The Gunner Government: A collision between Budget misuse and democratic responsibilities – Part III

by | Jun 26, 2020 | Opinion | 0 comments

This is part three of a five part presentation of an essay by Dr Don Fuller looking at the characteristics of good government including the principles of transparency and accountability and how the five core attributes of good government make for the foundation of strong economic and community development. Dr Fuller then uses these characteristics to evaluate the Gunner Government, which swept to power in 2016 and famously tabled a document to Parliament entitled, Restoring Integrity to Government– Trust and Integrity Reform Discussion Paper.

Northern Territory Independent Commissioner Against Corruption 

As discussed earlier amid increasing concerns about Government accountability and transparency the Northern Territory Independent Commissioner against Corruption (ICAC) was established on November, 2018.

Within a relatively short time, this office itself was involved in accusations of bias and incorrect process.

Commissioner Ken Fleming QC stepped down from his role overseeing the investigation into the police shooting death of Indigenous teenager Kumanjayi Walker.

Fleming had faced criticism that he could not approach the investigation impartially after saying at a protest rally in Alice Springs: “One of the most important messages today is ‘Black Lives Matter’. Anybody who says contrary to that is guilty of corrupt behaviour.”

Fleming released a statement soon after, saying he had informed the NT’s Chief Minister of his decision to exclude himself from the investigation, out of a concern over an apprehension of bias.

Many were left wondering why Fleming had been allowed by the Chief Minister to accompany him to Alice Springs in response to the incident.

Many were left asking whether the Chief Minister had a sufficient understanding of the role required by an independent head of the NT ICAC.

In a relatively short time after this event ICAC reported that whistleblowers faced reprisals in NT Government workplaces.

“It has been suggested to me that some agency staff are reluctant to refer matters to the ICAC because of fear of reprisal despite the statutory requirements to do so,” wrote Bruce McClintock, the inspector of the ICAC, in a preliminary report, the ABC reported.

“If that is the case it is highly regrettable, and action should be considered by way of amendment to strengthen whistleblower protection.

“If, as the [NT ICAC] general manager [Matthew Grant] has informed me, 16 out of 16 whistleblowers have had reprisals taken against them, it is extremely disturbing.”

The report said ICAC had received 318 reports of alleged “improper conduct, corrupt conduct, misconduct, unsatisfactory conduct and breach of public trust” by August 2019.

Mr McClintock’s report said 114 had been assessed, with 22 of these being “passed for investigation”

As a result the Commissioner flagged new guidelines for NT Government agencies. There was also a call for Government managers to be at the forefront of substantial change needed to improve accountability and transparency responsibilities.

This suggests little had been achieved by the Gunner government in building an ethical, professional, responsible culture within the departments and agencies they were responsible for.

To this end, it is vital that Government leadership at the highest level demonstrate their commitment to cultural change and show that they place the concepts of accountability and transparency to the community at a very high level of priority.

Where there has been an apparent disdain and dislike of such responsibilities at the highest level of Government leadership it is not likely that more junior members of staff will take these matters seriously. Many are worried that this has been, and continues to remain, a major problem for Government in the Territory.

It has also been reported in this context that serious allegations of ‘real corruption’ within the NT public service have been reported to ICAC. Speaking to ABC Darwin the NT’s first ICAC Commissioner said he hoped to launch broad investigations into some of the ‘really concerning’ allegations, made through the ICAC website, as early as possible.   

Mr Fleming believed it would quickly become clear that his office was under-resourced.

However, Northern Territory Treasurer Nicole Manison would not commit to providing more resources for the new anti-corruption body.

The A collision between Budget misuse and democratic responsibilities essay

Last month a leading national anti-corruption expert said an NT Supreme Court decision to force the ICAC to reveal a whistleblower’s identity would have a “chilling effect” on future disclosers looking to expose corruption.

Justice Stephen Southwood ruled earlier in May a whistleblower who had submitted evidence relating to an alleged historical rape in the NT Police Force should be named and their report handed over to the accused’s counsel.

The whistleblower will now also be subject to being called as a witness in the high-profile trial of former assistant police commissioner Peter Bravos.

