Opposition criticizes Labor government's use of contingency funding

Opposition Leader Jess Wilson has pledged to overhaul the way the state government funds and accounts for major infrastructure projects as a step towards restoring integrity to Victoria’s finances if the Coalition is elected on November 28.

Documents obtained under freedom-of-information laws reveal that former treasurer Jaclyn Symes last year approved $13.5 billion in “budget supplementation” measures so the Labor government’s cash-strapped departments could pay their bills.

The extraordinary sum included $11.2 billion of Treasurer’s Advances – a contingency fund which effectively serves as the state’s credit card – as well as the reinstatement of $1.8 billion of previously withdrawn funding, and a separate “temporary” advance of $466 million from another little-known contingency provision.

It meant that for the 2024-25 financial year – the most recent for which we have fully reconciled and published results – about 13¢ of every public dollar spent was accounted for outside the budget.

This continues a Victoria-only practice, which was established early in the life of the Andrews government and supercharged through the pandemic years, of using Treasurer’s Advances – a contingency traditionally reserved for emergencies – to pay for major projects, other capital expenditure and government programs.

The revelation prompted Wilson to declare that under a Coalition government, Treasurer’s Advances would not be used to make regular payments to projects like the Suburban Rail Loop and removing level crossings and would revert to their original purpose of meeting urgent and unforeseen expenses.

“That is not what Treasurer’s Advances are designed to be used for, and they shouldn’t be used for that purpose,” Wilson told The Age.

“Returning financial integrity to Victoria is a legacy that I want to leave for this state. We need to bring greater transparency back to the budget so that people can have confidence in how the government is spending their money.”

RMIT University public policy expert Professor David Hayward said the partly redacted ministerial brief, dated a week before the end of the 2024-25 financial year, showed how approval of, and oversight over, public expenditure had shifted from parliament to the treasurer.

Hayward said he had questioned former treasurer Tim Pallas and former treasury secretary Chris Barrett about why Victoria had adopted such a broad use of Treasurer’s Advances, but neither had provided a compelling explanation.

“When you look at the list of items that are covered, it doesn’t make a lot of sense to me,” he said.

“It is crucial that parliament approves how government money is spent. That doesn’t happen if a big block of money is just parceled out as the treasurer sees fit. That breaks down the whole principle of parliamentary accountability.”

Hayward said there was no suggestion of fraud or misuse of funds, but noted, “It’s about good process in the context of parliamentary democracy.”

Since becoming leader in July, Ben Carroll has staked his premiership on promoting greater integrity in government. When asked about Labor’s use of Treasurer’s Advances, he described them as an “important mechanism for unforeseen essential funding”.

“One thing I will never hesitate to do is use them to support our hospitals and nurses when there is an unexpected short-term surge in demand,” Carroll said.

In 2014-15, the financial year in which the Victorian government changed hands from the Coalition to Labor, $326 million in payments were made through Treasurer’s Advances. By the end of 2015-16, Tim Pallas’ first full financial year as treasurer, that figure had more than doubled, with an advance of $258 million provided to fund the removal of level crossings.

By the time COVID-19 hit in 2020, Treasurer’s Advances were running at close to $2 billion a year. Their use peaked in the 2021-22 financial year – the final year of the pandemic crisis. However, since then, usage has remained at emergency levels.

Victoria’s use of Treasurer’s Advances, which Centre for Public Integrity director Gabrielle Appleby previously described as a “slush fund”, is out of step with how contingency funds are used by other state and territory governments, and the federal government.

Though Western Australia also uses Treasurer’s Advances for non-emergency expenses, the government caps their total use at 3 per cent of the previous year’s total appropriations.

Shortly after Jaclyn Symes took over as treasurer from Tim Pallas, she publicly questioned the government’s use of advances, but was assured by Chris Barrett and other Treasury officials that holding money centrally was an effective means of exerting tighter control over the expense of public funds on major projects.

Symes approved changes to how Treasurer’s Advances are reported to distinguish milestone payments for capital works from unforeseen expenses.

The Victorian government has said that keeping money in a central contingency to be spent as costs are incurred keeps pressure on project authorities to find savings, rather than spending all money paid up front.

Jess Wilson said the state’s record showed otherwise.

“There’s a direct correlation in how the finances of major projects have been managed with the fact that Victoria has the highest level of debt of any state in the country and corruption playing out on these sites,” she said.

“There is real anger and frustration at the waste and corruption over the past decade. People want to be able to trust their government, and to do that, they have to be able to believe there is financial integrity in Victoria.”

The Coalition’s pledge to overhaul the use of Treasurer’s Advances would form part of the Charter of Budget Honesty it planned to legislate if it won the November election, the opposition leader said.

The proposed charter would require all capital expenditure, including long-term major projects, to be accounted for as line items within the state budget.

Projects with budgets over a certain threshold – such as $5 billion – would require an additional funding statement to report the breakdown between debt, Commonwealth funding and user charges, and any variances in cost estimates from the previous annual budget.

Long-term mega projects, such as the Suburban Rail Loop, would be accounted for with 10-year annual projections for contracted and uncontracted costs.

This year’s state budget includes line items for the amount spent on the SRL up to June 30 and estimated expenditure for this financial year, but lists all expenditure beyond that as “tbc”.

Wilson said the charter would also cement the government’s cash balance – rather than an operating balance which excludes capital spending – as the bottom line for budget results.

The opposition leader previously promised to deliver a cash surplus by 2032 as a significant milestone towards paying down debt. The government warns this would require $40 billion in budget cuts and come at the expense of essential services.

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