Jess Wilson’s promise to pay for a headline-grabbing health policy by winding up a state-owned investment company has punched an $880 million hole in the Coalition’s election costings and created a headache likely to dog the opposition leader through to polling day.
Under Wilson’s SurgerySooner pledge, a Coalition government would use public funds to pay for an additional 25,000 elective surgeries in private hospitals over the next four years at no cost to patients.
The cost of the policy, which aims to halve the number of Victorians currently waiting for necessary surgeries, would be “wholly offset” by a separate plan to wind up the operations of Breakthrough Victoria, a state-owned venture capital company established five years ago, the opposition claims.
Previously unreported budget figures provided to The Age and the details of an independent Parliamentary Budget Office (PBO) analysis which estimates the $1.27 billion in savings from ceasing its operations suggest potential shortfalls in the figures.
A source familiar with the PBO costing, which was provided to the opposition last month but has not been publicly released, said about $1.1 billion of the estimated $1.27 billion saving comes from repurposing funds earmarked for future capital investments by Breakthrough Victoria over the next 10 years.
The remaining $170 million would be generated by selling liquid assets already held by the company.
This costing assumes, based on publicly available information, that the government intends to provide grants of about $110 million a year over the next decade to Breakthrough Victoria.
However, three sources familiar with the operations and current investment profile of Breakthrough Victoria but unauthorised to discuss them publicly raised a number of problems with the opposition’s sums.
The first is that Breakthrough Victoria no longer exists as a standalone company. It ceased operations at the end of the last financial year, and its functions have been folded into a new entity – Innovation Victoria.
Breakthrough Victoria last month posted a note to its now redundant website reporting that, as of 30 June, it had made 103 investments totalling $529 million. That portfolio of assets was now valued at $824 million, representing nominal $246 million surplus. Most of these assets are illiquid, meaning they cannot be readily sold.
The second issue is that the opposition is proposing to use forgone capital expenditure over the next decade to cover an operating expense in the next four years. Given that nearly all government capital expenditure in Victoria is financed by debt, this would mean a Wilson government intends to bring forward future borrowings to pay for an immediate health expense.
While the state’s long-term fiscal position would be left largely unchanged by the Coalition’s plans, they would increase government spending, debt and the cost of interest repayments, and reduce the size of operating surpluses over the next four years.
A third problem is that unpublished budget figures for Innovation Victoria suggest that the PBO’s costings assumptions are out of date.
When announced by then-premier Daniel Andrews and treasurer Tim Pallas in the middle of the COVID-19 pandemic, Breakthrough Victoria was intended to invest $2 billion over 10 years in start-ups and other ventures.
Its funding was last year trimmed to $1.68 billion over 15 years, an average of about $110 million a year. These are the figures on which the PBO provided its costing to the opposition.
However, the current budget for Innovation Victoria reveals the new entity will this year receive just $72 million in government funding, $58 million in 2027-28, $50 million in 2028-29, and $100 million in 2029-30.
In total, Innovation Victoria is budgeted to receive over $280 million in public funds over the next term of government. Of this, about $217 million is for capital investments – the old functions of Breakthrough Victoria – and $64 million is for programs, initiatives and staffing the opposition wants to keep.
When the $1.27 billion cost of the SurgerySooner plan is offset by the $217 million from forgone investments over the next four years and $170 million from asset sales, the opposition’s costings come up $883 million short.
In responses to questions from The Age, the opposition did not explain how money not used for capital investments a decade from now could be used to offset the cost of putting more people through elective surgery in the first term of a Wilson government. It also declined to provide the full PBO costing for winding up Breakthrough Victoria.
“Faced with a choice between this Labor government playing venture capitalist with their money or halving Victoria’s elective surgery waiting list, Victorians will choose the latter every day of the week,” a spokesperson for the Coalition said.
“All our commitments are fully costed by the independent Parliamentary Budget Office.”
The savings from winding up Breakthrough Victoria and the cost of providing an additional 25,000 electives surgeries were separately costed by the PBO. This masthead confirmed that when senior Coalition campaign figures saw the similarity between the two numbers, they decided to use one to “rhetorically” offset the cost of the other.
A source close to Wilson conceded that while accountants might have problems with the budgetary details, voters would welcome the idea of the government prioritising an urgent health need ahead of future investments in emerging ventures.
The government accused the opposition of wanting to “Americanise” the state’s healthcare system under the election campaign.
“Jess Wilson’s centrepiece health policy is to Americanise our health care system and cut public hospitals and nurses at the same time – and on top their numbers don’t add up,” Minister responsible for Innovation Victoria Anthony Carbines said.
Treasurer Colin Brooks asked,“How can you be expected to govern if your primary health policy isn’t costed properly?”
A spokesperson for the Coalition said the opposition “will not be lectured to by a team of economic vandals running a desperate scare campaign in a vain attempt to distract from their own failures”.
Operating expenses and capital investments, while accounted for differently in budgets, contribute to the overall fiscal position of the government, which Wilson has emphasised with her pledge earlier this year to return the state’s finances to a cash surplus by 2032.
Campaigning in the marginal seat of Bass on Sunday, Wilson said a cash surplus was the first step towards paying down debt and long-term budget repair. “In simple terms, what it means is there will be more money coming in than what is going out,” she said. “At that point in time, we stop borrowing money, and we start to reduce debt and the interest bill.”
Victoria last posted a cash surplus in 2016-17, after the Andrews government sold a 50-year lease on the Port of Melbourne for $9.7 billion, and reduced the state’s net debt to $15.8 billion.
This year’s budget forecast cumulative cash deficits of $30.5 billion over the next four years, when net debt will reach $200 billion and the state’s annual interest bill will be pushing $12 billion.