Lawyers for the ICAC unsuccessfully argued that revealing the identity of a whistleblower could deter others from coming forward with information.

The whistleblower sent the report to what was then called the Public Interests Disclosure (PID) commissioner in 2015, which the ICAC has since replaced. 

Professor AJ Brown, a leading corruption and integrity expert with Griffith University, told the NT Independent that the NT Supreme Court decision would have consequences for future confidential disclosures in the Territory.

Continuing major problems of Budget management

By end November, 2018, commentators were pointing to a ‘grim outlook’ for the Territory Budget with the annual deficit expected to surpass $1.5 billion.

In delivering the mid-year financial report to Parliament the Treasurer pointed to large cost blow-outs of more than $350 million in unbudgeted spending and operational expenses.

Ms Manison justified the additional un-budgeted expenditure on the basis that it was necessary to keep people employed in the construction industry.

However, the Treasurer seemed unaware of the impact such a budget was likely to have on wider business confidence and private investment, in particular.

This was even though the report highlighted a steep decline in private investment in the Territory. While this was due to the completion of the Inpex project, it was also noteworthy that private investment was down a further 15 per cent from earlier projections.

Rather than consider the need to reduce very high levels of expenditure, particularly in unbudgeted, unplanned areas, Ms Manison attempted to deflect the blame on to the Commonwealth.

“No Government has ever experienced the unprecedented reductions in GST that we have seen in the last two years,” she said. “You can see the changes we’ve had with the GST … is having a big impact.”

A plan for NT Budget repair and management

In November 2018, the NT Government established the Fiscal Strategy Panel, chaired by John Langoulant, a highly experienced, senior Government Treasury official – former WA under-treasurer- to provide an independent assessment of the NT’s fiscal outlook and develop a plan for Budget repair.

The Gunner ministry appeared to have a limited set of ideas on how this should be done.

The interim report released on December 14, 2018, confirmed that the Territory faced serious financial challenges and was in the unsustainable position of borrowing to fund recurrent activities and interest costs.

While the report acknowledged a reduction in the Territory’s GST revenue was an important reason for the financial position, importantly, the report also criticised the Gunner Government for maintaining a culture of persistently exceeding approved budget targets due to unbudgeted and unplanned expenditure.

Langalount pointed out that the effectiveness of his recommendations would be heavily influenced by the Government’s ability to change this culture and follow the expenditure decisions actually approved in the budget.

To improve the integrity of the budget process, he was forced to recommend that the Territory Government adopt a ‘charter of budget discipline’ that, barring exceptional circumstances, would limit funding decisions to the annual budget development process.

This shows Langalount’s concern about whether the Gunner Government had the required competence to manage the Budget, without setting out clear rules and directions for them to follow.

More opinion by Dr Fuller

Inability to properly manage a Budget cuts at the heart of a Government’s responsibility to deliver efficient and effective essential services to the Territory community – including health, education and law and order. It therefore directly undermines the trust necessary to ensure proper government of the people who have transferred their governing rights to the elected representatives of Government. 

The Langalount interim report also provided the basis for community input to assist in the development of the plan for budget repair. Several dominant themes emerged from this community input. These included:

  • the economy is struggling and businesses are closing, particularly in the Greater Darwin region
  • business confidence is low and new projects are not imminent
  • attracting private investment is crucial to generating jobs, population growth and economic activity
  • red, green and beige tape is creating uncertainty and is deterring private investment
  • continuing Government stimulus is not sustainable
  • public sector wages and entitlements are generous compared with the local private sector making it difficult for the private and community sectors to compete
  • significant reform and productivity increases across the public service are needed

While these are all valuable indicators of why the Gunner Government is in dire financial difficulty, such valuable input has not been acted upon in any coherent manner.

This suggests an inability to deal with the complex challenges associated with economic and community development in the Territory.

In addition, Langalount set out the following recommendations. Such recommendations are disturbing as they indicate just how far good governance and sound budget management has fallen in the Northern Territory.

They include the need to rapidly reform in three main areas.

