Opinion by Dr Don Fuller
This 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.
Good government has five main characteristics.
First, it can manage budgets efficiently and effectively. Second, decisions related to budget expenditure are accountable, transparent and honest. Third, decision making is seen to be ethical. Fourth, the Government is responsive to community input and suggestions and actively encourages input. Finally, good governments are good at communicating with the community.
Accountability and transparency are key tenets of good governance. Public accountability requires office holders to provide clear and honest explanations for their actions and decisions.
In general, a Government needs to be accountable to those affected by its decisions.
Transparency requires that information should be provided in easily understandable forms. It should be freely available and directly accessible to those who will be affected by Government policies and practices, as well as the outcomes that result from Government decisions. In addition, decisions taken and their enforcement need to be seen to be in compliance with established rules and regulations.
The International Monetary Fund defines fiscal transparency as “the clarity, reliability, frequency, timeliness, and relevance of public fiscal reporting and the openness to the public of the Government’s fiscal policymaking process.”
Raising, allocating, and spending public resources are among the primary functions and policy instruments of Government. Government budgets and how they are managed profoundly affect economies and society.
In recent years however, interest and action with respect to transparency, participation, and accountability in fiscal decision making have heightened around the world. Over the past two decades, several broad trends have brought fiscal transparency, participation, and accountability into sharp focus:
· The proliferation of good governance norms and standards that emphasise greater transparency, participation, and accountability in all Government matters,
· Transitions from closed, authoritarian political regimes to ones characterized by policy contestation, separation of powers, political party competition, an organised civil society, an engaged citizenry, and an active media,
· The introduction of modern public finance management systems, and
· The rapid growth, spread, and use of information and communication technologies around the world.
The way in which political decision making takes place within a Government can have a major impact on shaping whether transparency, participation, and accountability actually occurs in an effective manner in Government decision making.
For example, political decision makers who benefit from a lack of accountability and transparency by shifting public funds to their political supporters or preferred projects often hold powerful positions and are well organized to defend their interests.
On the other hand, those who would benefit from increased openness and inclusion in fiscal processes and practices are typically numerous and poorly organized. They may for example, include Government officials who have been excluded from the budget making process and citizens who use and pay for public services such as health, housing, education, and transportation but are excluded by a lack of information.
Why is Government accountability so important?
Accountability is fundamental to the ideals of democracy, the rule of law and essential to good and responsible governance. It has become a core value in measuring the performance of Governments and administrations.
The nineteenth century English politician Benjamin Disraeli wrote: “All power is a trust; that we are accountable for its exercise; that from the people and for the people all springs, and all must exist”.
More recently, the secretary general of the Organisation for Economic Co-operation and Development (OECD), of which Australia is an active member, stated: “Openness and transparency are key ingredients to build accountability and trust, which are necessary for the functioning of democracies and market economies. Openness is one of the key values that guide the OECD vision for a stronger, cleaner, fairer world”.
Where the public’s power is entrusted to others, there is an important constitutional requirement that those entrusted with public power are accountable to the public. The public’s trust in Government is closely related to the level of confidence the public has in Government.
Such confidence and trust can only be achieved with adequate levels of Government accountability.
Government accountability requires the Government to demonstrate competence and honesty in a manner that allows the public to judge how trustworthy the Government is, particularly in the use of public money.
The prevention of corruption in the public sphere, and the effective monitoring of the fiscal responsibility of Government have become key values of public accountability.
Accountability needs to satisfy four necessary conditions:
· There needs to be timely, accurate, adequate and relevant information made available on the decisions and actions of Government.
· There should be external, independent institutions able to examine, evaluate and report on Government processes and decision making.
· There needs to be an ability for those affected by a breach of accountability to seek recourse. Appropriate sanctions must be available for clear breaches of accountability.
· Public accountability needs to be supported by clear legal and institutional arrangements. A ‘public accountability system’ needs to be in place that brings together principles, procedures, regulations and arrangements to enable effective Government accountability.
The first two points are essential to ensuring that people can become aware of the reasons for decisions by Government. This is often referred to as a need for Government ‘transparency’.
Instruments such as Principles for Integrity in Public Procurement, the Best Practices for Budget Transparency, the Principles for Transparency and Integrity in Lobbying and the Guidelines for Managing Conflict of Interest in the Public Service not only help mitigate corruption risks but also improve efficiency and ultimately contribute to public trust.
It is on these fundamental principles to constitutional, democratic government that this series of articles will examine the performance of the Gunner Government since assuming office in August 2016.
In particular, there will be a focus on budget accountability and transparency given they are both essential to the proper functioning of an ethical, democratic Government.
Why do we need Government transparency?
Transparency ensures that information is available that can be used to measure Government performance and to guard against possible misuse of powers.
Transparency therefore serves to achieve accountability. Fundamentally this means that authorities can be held responsible for their actions.
Without transparency and accountability, there will be a lack of trust between a Government and those whom it governs. In severe cases this can lead to the breakdown of Government, social order and key institutions in society. The result of such social instability leads to an environment where economic development is severely curtailed and affected.
A lack of transparency can:
· Facilitate corruption.
· Facilitate the ability of public representatives and Government officials to not act in the public interest.
· Create informational advantages for privileged groups, by which they may profit.
· Incentivise opportunism and undermine cooperation.
· Limit the ability to select for honesty and efficiency in public sector positions and contract partners; and hinder social trust, and therefore development.
Many of these points have served to undermined community trust in Territory Governments since self government.
Good governance therefore requires credible and trustworthy institutions built on an effective adherence to the key principles of transparency and accountability.
