — Following on from my concerns about the operation of the Borrowing and Investment Powers Amendment Bill 2013, I restate my concerns about the manner in which the government is going about introducing this legislation and the practical effect it gives to the government, which is a capacity that will not be overseen by the Parliament, to increase the borrowing levels and therefore the level of state debt to two specific corporations, Melbourne Water and the State Electricity Corporation of Victoria (SECV). Many in this place have previously expressed concern about the level of state debt. One of those people is now the Premier, who on 29 May 2008 in the second-reading speech on the Appropriation (2008/2009) Bill, on page 2052 of Hansard said:

In 2002 the debt responsibilities of this government across all sectors totalled $3.5 billion.

Oh for the good old days!

By 2012 it will be $22 9 billion, close enough to $23 billion, and getting up to the levels of the Cain and Kirner era in the mid-1980s.

How wrong he was.

We have a massive debt. Worse still, it is an increasing debt — a debt spiral. On top of that the debt incurs interest payments.

From 2012 Victorians will be required to pay at least $1.8 billion each and every year in interest payments — and it is growing. That will cripple the capacity of the government of the day to deliver services to ordinary Victorians. That $1.8 billion will be spent on interest payments to overseas financiers rather than on improving our local roads, building new schools, opening hospital beds …

As a consequence of this government’s effective tripling of debt from the pre-election budget update in 2010 to the out years identified in the budget papers to 2015 from $8 billion to $25 billion — the tripling of debt identified in those arrangements — the debt repayment levels will go from $1.8 billion per annum to closer to $2.2 billion and will ultimately move up to $2.3 billion per annum at the debt’s peak under the projections of this government.

Debt reduction strategies of this government are seen for what they are — an abject failure. So great a failure are they that effectively they consign Victorians to underinvestment in infrastructure and a very transparent and obvious use of this legislation to avoid the scrutiny of this place when further debt is incurred, and I believe that is a matter that should be of grave concern to every member in this place.

The government is also trying to sneak the bill through.

We want to send it to the Economic Development and Infrastructure Committee because that committee can tell us what the implications will be to state debt and to the levels of accountability that the government itself saw as being particularly important. I recall that before the last election the government, then in opposition, made a very clear commitment to reduce state debt. I think its commitment was somewhat less overwhelming than that, and to be fair and to quote from its policy document — The Liberal-Nationals Coalition Plan For Better Financial Management — the great goal it was aiming towards was:

All of our service improvements will be delivered whilst maintaining an operating budget surplus of at least $100 million each year, without pushing up debt and without increasing taxes.

You could not see a more transparent falsity than the way this government has acted.

It has increased taxes at every possible opportunity and it has failed miserably in its so-called debt reduction strategies, which can only be viewed as a success if you look at them in reverse.

The Treasury Corporation of Victoria provides debt funding to government business enterprises. Melbourne Water and the SECV are the Treasury Corporation’s biggest customers. This bill is about the Treasurer taking sole control of the amount of debt that the state can sell to its two biggest customers — and most certainly in terms of the debt levels from Melbourne Water, it is an area where it is rapidly getting close to its debt threshold. This comes on top of the increase to dividends that the government is demanding and the removal of the cap on the financial accommodation levy. The government is trying to increase the amount of money it can draw from these bodies and increase the total amount of debt to the state.

The government spends so much time condemning debt that it is hard to reconcile that with its efforts to live up to its pre-election commitments. Simply to remove a process of accountability in respect of the management of debt is a matter that would be of great concern to each and every Victorian, but perhaps more so to the members of this place who take seriously their role of scrutinising the performance of government.

Through this legislation the government is proposing to remove the Parliament’s control over the debt that could be incurred — that is, to take away the break that constitutes the threshold over which further debt cannot be incurred without further parliamentary oversight and legislative amendment. Instead, the government wants to put it under the control of a Treasurer whose main concern is how to make some sections of the book look the way he wants. In effect that is simply a process of contrivance. We already see the level of debt being pushed further and further upwards by this debt-tripling government.

We already see a profound underinvestment in infrastructure, and that is acknowledged by no less an authority than the Public Accounts and Estimates Committee. We see a government that is trying to find ways to avoid its obligations of accountability that it waxed so lyrically about before the last election. There is no accountability or proper way for public corporations to be run by this Treasurer or indeed by this government.