  • economic reforms to stimulate private investment
  • fiscal strategy reforms to reset Government’s fiscal objectives towards budget repair
  • whole of Government structural reforms to support the new fiscal strategy, including–increasing financial accountability and transparency.

Langalount indicated that rapidly improving financial accountability and transparency should be the first goal and highest priority for the Gunner Government.

The fact that Langalount needed to emphasise that the Gunner Government focus as a matter of priority on the key areas of financial accountability and transparency, suggests that these important requirements have not been given the attention required.  

Deficient understanding of the importance of accountability and transparency, particularly related to financial decision making shakes the foundations of a democratic state.

Such governance practices are more reminiscent of those commonly found within authoritarian states. These states are characterized by non-existent to very low-levels of budget accountability and transparency and very low levels of community involvement in government decision making.

By December, 2018, it was widely recognised that the Northern Territory was in “the throes of a financial crisis, with no immediate plan for fixing the deep fiscal problems.”

While an excellent final plan was put in place by Langalount, the main question was whether the Gunner Government had the discipline and competence to stick to this plan.

With the Territory Government now in financial crisis, Treasurer Manison was forced to fly to Canberra, ‘cap in hand’, for emergency meetings with Federal Treasurer Josh Frydenberg.

NT Government finances had deteriorated to such an extent that the Government was borrowing and increasing debt, to cover day-to-day operating costs, such as the wages of public servants and interest on previous borrowings. The Territory’s net debt was escalating rapidly from $1.7 billion in 2016, when Labor was elected, to around $3 billion two years later. It was estimated that the Territory’s net debt was projected to increase tenfold from $3 billion in 2017-18 to $35.7 billion in 2029-30.

The Territory’s fiscal woes are not good for business confidence, according to the NT Chamber of Commerce, who lambasted the Government’s “willy nilly” spending.

“There doesn’t appear to be too much in their plan. It’s go to Canberra, cap in hand to ask for a further handout,” Chief Executive Greg Bicknell said.

“And what people I think would really like to see is the Northern Territory doing its bit to pull its weight in terms of these expenditure overruns.”

Charles Darwin University Associate Professor of economics Ram Vemuri said the Labor Government was not prepared to fundamentally change the way it did business, and warned of a “backlash”.

“The Government must change their whole approach to economic management — you can’t just do cosmetic changes,” he said.

“People are saying what has the thunderous [majority] of Labor actually done for the Territory economy?

“And the answer is very, very minimal. There’s been a lot of talk but they’ve been ignoring the warning signs for a long time.”

In May this year, the Gunner Government quietly dropped a budget reform progress update on a Thursday night that showed major recommendations of the Budget Repair report were not being met.

Of 74 recommendations made in the Langoulant report, 25 have been completed, according to the status update for the March 2020 quarter. A further 39 are counted as underway, three “nearly completed” and seven not yet started.

Actual financial figures were not included and the government also declined to comment on the report.

The “fix the budget” status update was prepared before the coronavirus pandemic halted the Territory’s economy, raising questions of where the reforms currently sit with a delayed budget not expected until after the August election.

Among the items not yet completed is setting clear and strict guidelines over the use of Treasurer’s Advances which were found to have resulted in perennial budget blow-outs and questionable spending, including last year when the Turf Club was awarded $12 million in unbudgeted money for its grandstand.

The Gunner sacking of Minister Vowles, and Collins and McConnell

In an attempt to heighten the critical importance of controlling budgetary expenditure and what they saw as a Government financial system spiralling out of control three brave Government members, Aboriginal Affairs and Resources Ken Vowles, Assistant Minister Jeff Collins and backbencher Scott McConnell, decided to state their well-justified concerns to the public.

They had previously attempted to make their concerns known to both the Labor Caucus and to senior members of the Gunner Government, with little effect.

Each of these three previous members of the Labor Government were concerned that Territory finances were rapidly becoming unsustainable after years of dysfunction and mismanagement and that, as a result, the Gunner Government was leading the Territory towards insolvency.