Are accountability and transparency good for economic development and growth?
International experience, and that from research, shows there is a strong positive correlation between accountable and transparent Government and the sustainability of economic and community development.
Nobel laureate Douglas North’s historical analysis of the transition from less developed countries to open societies shows how economic and political development are far more sustainable in jurisdictions that have open and transparent Government systems.
Is it likely then, that a limiting factor to on-going Territory economic and community development can be traced to increased problems with Government accountability and transparency?
Likewise, numerous cross country studies show the negative impact of corruption on growth and investment. For example, a study by Aidt et al. of 70 countries indicated that countries with higher quality institutions experience higher growth and lower corruption. It further estimated that countries moving to high quality institutions had an economic and employment growth premium in both the short and long run.
In a presentation to chartered secretaries, the Western Australian Ombudsman stated that appropriate standards of Government accountability and transparency were essential for creating the most prosperous, productive economies – that allow individuals, businesses and Governments to create the highest possible standard of living for the highest possible number of people.
If then, the Gunner Government has been found to be wanting in these key areas of Government accountability and transparency, it is, following this view, likely the standards of living of Territorians have been compromised and prevented from reaching their full potential.
In a recent 2019 Prosperity Index, the Legatum Institute assessed 167 countries, representing over 90 per cent of the world’s population, in terms of a series of measures, such as:
· Whether a country possesses “an honest and effective Government that preserves order and encourages productive citizenship” and whether it features a “transparent and accountable governing institutions that promotes economic growth”.
In the 2019 index, Australia finished twelfth behind Canada and the United Kingdom and well behind New Zealand in fifth place.
One can only surmise where the Territory would have ended up on such a scale.
What becomes apparent very quickly about those countries at the top of the prosperity index is that they are countries that are not just prosperous, but enjoy high levels of economic and personal freedom, respect for the rule of law and high levels of accountable and transparent governance.
The Legatum Institute notes that “the foundations of prosperity reinforce each other” and goes on to say that “countries in which sound governance creates satisfied citizens are also the most likely to have the healthiest economic fundamentals and the most entrepreneurial societies”.
More opinion by Dr Fuller
- Computer driven, globally focused industry – Can the NT transform?
- Should the CDU city campus be built?
- How not to manage government finances – The case of the Northern Territory
Numerous studies have shown there is a very strong correlation between prosperity, the rule of law, democratic institutions, respect for economic and personal freedoms and good governance hallmarked by accountability and transparency.
High levels of accountability and transparency, especially related to the expenditure of public funds, is therefore essential to political, economic and community development.
An apparent lack of appreciation of the important linkages between accountancy and transparency and economic and community development has been one of the main on-going criticisms regarding the performance of the Gunner Government.
In a keynote address a director of the World Bank stated recently that it is ‘the citizens’ right, but also their duty, to demand adequate Government accountability and transparency.’
As distinct from a democratic state a key feature of an authoritarian political system is that there is little accountability or transparency of Government decision making.
As pointed out by the researcher Marlies Glasius in the Journal of International Affairs, the reasons for citizens encouraging a high level of transparency and accountability is that it ‘shines a light’ on the potential for authoritarian political behaviours, where Governments do not respect the need to explain and justify their conduct. Accountability and Transparency is necessary then, to prevent the ‘domination’ of citizens by Government in authoritarian type political behaviours.
Authoritarian practices she argues enable and encourage domination by politicians. Such behaviours include substantive and procedural rule-breaking. They also interfere with community preferences and inhibit the civic virtues of those to whom accountability is owed. Information flows are strictly controlled.
Firms are much less likely to invest in a region where it is not clear on what basis Government makes important financial decisions. Firms are also concerned where resources are seen to be wasted by a Government not following proper budgetary and democratic principles requiring high levels of accountability and transparency.
Statement on accountability and transparency by the Gunner Government following its election win
The Gunner Government took power in the Northern Territory after the August 2016 election.
Following wide community concerns regarding questions of accountability, transparency and budget decision making under the Giles Government, there was substantial community support for a document tabled in the NT Parliament in November, 2016 by the incoming Government titled Restoring Integrity to Government – Trust and Integrity Reform Discussion Paper.
Key aspects of the report
This document commences with the statement, “Territorians want and deserve a Government they can trust. An open, accountable and transparent Government is essential for this trust to exist.”
It points out that, “Confidence in the integrity of public officials and Government processes is essential if we are to meet the considerable challenges that we face and to grasp the opportunities that we share.”
The document emphasises that “Territorians have the right to access Government information, it belongs to all of us”, and that, “Open, transparent and accountable Government is also the best way to maximise the health and prosperity of the whole community.”
As if to emphasise further, the document states: “A future Territory Labor Government will be guided by the principle of restoring integrity to Government through leadership at the highest level of Government through actions, not just words’”.
Such statements, as the Gunner Government comes to the end of its term, now appear to many to be perplexing, at best.
The document further states that maintaining a healthy integrity framework relies on continuing to review of the effectiveness of the system.
This begs the question as to whether, and when, this actually occurred during this term of Government.
Unfortunately, the charge has been made on a number of occasions, that the document that held out so much hope and promise for improved governance should be consigned to the ‘all words, no actions’ bin.
An inability by a Government to meet the objectives that it has set itself in key areas such as integrity, accountability and transparency, serves to further damage an already very fragile Northern Territory system of governance.
Gunner Government decision making – a failure in accountability and transparency
Concerns regarding how seriously the Gunner Government was to treat its accountability and transparency responsibilities surfaced early, following the 2016 election.