This is one of the shorter bills the government has brought before Parliament, and I am sure the Treasurer was hoping it would pass quietly without debate or scrutiny. But we need to go back and look at what was said when the act which the bill amends, and the threshold attaching to it as it currently stands, were debated in this place. At that time the government of the day took the view that these safeguards were appropriate. Who was the Treasurer of the state at that time? It was the Honourable Alan Stockdale, who saw a role and a process for the state in terms of supervising and overseeing what constituted appropriate debt levels to be adhered to by those corporations.

It is counterintuitive that while Victoria’s debt continues to rise, the government is constantly boasting that it is delivering a surplus.

The government may be delivering an operating surplus, necessitating it having to plunder statutory authorities for dividends in order to do it — something that the previous Treasurer, the member for Scoresby, spent a lot of time complaining about when he was in opposition, but let us put all that aside. This government seems intent on increasing overall state debt, despite the fact that it keeps talking about reducing debt. The government has lifted state debt levels from 2.6 per cent, or $8 billion, in the general government sector, to $25 billion. That is an issue that should concern every Victorian, and it demonstrates beyond any shadow of a doubt that this government cannot manage money. It also demonstrates that this government cannot deliver services, because its policies and priorities are not so much askew as moribund. The government has nothing that constitutes a touchstone of policy commitment.

When the government is robbed of its one touchstone of economic accountability and credibility it becomes obvious that this government has no idea about its responsibilities in governing.

The Napthine government surplus, just like all of the Baillieu government’s surpluses, is a fraud. It is a surplus propped up by gouging state-owned companies that provide services to ordinary Victorians. The government has devised an arsenal of sneaky tricks to make the book look better: bleeding water authorities through dividends, taking money out of the Transport Accident Commission and upping the interest rates that it charges itself. With this bill the government is trying to cover its tracks even more. It is a sneaky bill that does very important things. It takes away from the Parliament the power to limit how much money Melbourne Water can borrow, and it gives it to the Treasurer.

Currently there is a law, contained in the act that this bill amends, that says Melbourne Water is not allowed to borrow more than $4 billion and therefore encumber the Victorian taxpayer. In 2011 Melbourne Water’s debt was sitting at $3.6 billion, which went up by $200 million in 2012. If this bill is passed, there will be nothing that this Parliament can do to stop Melbourne Water’s debt topping $4 billion next year, and the sky is the limit from there. The only brake on this government’s capacity to incur more and more debt through these authorities — which could become nothing more than shell organisations, to be assigned further and further debt — will rest with the Treasurer himself.

You could not think of a more unrepresentative and unaccountable process of governance. It is one that a former Liberal Treasurer of the state, Alan Stockdale, would no doubt be quite concerned about, given his comments in this chamber when he put measures in place in regard to a threshold for debt levels. If this bill is passed, there will be no parliamentary safeguard.

The fact that this debt does not impact on the government’s operating surplus does not mean that it will not have huge implications. Those implications go to debt and the capacity to service debt.

In that respect we should remember the observations of the Auditor-General when he looked at these issues and the capacity of the state to deal with its debt repayment capacity. On page 15 of his midyear update, entitled Auditor-General’s Report on the Annual Financial Report of the State of Victoria, 2011-12, the Auditor-General said:

The state’s ability to service debt declined sharply in 2011-12 as debt continued to grow faster than GSP.

The state’s debt increased by 31.9 per cent to $73 388.5 million at 30 June 2012 … Over the same period GSP increased by only 2.3 per cent.

This is the Auditor-General saying that under this government’s watch, well into its second budget, state debt had increased by 31.9 per cent — and that is a gross figure — and then the gross state product increased by 2.3 per cent. That is a debt reduction strategy. The Auditor-General went on to observe that this means that the state’s debt is growing at a much faster rate than economic output. The result is a reduced — —

Mr Watt — On a point of order, Deputy Speaker, the member is clearly not speaking on the bill. The bill is about Melbourne Water Corporation and the State Electricity Commission of Victoria and is not about total state debt. It is specifically about debt for Melbourne Water Corporation and removing a $4 billion limit, and this has been brought about because of the desalination plant.

The DEPUTY SPEAKER — Order! Unfortunately I have not been in the chair long enough to know what the member was speaking about, but I ask him to speak on the bill.

Mr PALLAS — A fundamental part of this bill goes to the level of state debt, because the bill provides a facility for state debt to be increased without the scrutiny of this Parliament. That is the fundamental point.

The capacity of the state of Victoria to service its debt is not only fundamental to this bill but fundamental to the work that we do in this place in terms of administering an effective economy and ensuring a budget is capable of delivering for all Victorians. I will continue to speak in the context of that issue.

Mr Wynne — It is called ‘borrowings’.

Mr PALLAS — It is called ‘borrowings’, yes.