However, such obvious, natural, responsible and ethical concerns for the Territory and its people were not to be tolerated by the Gunner Government’s approach. All three were forced on to the cross benches and out of the Labor party. This of course, also says much about the lack of accountability and transparency on very important financial matters displayed by the Gunner Government.

At a press conference following his sacking Mr Vowles said the move was “an absolute bloody disgrace”.

“This is a sad day for politics,” he said.

“We were elected to govern for the Northern Territory, not for ourselves.”

“I have stood up many times for 18 months about the budget situation and nothing has improved.”

“We saw the Mid Year Economic and Fiscal Outlook. We have spent $354 million more than we thought we would.”

“This is a disgrace. Territorians should be asking us what is your plan for the future.”

Mr Collins said he received the news via a phone call earlier in the afternoon.

“The Chief Minister moved a motion that the former primary industries minister Ken Vowles, myself and Scott McConnell be excluded from Caucus for the rest of the term,” Mr Collins told the ABC.

“That motion was voted on before there was any debate or any chance to have a say, so yeah.”

It followed a series of emails where Mr Vowles told colleagues “the community has clearly lost faith in us.”

“Colleagues, our budget situation is dire — our debt level is ridiculous for our population,” Mr Vowles wrote.

“We need to re-evaluate every announcement, every commitment, because we need to make the hard decisions for the future of the Territory, not decisions to enhance our re-election prospects.

“The community have clearly lost faith in us and in our ability to manage the Territory and our budget for them.”

Terry Mills said Mr Gunner’s position was now untenable.

“This is the beginning of the end for the Gunner Government, resorting to throwing team members under the bus when really we’re headed for a serious crisis,” Mr Mills said.

“And the question is: does the Territory possess the political capital to face the challenge that is bearing down on us?”

Significantly a senior MLA had been forced to confront just whether or not the Territory had the competence in government to continue as a self-governing jurisdiction as it had from 1978. Presumably the alternative was to place the Territory once again under Commonwealth administration and control.  

This was a question directed at the very governance foundations of the Territory caused essentially by an assessment of persistent financial mismanagement by Government.

In this context it is important to acknowledge that the first Chief Minister of the Territory, Paul Everingham had also questioned some years ago, whether the Territory was able to govern itself and whether it may be preferable if the Territory placed itself once again under Commonwealth control.

This is a striking example of what can eventuate in the Territory as a result of a lack of understanding of the main principles of governance and the importance of professional and competent Budget management, in particular.

In the first sitting day for 2019 now independent MLA Jeff Collins delivered a stinging rebuke of his Labor colleagues, saying he has been “crucified” by “career assassins” in the party for daring to offer an opinion.

It came as exiled Labor backbencher Scott McConnell sided with the Country Liberal Party members and other independents by signing a statement to call on the NT Government to “recognise the gravity of the financial crisis facing the Territory and take … action.”

Mr Collins was heavily critical of the processes used by the Chief Minister to expel him and his colleagues from Caucus. Mr Gunner, he said, had no understanding of due process.

“Chief Minister, you wouldn’t recognise fairness and due process if it walked up and slapped you in the face,” he said, adding that invoking “Labor party standards” as the reason for sacking him was disingenuous.

“Every time you do so you make a mockery of Labor values and I’m fairly confident you wouldn’t recognise Labor values if they stood in line and waited their turn behind fairness and due process.”

He added he was expelled from the party for “having the audacity to have an opinion.”

Mr Collins said given that he was locked out of Government offices and was ex-communicated by the party, he could no longer effectively represent his constituents as a Labor member.

“It was an improper, in fact illegal, fetter on my role and my responsibilities as a member of this assembly,” he said.

“I came to the difficult and personally painful conclusion the only course of action for me was to resign my membership and to continue to represent the people of Fong Lim as an independent.”

Mr Collins became emotional when he spoke of the impact his expulsion had on his two young daughters.

“It’s disturbing as a parent to watch how they react to these stresses,” he said.

“They have watched their father interrupt a career as a senior lawyer to come to this place to try to do something good.”

“As young as they are, they each have a well-developed sense of social justice, of what is right and what is wrong.”