In May 2017, previous Labor MLA and Charles Darwin University law lecturer Ken Parish wrote for Crikey, “the Gunner Government’s end of semester report card gives it a fairly miserable failing D grade in the subject accountability and transparency.”
Parish wrote the Gunner Labor Government came to office in August 2016 promising to restore the trust of Territorians in Government, after it had been shattered by four years of chaos, division and dubious ethical behaviour by various members of the Giles CLP regime.
Enacting and boosting safeguards ensuring accountability and transparency were to be at the forefront of the new Government’s program.
“After nine months in office, how are they going,” he asked?
“In my assessment the record is none too impressive.”
Some limited progress was made he argued, to publish the registrable interests of MLAs who potentially could have a conflict of interest in decision making. However, changes were regarded as limited due to the time allowed before publishing such interests.
“In the meantime the Gunner government moved in Parliament a couple of weeks ago to enshrine in legislation its seemingly hasty decision late last year to impose a previously unannounced ‘policy’ for a maximum floor area of 400 square metres for takeaway liquor outlets.
“The effect of including that ban in parliamentary legislation, as opposed to mere subordinate legislation, will almost certainly be to prevent the circumstances surrounding the decision (including any connection with rather large donations to the ALP by interests associated with the Australian Hotels Association, whose members stand to benefit from the exclusion of Dan Murphy’s) from being probed by the Federal Court in proceedings commenced by Woolworths.”
This resulted in a loss of trust in Government decision making with suspicions that political donations from interests associated with the Australian Hotels Association, had influenced the decision.
The Gunner Government promised to set up a Territory Independent Commission against Corruption. The NT ICAC was funded to the amount of $3 million in the 2017-18 Budget. Which was less than the $3.5 million the Government was stumping up for Bruce Munroe’s Tropical Light exhibition, which was due to run for just 180 days.
However, despite the funding, ICAC did not commence taking reports until end November 2018.
Parish points out that for around half of the term of the Gunner Government neither the Ombudsman nor Commissioner for Public Interest Disclosures had the power to investigate allegations against politicians or their staffers.
While ICAC came out with its first finding this week, that the independent member for Goyder and now former Speaker Kezia Purick engaged in “corrupt conduct” by misleading investigators under oath and engaging in undemocratic behaviour.
The Commissioner Ken Fleming found Ms Purick repeatedly lied to investigators and breached the public trust about her involvement in interfering in the establishment of the North Australia Party, which now Territory Alliance leader Terry Mills had looked at forming in 2018.
It is doubtful whether the NT ICAC will actually ever have the resources to investigate several, or maybe many, dubious actions occurring before the Gunner government came to power. This does little to build trust and confidence in Government decision making free of corruption and malfeasance in the Territory.
In the 2016 NT election, the Labor party finished with 18 seats and the CLP opposition finished with two seats. The balance of five seats was made up of independents. While the preferential voting system used in the Territory is largely responsible for such lop-sided results, this clearly required a parliamentary leader aware of ethical and democratic responsibilities in the face of a very weak opposition.
It was therefore a very important challenge for the new leader in a situation where the integrity of the democratic political system in the NT was to be sorely tested.
An ethical and responsible leader was beholden to uphold the main principles of a democratic state rather than to attempt to bully a weak opposition into submission or irrelevance, based on an overwhelming number of seats in Government.
In fact, in that election the CLP gained around 32 per cent of the popular vote compared with 42 per cent for the ALP. If a proportional representation voting system had been used, as it is in the smaller jurisdictions of Tasmania and the ACT, the CLP would have had a substantial Opposition of around eight members to the ALP’s 11.
It was clear that a relatively high proportion of the population in the Territory had not voted for a Gunner Labor government. A wise, careful leader needed to take this into account.
At this time in particular, the Territory required a leader of Government who understood and valued the key principle that the essence of democracy requires that minority rights are also protected.
This keystone principle was expressed by Thomas Jefferson, the third President of the United States, in 1801, in his first inaugural address.
“All . . . will bear in mind this sacred principle, that though the will of the majority is in all cases to prevail, that will to be rightful must be reasonable; that the minority possess their equal rights, which equal law must protect and to violate would be oppression.”
It is profoundly unfortunate for the governance of the Territory then, that the elected minority has had insufficient resources to pursue their task and prevent the sense of such ‘oppression’.
It therefore appeared to some to be a calculated attack on the integrity of the democratic system in the Territory when, as pointed out by Ken Parish, the Chief Minister’s Government decided not to provide any extra staffing or resources (other than two parliamentary library staff shared between all of them) to the five independent MLAs in the Legislative Assembly.
Such assistance is vital to allow the MLAs to subject the Government to effective scrutiny and oversight, a fundamental purpose of Parliament in a Westminster system.
Weakening the capacity of the Legislative Assembly as an effective opposition struck at the heart of the need for accountability and transparency in a democratic system.
The two CLP MLAs were deemed to be the official ‘Opposition’ and given the resources that accompany Opposition status.
Additional reduction in Parliamentary scrutiny
According to Ken Parish, the Gunner Government not only reduced parliamentary oversight and scrutiny by allocating insufficient resources to MLAs, it also significantly watered down very good recommendations by the Select Committee for opening Parliament to the people.
The most serious of these was a decision by the Gunner Government to halve the available time for parliamentary scrutiny of the Government’s Budget by the Estimates Committee from 60 hours to just 30.
In addition the Government rejected a key recommendation by the Select Committee that it give the Auditor-General the power to conduct performance audits on departments and agencies. This is a responsibility given to every other Auditor-General in Australia, except the NT.