By providing the capacity for that debt facility to be increased beyond what the legislation currently sets out, the government has made it clear that it has an agenda to bypass the scrutiny and assessment of this Parliament in terms of what level of state liabilities is being incurred.

If those opposite think it is clever to outsource all responsibility for the government’s economic management to the executive and for the Parliament to have no responsibility in this process, then no doubt they will love this bill. However, it is a bill that anybody who believes in good governance will see as nothing more than a tawdry effort by this government to provide greater power to the executive — unaccountable power — and power that the former Liberal Treasurer of this state saw as inappropriate at the time those debt facilities were set at the level that they were.

For my part, I believe the Economic Development and Infrastructure Committee needs to look at these issues and form a view, because as the now Premier said in May 2008, the repayment of ever-increasing debt can cripple the capacity of the government of the day, and that goes very much to the heart of what this bill seeks to do. Nothing could be more front and centre of this bill.

The original point of the guidelines that were incorporated into the legislation, as described by the Treasurer at the time, Alan Stockdale, was ‘to ensure that guarantees and indemnities are given only for the purposes of the act and that applications are assessed in a prudent and responsible manner’. Those are his words. Those were the processes that the Liberal Treasurer of the day saw as being appropriate.

The mechanisms proposed in this bill go further than simply extending the borrowing limits — that is, the debt of the relevant authority. The bill removes the right of the Parliament to set the borrowing limits and places that power in the hands of the Treasurer. By removing the Parliament from the oversight of this process, the government is basically signalling a shift to greater executive responsibility and ultimately its culpability if debt in these agencies is not properly managed.

If that is the judgement of those assembled, they can make no excuses if the state’s debt continues to burgeon, as it is, on the projections of these arrangements.

If the bill passes this Parliament, the Parliament will be relinquishing one of its powers of control over debt — a power it has had for over 25 years. Then it will be up to a Treasurer who cannot be trusted to tell us exactly what is happening in terms of the economy to determine the borrowing limits for Melbourne Water, and for that matter the SECV, an organisation whose debt levels are modest, certainly by comparison to those of Melbourne Water. One has to ask why on earth a shell organisation needs an unconstrained capacity to borrow. It has limited liability at the moment, but it will now have an unconstrained capacity. We will be looking closely at what plans the government has in respect of this institution in the future.

The government is trying to sneak this bill through, but we will seek to refer it to the Economic Development and Infrastructure Committee so that this important change can be explored fully before it is implemented. Before we take the power over debt away from this Parliament and give it to the Treasurer we would like to know more, and we think such a process is right.

We know the government has been bleeding the public non-financial corporations (PNFCs) dry. It has been demanding increased dividends from water authorities, doubling the amount it took from 2011 to 2012. In this financial year it also removed the financial accommodation levy cap. These two changes, in combination with the removal of the cap on debt, means that the government can massively increase the amount of money that it takes from PNFCs and put it into general government funds. The government is already bleeding Melbourne Water dry through tax increases and by demanding higher water dividends. This is sneaky budget management.

Even though this budget is in surplus, it is a surplus built on foundations of sand. Victoria’s debt keeps rising on this government’s watch through this government’s choices and decisions, and Victorians are seeing a continuing erosion in services and an underinvestment in infrastructure. The Treasurer has basically been caught trying to prop up his phoney surplus, but you cannot trust this government, and members should not trust this government by passing this bill, which will effectively give the government an unconstrained capacity to increase the debt facility of these organisations.

This is about removing the power of oversight from this Parliament — this from a government that has so transparently failed in its budget management responsibilities. The Public Accounts and Estimates Committee report on the 2013-14 budget estimates tabled today confirmed that net debt is set to rise to over $25 billion over the next two years, from the current level of $19.8 billion.

We know that those debt projections are far in excess of the debt projections identified at the time of the 2010 pre-election budget update. This represents a tripling of debt from the 2010 pre-election budget update. This sort of sneaky bookkeeping and sinister tricks are aimed at trying to find ways by which the government can prop up its budgetary position.

It would augur very badly for this Parliament if we passed the bill without any assessment of the implications of it for the state’s economy and our capacity to service debt, a matter that, I might add, was of great concern to the Premier when he was simply the member for South-West Coast. We can see that regarding these issues the state is in desperate need of proper oversight. With this bill the Treasurer is seeking to further remove oversight of the budget tricks he and the former Treasurer have been employing, as well as increasing debt, which he is effectively putting on the back of each and every Victorian.

This bill lacks merit, accountability and transparency, and ultimately it will cost Victorians dearly.

See Tim’s speech in Hansard here.