Fellow exiled Labor MLA Scott McConnell also delivered a speech in which he criticised his colleagues for subverting democracy by sacking him for voicing his concerns. He was most critical of the Chief Minister for attacking “how democracy is supposed to work”.

Mr McConnell also joined the Parliament’s independents and Opposition members to sign a statement calling for the NT Government to better address the region’s “fiscal crisis”.

It marked the first time Mr McConnell has publicly made a move alongside NT independents since his sacking.

“The fiscal situation currently facing the Northern Territory is unprecedented and threatens the livelihood, security and freedom of each and every Territorian,” the statement read.

As a result of escalating concerns Independent MLAs called for a royal commission into Government finances before there is ‘no road back’ for the Northern Territory. 

The Member for Stuart, raised the motion as a matter of public importance, stating that dysfunction and mismanagement has disenfranchised Indigenous people and led the Territory towards insolvency.

“Our structural problems are affecting our capacity and ability to resolve the crisis we are in now … this is why we must ask the Federal Government and the Opposition to commit to a royal commission before there is no road back for us as a Territory.”

“The real issue is not GST receipts, or other Commonwealth grants [tied or untied], but rather the inability of successive Northern Territory Governments to raise sufficient own source revenue [currently only 27 per cent compared to 56 per cent in other jurisdictions] or, importantly, control expenditure growth.”

Between 2004 and 2016, the Territory’s public service grew by 40 per cent — far outstripping the natural population growth of the Territory.

“The systemic problems are deeply entrenched,” Mr McConnell told the ABC.

As discussed, good governance needs to have the following major characteristics. It needs to be participatory, consensus oriented, accountable, transparent, responsive, effective and efficient, equitable and inclusive, and follow the rule of law.

Good governance needs to be responsive to the present and future needs of the community. It needs to exercise prudence in policy-setting and decision-making, and ensure that the best interests of all stakeholders are taken into account.

The decisions made by Chief Minister Gunner and the processes used to expel sitting MLAs from the ALP Caucus significantly hampered their ability to effectively represent their constituents as members of a party they were elected to represent. This appears to be to be a major contravention of the underlying principles guiding how a well functioning, healthy democracy should work.

On many of the above criteria for good governance, the Gunner Government appeared to be failing.

Many felt that the sacking of Vowles, McConnell and Collins for daring to finally make public their concerns on the financial crisis facing the Territory should have been handled with far more understanding of the rights of key stakeholders (MLAs) in a democracy.

The Gunner approach to Government seemed to show little respect for the rights of MLAs to participate in key policy formulation and decision making – in a major area of concern – Budget management – upon which an effective Government depends.

The approach of the Chief Minister also fails badly when considered against the criteria of ‘consensus’.

No extended discussions appear to have been held by Caucus members in the company of the three sacked members to consider or respect their important points of view before removing a minister in key portfolios from Caucus and two other MLAs.

It appears that there wasn’t even a vote held to exclude the MLAs.

 Of major concern is an apparent disdain and unwillingness to demonstrate a desire to be accountable for such rapidly deteriorating Budget conditions.

This is very worrying as many of the decisions leading to the disastrous Budget outcomes were financial decisions made outside the normal Budget process.

The Gunner Government also fails badly on the need for ‘prudence’ and care in protecting the financial resources of Territorians through a culture of financial management that many regard as erratic, inconsistent and irresponsible.

Part IV of the essay will look at the Gunner Government’s expenditure problems continuing, the failed $10 million taxpayer funded payment to NT Beverages, the release of the 2019-20 Budget and with it the indication the daily Territory Government interest bill would exceed $1 million a day and that forecast debt would climb to $6.2 billion during the period. And then came the serious questions regarding probity, accountability and transparency involving the construction and funding of Fannie Bay Racecourse grandstand.

Professor Don Fuller

Dr Don Fuller holds a first class Honours degree and PhD in economics from the University of Adelaide. He has worked as senior public servant in the Territory. This included as a senior economic advisor to Northern Territory chief ministers. He was also Professor of Governance and Head of the Schools of Law and Business at Charles Darwin University. He grew up in Darwin and attended Darwin High School. 

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