As departments and agencies are not legally required in the NT to report on their efficiency and effectiveness, most do not bother to do so.
As Ken Parish notes, “the end result is that the Northern Territory, alone of all Australian states and territories, has no proper system at all for independent scrutiny of Government departments’ efficiency or effectiveness in spending taxpayers’ money.”
In 2019-20 Commonwealth funding to the NT is estimated at $4,3 billion. This is around 66 per cent of the Territory’s Government sector revenue. It is therefore surprising as Ken Parish notes, that the Commonwealth has not required the Northern Territory to establish the appropriate standards of fiscal accountability that occur elsewhere in Australia.
Further events causing concern on the accountability and transparency of the Gunner Government
In June 2018 it was reported that Dong Hai Airlines had begun operating flights between Darwin and Shenzhen. The Government was accused of refusing to reveal the costs of its partnership with the airline, saying it was unaware that the owner had been named in court hearings over the alleged bribing of an official in Hong Kong.
The Government was accused of failing to disclose the cost of the partnership to Territory taxpayers and for how long the agreement would run.
This failure to disclose occurred even though previous subsidy agreements between the NT Government and private airlines involved ‘millions’.
This included the CLP Government giving Airnorth $700,000 for the Darwin to Alice Springs link in 2015 and the previous Henderson Labor Government giving Jetstar $3 million in August 2018 to establish an international hub in Darwin. A further $2 million was given to the airline in 2009 for marketing purposes. Jetstar cancelled the routes in 2013.
Mr Parish said he did not buy the Government’s line that the cost of the partnership is commercial in confidence information. These can be redacted.
“We are entitled to information about how much of our money the NT Government is giving to it as an inducement to fly here.”
Further evidence of problems with accountability and transparency emerged in September 2018 when it was disclosed that a report by the Auditor-General Julie Crisp found the NT Government had handed out billions of dollars in grants without proper record-keeping processed in place and without a Government wide oversight procedure in place.
The audit found that while the Government knew the oversight of the grant system was flawed; by 2018 an improved monitoring system had still not been implemented. It was still not clear what amounts were being paid and for what reason, so major transparency problems remained.
The Auditor-General stated that while she was unable to determine the total amount of money paid out since 2014 because of improper record keeping, it was expected to be in the billions of dollar.
The audit was conducted around the time that the NT Gunner Government was calling on the Commonwealth Government to provide more funding from GST revenue. At the same time, NT debt levels began to escalate to record levels.
The Auditor-General Ms Crisp, reported that “Existing processes are prone to human error due to a lack of programmed [information technology] checks and oversight.”
She further noted, “agencies experience difficulty reconciling grant activity with expenditure and there is an inability to generate meaningful reports on grants issued across the NT Government.”
Ms Crisp found the Department of Chief Minister — which administers a large portion of grant funding annually — did not have modern systems in place to monitor the grants.
This is a startling statement given the importance of government accountability and transparency involving taxpayer funding.
The then Deputy Leader of the Opposition Lia Finocchiaro, called the audit “deeply concerning”, “particularly given the perilous state of the Territory’s budget and burgeoning debt levels.”
“Territorians would expect that awarded public monies would be appropriately acquitted, and that grants and subsequent spending is monitored and reviewed.
“This report poses a series of further questions in relation to the Gunner Labor Government’s so-called open and transparent rhetoric, particularly in relation to spending by the Department of Chief Minister,” she said.
It appears that at this stage serious problems were beginning to emerge for the Gunner Government regarding the priority given to the key democratic principles of accountability and transparency.
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.
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.
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.
“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.
Despite Langalount Gunner Government expenditure problems continue
Despite the clear call by external experts to reduce Government expenditure, the NT Infrastructure Development Fund (IDF) approved a $10.5 million taxpayer funded payment to Darwin water bottler NT Beverages despite the company ‘being deeply in debt and on the brink of financial collapse’.
At the same time the NT Government had threatened the company with debt recovery action for unpaid stamp duty.
Two weeks later the IDF approved the company receiving 10.5 million in taxpayer funding.
This clearly demonstrates a clear lack of consistent, integrated financial decision making within the Gunner NT Government.
In this case the creditors’ report into NT Beverages operations found the company had spent $9.2 million of the taxpayer funding in just four months. It remains unclear on what the money was used for.
The Administrator’s report also found NT Beverages owed more than $130,000 to the Australian Taxation Office, including penalties for not paying their employees’ superannuation contributions.
The NT Government’s member on the IDF board, Northern Territory’s head public servant Jodie Ryan is reported to have declined to answer the ABC’s questions, including why she approved the $10 million of public funds less than two weeks after the NT Government threatened debt recovery action for $221,000 in unpaid stamp duty in February 2018.
Ms Ryan was reported as also not answering questions over her personal role in overseeing the funding as a board member or why taxpayers later loaned the company an additional $100,000 to pay wages.
As pointed out by Vowles, McConnell and Collins, without clear and uniform standards and guidelines, Government administration is in danger of squandering public funding in an undisciplined and uncontrolled manner and becoming dysfunctional and chaotic.
However, unfortunately for the people of the Territory, the Gunner Government was in no mind to listen and take wise advice. Rather, they seemed content to ‘shoot the messengers’ and ‘pile on (somewhere- anywhere?) regardless’.
The impact of the 2019-20 NT Budget
The NT Treasurer released the 2019-20 Budget in early May 2019. This indicated that the Territory’s daily interest bill would soon exceed $1 million a day and that forecast debt would climb to $6.2 billion during the period.
