Cutting Public Service won't reduce government spending

The Sydney Morning Herald's economics editor Ross Gittins has written a scathing opinion piece on the Government's brutal cuts to the public sector. 

Gittens says: "This year's budget does little to reduce government spending and has trouble even in sticking to the Coalition's resolve to ensure all new spending (of which there's always a fair bit) is offset by spending cuts.

But when you've been playing that game for years, the departments adapt, learning that their inefficiencies are valuable currency, not to be offered up except in return for some exciting new program.

It's a similar story with the ironically named "efficiency dividend" imposed on government departments and agencies, which is to be ramped up for a further three years, saving $1.4 billion on top of the normal "dividend".

Truth is that, contrary to popular impression, the cost of public sector wages, paperclips and so forth is such a tiny proportion of total federal (as opposed to state) spending that no amount of "efficiency dividends" could make a noticeable difference to the deficit."

But that's not to deny that yet further penny-pinching will worsen public service efficiency. The cuts have gone on for so long that "efficiency dividend" is now a euphemism for further compulsory redundancies."

But as Gitten's points out: "The people who get the bullet tend to be those who could help their department and the government formulate better policies – not to mention the long-gone people in Treasury and Finance who knew where the real inefficiencies are still buried.

The point is that when you see a government resorting to yet another round of indiscriminate, no-brainer cost cutting you realise it isn't fair dinkum about "reducing spending growth".

Another sign of unthinking half-heartedness is when – as in this budget – you see the pollies taking the path of least resistance: picking on only those interest groups that lack political clout and public sympathy.

Such as? Well, public servants, for openers. We could cut the funding and staff of the Australian Securities and Investments Commission (until the opposition demands a royal commission into bank misbehaviour) and the Tax Office (until the punters get wind of how little tax the big multinationals are paying).

But also the unemployed, sole parents, overseas aid (with a budget deficit we can't afford to give money to poor foreigners, though we can afford to give tax cuts to rich foreign shareholders), legal aid and domestic violence (until Rosie Batty caught up with us).

Point is, if screwing the politically defenceless is the best you can do to control government spending you're never going to make it. They don't have enough to cut."

http://www.smh.com.au/business/comment-and-analysis/how-not-to-reduce-government-spending-20160528-gp639z.html#ixzz4ABlgFfAv 


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