It followed the release of former WA under-treasurer John Langalount’s Plan for Budget Repair in April, which set out a range of savings measures designed to help the Territory claw back a surplus by 2027-2028.
But Moody’s Investor Services report author John Manning was sceptical as to whether the Territory Government had the ability to implement the plan and said it would “require a lot of ducks to line up.”
Importantly, even though spelt out by Langalount to the NT Government on how to proceed to bring Government finances under control, Moody’s Investor Service stated, “The Territory’s plans to cap, and ultimately reduce, this rising debt burden is unclear.”
It appears that the NT Treasurer had been unable to translate the Langalount report into an effective strategy for implementation, even though this had been set out in clear and logical steps.
Earlier this month the agency said the Territory’s rating of Aa3 (stable) would most likely continue, but only because of the Commonwealth potentially bailing it out should financial problems worsen, and in spite of its inability to implement meaningful fiscal reforms.
“The Territory’s stand-alone credit profile … reflects a structural fiscal imbalance that will require a rising debt burden in order to fund recurrent and capital expenditure,” the report noted.
It added the “reputation risk” to the Commonwealth of not bailing out the NT would be too great, if the NT “were to experience acute liquidity stress”.
Credit downgrades are important as they signal higher interest costs per day for the on-going payment of escalating Territory Government debt.
Langalount had provided very clear warnings in his report to the NT Government to avoid overspending, particularly outside the Budget cycle. He had also importantly pointed to the need for the Government to change their culture and to understand and act on the importance of disciplined Budget management, in order to reduce the escalating level of debt.
Despite this, it was being reported in October 2019 that the debt-laden Gunner Government spent almost $170 million on unbudgeted policy changes — including $12 million for the now very controversial grandstand at the Fannie Bay Racecourse — in the two months after its May Budget was handed down.
In the Annual Financial Report tabled by Treasurer Nicole Manison the report showed increases in revenue because of higher than expected GST receipts and higher taxation and royalty receipts than previously forecast.
However, this improvement was countered by spending on unbudgeted policy changes, including $64.5 million in capital grants, such as upgrades to sporting facilities, and community infrastructure.
Major problems of accountability and transparency for Gunner regarding the Fannie Bay Racecourse grandstand
By early 2020 the Chief Minister was being confronted by serious questions regarding probity, accountability and transparency involving the construction of the. This was exacerbated by the fact that the racecourse was deep inside the Chief Minister’s own electorate of Fannie Bay.
Documents obtained by the ABC showed the Chief Minister’s former chief of staff Alf Leonardi helped draft a letter so that the Darwin Turf Club could receive funding from the Government for the construction of the new grandstand. This letter was then used by the vlub to support a $12 million dollar funding request for the grandstand from public funds.
The Chief Minister claimed that this conduct was ‘completely inappropriate’.
This is seen by many as a potential major breach of Government probity, accountability and transparency.
The Chief Minister has provided documents to the NT Independent Commissioner Against Corruption for evaluation and assessment because of such concerns.
It is important in this context that the relevant documents came to light only after a Freedom of Information request by the ABC. Such documents were not released in an open and accountable manner without the need for a formal request under FOI.
The grant has been controversial since it was first announced in July last year, when critics questioned the merits of funding a corporate grandstand at a time when the Territory was facing unprecedented levels of debt. How could the Chief Minister not understand the priority of reducing this debt and containing expenditure following the excellent advice provided by Langalount, they asked?
Concerns about the probity, accountability and transparency of the Government funding arrangement intensified when it also emerged that the winning tenderer to build the grandstand was Jaytex Construction — a company part-owned by the Turf Club’s chairman Brett Dixon, it was reported.
While the Chief Minister has stated that the way in which this process was handled was ‘completely inappropriate’ according to reports by the ABC, it appears to be both important and relevant that the Chief Minister himself responded to a letter from Mr Dixon, telling him he supported the assertion that the project would create a world-class facility.
‘I look forward to a timely outcome from that process,’ Mr Gunner is reported to have written.
It is therefore difficult for many to believe that the Chief Minister was not involved in the processes and financial decision to provide funding for the construction of a grandstand within his electorate.
In April the NT Independent reported an internal planning document obtained by the paper showed the grandstand project was “unlikely” to increase visitors to the Northern Territory.
The report, which was dated June 2019, contradicts public comments made by government officials and the club’s CEO Brad Morgan, who told a local radio station the day before that while the structure won’t be enjoyed by spectators this year due to COVID-19 restrictions, “the response from overseas and interstate was phenomenal”.
“The proposed grandstand will provide improved and additional function space and facilities for race day attendees, and is unlikely to significantly increase race-day attendance,” the report stated.
The highly respected independent MLA Gerry Wood was reported as telling the ABC that he was concerned the independence of the Government’s decision-making process had been compromised.
He urged the Chief Minister to ask the Auditor-General to review the process.
“From what I hear now, I think there is a lot more there that needs to be looked at,” he said.
“From whether the due process was done and whether the turf club got favourable treatment by using staff within the Government — in this case the chief of staff — to write a letter which was really weighted with the hope that the ministers would say, ‘Oh yeah, $12 million, we give it the tick’.
Such concerns and increasing lack of confidence and distrust of Government highlight the damage that can occur when the essential underpinnings of democratic Government appear to many to have been ruptured, by inappropriate Government actions – particularly involving the Chief Minister.
In this case the Chief Minister appears to operating at anything but arms length from a commercial transaction that he can be seen to be personally benefitting from. It appears that there is potential in such processes for a clear conflict of interest.
Territorians need truth on economy and Government finances
In May 2020 it was reported that the Gunner Government had refused to provide Territorians with a clear picture of the books prior to the election and that this ‘goes against their promise’.
While the Gunner Government caved into the pressure, it had first refused to provide budget information before the August election.
The Budget had been delayed until at least November. However, the Government refused to release a pre-election outlook.
This meant that it would be the first time in NT’s history that voters would go to election without knowledge about the state of the books. The Gunner Government had argued this was not possible due to the impact of the coronavirus.
However Tasmania, a relatively small jurisdiction like the NT, managed to release a detailed fiscal outlook during May, 2020. While it acknowledged the volatile conditions it was still able to provide Tasmanians with a view on the challenges confronting them.
Recently, the Gunner government agreed following substantial pressure, to provide Territorians with a ‘rough guide’ of the Budget situation – whatever this may mean.
Langalount found that NT Budgets had been treated more like “rough guides”, rather than serious financial plans.
Territorians have now been informed by their Chief Minister to expect another ‘rough guide’ for a fiscal outlook.
The democratic principles of accountability and transparency are to be again dragged bucking and kicking to the starting gates – with the jockey riding on instructions that ‘rough enough will be good enough.’
Stopping information flow through failing Freedom of Information system and banning a newspaper
In January last year The Guardian reported the Northern Territory Government was refusing one in four Freedom of Information requests, a rate seven times higher than Victoria’s and eight times Western Australia’s.
The paper analysed state and territory FOI data which showed the NT was by far the most likely jurisdiction to block requests for government documents. It showed in the previous financial year, the NT government granted just 292 of the 900 FOI requests it finalised, and partially granted another 298.
IT quoted CDU legal academic and former NT Labor MLA Ken Parish who said the Territory’s FOI legislation was no more restrictive than other jurisdictions and said the refusal rate might be partly a cultural problem within the NT public service.
He said the large public service relative to other jurisdictions was “top-heavy”, with “almost half the workforce being made up of managerial or administrative staff”.
He said the public service was dominated by managers who were “very much politicised because of the senior executive service and a large and still-growing set of ministerial advisers”.
Perhaps tellingly, the officer of the Chief Minister did not respond to The Guardian’s questions about the Territory FOI data.
The importance of FOI documents was well highlighted earlier in this essay with a FOI request by the ABC showing the Chief Minister’s then chief of staff Alf Lenoardi helped Darwin Turf Club chair Brett Dixon draft a letter to lobby the Chief Minister and Cabinet to pay $12 million for a new grandstand. As well reported, the Gunner Government did fund that grandstand.
That is just one example of the powerful and sometimes startling information that has come from FOI requests by journalists in the Northern Territory.
The Gunner Government has also gone into the business of banning the free press.
In the middle of the deadly coronavirus pandemic, the Gunner Government banned the NT Independent from attending press conferences and from seeking information from government departments to report to the public.
In an email on April 14, a few weeks after the paper launched, Chief Minister Michael Gunner’s director of communications, Maria Billias, banned Independent staff shortly after they asked questions at a press conference held by Deputy Chief Minister Nicole Manison.
She said the Government did not recognise the paper as an independent and reputable news media outlet because it was owned by Owen Pike who runs an unrelated Gumment Facebook page she described as a “concerted online hate page against several members of government”.
Earlier this month the Chief Minister moved a press conference at the last minute after learning the NT Independent’s journalists would attempt to ask him questions.
The press conference was to announce the Government’s tourism voucher scheme, but was delayed while Chief Minister Michael Gunner and Tourism Minister Lauren Moss circled the area in government cars before heading back to Parliament House to hold the press conference there.
Editor Christopher Walsh and the NT Independent’s digital editor David Wood attempted to enter Parliament House for the press conference but were informed by security that they were not permitted to attend the Chief Minister’s event.
This sparked a news story on the ABC Northern Territory 7pm bulletin that night and also drew the attention of the ABC’s media watchdog program Media Watch which labelled the Government’s move “crazy”.
“It is crazy stuff, and they really do need to sort this out,” program host Paul Barry said.
The Fourth Estate is a pillar of democracy and is vital in engendering a democratic culture that extends beyond the political system. It supplies important information that helps people break down the promises and actions of governments and oppositions and they are also the watchdogs for uncovering errors and wrongdoings by the powerful.
It undermines that system when the Government chooses who it will have report on it. And a healthy Government that is actually interested in accountability and transparency should welcome the scrutiny, and further encourage a diversity of the media as they would with other sectors of the economy.
The Gunner Government and project development – A business plan? What’s that?
The Gunner Government has been prepared to support major project developments without the need for a professional business case that provides accountability and transparency for taxpayers.
Unplanned developments have the potential to have major negative ongoing implications for the Territory Budget and community.
A striking example of this lack of openness and accountability has occurred with the Charles Darwin University Darwin CBD development.
A recent excellent letter to the editor of the NT News captured the major problems that can be expected as a result of a lack of competence, expertise, transparency and accountability in the decision making of the Gunner Government. This letter is quoted in full below:
Why the CDU –Darwin CBD Development will fail
Let’s run the ruler over the CDU city campus deal. The stakes could not be higher. With $150 million of borrowed money, the two proponents, the CDU vice-chancellor and the NT Chief Minister, have put all our chips on red.
Everything must go perfectly right or our university will never recover.
- The underlying performance of the user – the current trajectory of CDU operations is spiralling out of control. It has reduced courses, reduced student numbers, made staff redundant and recently called on staff to volunteer to work fewer hours. Staff morale cannot be measured. It does not exist.
2. Financial track record of proponents – CDU has recently recorded one of the largest losses in history (this is before COVID!). The NT Government meanwhile has declared a financial crisis and has yet to do anything meaningful to address it.
3.The general market – Australian universities are facing the largest crisis in history. Their financial reliance on foreign students has been fully exposed and a call for a massive bailout is nigh.
4. The target market – Interest in supporting and nurturing our own best and brightest has been dismissed and the entire focus is on attracting second tier overseas students from the sub-continent. Whilst it is politely pushed under the carpet, the language barriers in the current cohort are a reason for extreme concern.
5. The real need for extra space – CDU has swathes of space at its current campuses. This will be exacerbated when they move a range of faculties into the city.
6. The design – The eight story glass wall without shading has been beautifully tilted so that it catches every last ray of the western sun. The unusual noise you are hearing is the sound of the local architects’ and environmental advocates’ jaws dragging along the ground.
7. Public support – Is there a single person beside the two proponents and the Property Council who believes this is a sensible spend of taxpayer money? Please raise your hand if you exist?
8. Local Content – Any notion that this will boost local business is laughable. The project manager, main architect, interior designer and landscape architect are all FIFOs. A great early record for our peak educational institution.
9.The location – Situated far away from the waterfront, state square and the three key commercial buildings, it yet again decentralises our poorly laid out CBD.
10. The forecast for success – the modelling of success of the campus forecasts 11,700 new students … you’re joking! When the real number fails to eventuate who picks up the pieces?
The score? 0/10. Until the CDU fixes its core business, its use as a saviour for the deep-seated CDB problems is pure mischief.’
In addition to these excellent points, the Gunner Government in concert with CDU, has shown insufficient concern as to the significant and problematic implications of such a development on CDU campuses located in other important regional centres of the Territory. These include the centres of Alice Springs, Katherine and Tennant Creek.
Regardless of the clear opposition to this project on the basis that there are far more productive and less risky projects that deserve public support, the Gunner Government is determined not to listen to advice and to plod on regardless. That is plod on regardless of what the community thinks or wants.
Principles of good governance require that Government is responsive to community input and suggestions and actively encourages such input. It also notes that good governments are good at communicating with the community.
The Gunner Government receives a fail for their ability to understand and adhere to these important principles of good governance – encouraging and being responsive to community input and good at communicating with the community.
The State Square redevelopment – A business plan? You’ve got to be joking
As pointed out by NT Independent editor Christopher Walsh, the Gunner Government has been unable to explain why it spent tens of millions of taxpayer dollars on the State Square redevelopment before a proper business plan was in place.
As a further, troubling indication of the Gunner Government’s lack of understanding of the primary importance and methods of financial decision making the Infrastructure Minister, Eva Lawler suggested the reasons for the project were “broader than just dollars,” “this is about the greatness …yeah,” it was reported.
However, Government expenditure, particularly of this magnitude needs to be justified by a properly constructed cost benefit analysis.
Such analysis should be an important part of the business plan. This cost– benefit analysis by its very nature, takes into account both financial and non-financial factors in evaluating whether the project should proceed against competing project uses for what should be scarce Government funding.
That no such cost-benefit analysis was undertaken suggests the Government makes such decisions by ‘gut feel’ or for example, to satisfy the demands of special interest groups.
Such decision making is an unacceptable means of dealing with large amounts of public funding within modern democratic governments and successful economies.
Rather, it leads to the sort of complete Budget mess, the Territory is now experiencing. Such a naïve, unsophisticated and unprofessional approach to the expenditure of public funds acts as a major disincentive to private investors seeking to commence business operations in the Territory.
It leads to a serious lack of confidence in the professionalism and competence of Government in the Territory and serves to substantially increase business risk.
Before developing a business case for its “critical” State Square project, the Government paid $1.5 million to demolish the Chan Building, built a $20 million underground carpark, paid for a $500,000 “masterplan”, and awarded tenders to contractors for a variety of associated works since 2018.
Unplanned and unbudgeted expenditure and a Budget seemingly out of control has been the hallmark of the Gunner Government.
However taxpayers’ expect Government to be as careful with their money and follow similar disciplined financial processes to that expected within commercial businesses.
Commercial businesses would rapidly go bankrupt if they operated in the same mode as the Gunner Government.
Many have been worried that it is only a question of time before this Government suffers a similar fate to a South American dictatorship and effectively goes bankrupt, requiring a complete take-over by the Commonwealth.
An alternative approach to governance and Budget waste
While there would be few that would take issue for the need for new infrastructure development projects within the NT, particularly following the pandemic, the main question is whether the best projects have been chosen so that the Territory can get the best result from the expenditure.
Without proper community consultation or planning processes in place the Government appears to be working on a ‘hit or miss’ basis rather than a logical, thoughtful, disciplined, professional process involving the disciplined economic evaluation of alternative options.
This becomes essential as available financial resources become even scarcer, an event bound to occur to the NT.
For example, in a previous piece I have pointed to the well appreciated fact that Australia’s labour costs make it very difficult to compete in the traditional industries of manufacturing. As a result, we have continued to try and depend on our service sectors like tourism and the industries of agriculture and mining.
Many now believe that while the more traditional foundation industries are important there also needs to be a Government focus on kick-starting advanced manufacturing.
These industries are essentially knowledge based and concerned with the innovation of high-end technology products in almost all established and evolving industries.
Such sectors can locate almost anywhere because they are computer driven. What they need is high quality technical and computer based skills. There is a huge export potential in such knowledge driven industries. Exports are growing rapidly.
Advanced manufacturers share a number of important characteristics.
They are globally oriented. They produce new, innovative products with high levels of design. These products are technologically complex, reliable, affordable and available. They are also newer, better and more exciting.
Advanced Manufacturing products are designed and built to solve a variety of problems and therefore, have multiple uses. They are underpinned by a high component of intellectual property control and sophisticated, state of the art computer based skills and systems.
Such products include new computer software technologies and applications (e.g. for Defence), high precision cutting and welding and building technologies, advanced robotics and intelligent computer based production systems, automation of processes, control systems to monitor manufacturing processes and products and systems for environmental management.
Many of these sectors could be located in the Northern Territory if institutions such as Government and the university provided the required support and leadership.
In addition, the Territory is confronted by a number of major problems of social and economic inequality.
While the Aboriginal population makes up around 30 per cent of the population, many live in third world conditions of poverty and are sadly destitute, with no hope for a better future, particularly in remote communities.
Would it be too much to expect that a Labor government in the Territory, that is supposed to stand for equality and equity regardless of racial background, did more to overcome such obvious and long-standing economic, social and human disadvantage?
Would not this be a fairer and more beneficial spend of the taxpayer dollar than wasting such resources on an expensive, high risk infrastructure project such as the CDU Darwin CBD development that is most likely to fail?
While the current Prime Minister may not understand the importance of this, the previous Prime Minister, Tony Abbott certainly would have.
Such alternative options should be closely considered and properly evaluated by Government.
A complete lack of understanding of Government finance – The emperor unveiled
OnMarch 11, 2020 Michael Gunner visited Alice Springs.
He was asked by the Alice Springs News editor Erwin Chlanda: “What is the collateral for your Government’s borrowing?”
It was reported that Gunner replied: “This is a commercial arrangement and I can’t discuss this.”
This is a staggering and startling response from the leader of an Australian government.
This carefully placed question by Mr Chlanda unveiled in spectacular fashion how the Chief Minister appears to have a complete lack of understanding of Government finances and how a key component of this finance, Government debt, actually works.
Suddenly, the Emperor had no clothes.
Thus, borrowings in the case of private commercial entities such as businesses or private households do require collateral to support their holdings of debt. Most who have a mortgage on their private dwelling would appreciate such arrangements. In such a case, the collateral is the dwelling and the deposit required from the borrower. Similar forms of collateral are required in the case of borrowing by a private or large commercial business.
However, in the case of a state, territory or national Government in Australia, no such collateral is required by lenders of finance. In these cases lenders are aware that state and territory governments have very extensive assets in the form of property, capital equipment and infrastructure.
They are also very aware that governments such as the Territory Government have revenue raising capacity through taxation as well as the financial support of the Commonwealth – up to a certain point.
However, what lenders are very concerned about is the financial state of the Budget and in particular how much spending is exceeding revenue and how much debt the Territory has.
Irresponsible Budget management as we have seen in the Territory may have the effect of delaying interest payments if complex negotiations are required with the Commonwealth to “bail out” the Territory so that it can continue to pay its interest obligations to lenders. An inability to do this is a prime reason for sending a commercial operation bankrupt.
What lenders to the Territory watch very closely is not a collection of collateral but how well the Budget is being managed. As discussed earlier in this essay, this is regularly evaluated by ratings agencies.
These agencies analyse the Budget health of states and territories and provide them with a rating which is also made public. Lenders watch such rating evaluations closely.
Any fall in this rating results in a re-evaluation of the risk lenders place on lending to the Territory. A decrease in ratings will result in a rise in interest rates on Territory borrowings. This does not mean the Territory can’t pay its debt necessarily, but it does mean that there are more attractive alternatives available for lenders than the Territory Government. Because of this, the Territory will be forced to pay an increased amount for its ‘less desirable’ borrowings.
So, this is not a matter of “commercial in confidence” at all, as stated by the Chief Minister.
The arrangements are widely known, in the public arena and appreciated by those with a minimum understanding of financial issues and have been for a very long time.
With this in mind, it is therefore important that the premier ratings agency Moody’s Investor Services in May 2019 was reported to have “voiced scepticism” at the NT Treasury’s optimism over the Budget. It stated that for the Government to achieve its savings measures it would take a “lot of ducks to line up”.
It is again concerning that the NT Treasurer was reported to have shrugged off Moody’s appraisal and stated that the NT economy was “starting to turn”.
There appears not only to have been a lack of respect and follow through given to the effort and professionalism provided by Langalount in his excellent report showing the NT Government how to proceed to get out of the Budget ‘mess’ on a step by step basis.
There also appears to be a lack of understanding by both the Chief Minister and the Treasurer of the importance of ratings agencies such as Moody and their warnings for the Territory economy.
To have such an apparent lack of financial understanding by those leading the NT Government at this time of financial stress, is ‘very scary’, for most Territorians to say the least.
What chance does the Territory have of building a confident, competent economy under such leadership?
The answer? Very little.
High levels of accountability and transparency, especially related to the expenditure of public funds, is essential to political, economic and community development.
An apparent inability to understand the important linkages between adequate levels of financial accountability in a properly functioning democratic Government – and political, economic and community development – has been one of the main criticisms of commentators regarding the performance of the Gunner Government, since coming to power.
It is of substantial concern that such failures have continued to occur since the election of the Gunner government some four years ago.
Disturbingly, there is little evidence of a Government capable of learning.
Sadly for the Territory, good government and in particular, sound financial management, appears to have proved far too complex and difficult for the Gunner Government.
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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