Nick Richardson, “Modesty ablaze,” The Bulletin, April 30, 1996, pp. 48-49.
Last September, at a dinner in federal parliament before about 60 Coalition MPs and friends, former New Zealand finance minister Ruth Richardson made a presentation called “Freedom in action”. It detailed how necessary it has been to take drastic steps to lift New Zealand’s economic performance and included how Richardson had raised budget transparency and accountability.
The audience was impressed. But the select group of MPs had a fair idea of what they were getting when one of the number, the former political adviser to Malcolm Fraser and political scientist David Kemp, invited her to address them. The low-profile, predominantly “dry” group of Coalition MPs known as the society of modest members was already in broad sympathy with Richardson’s goals.
Within five months, a version of those goals would become part of the Coalition’s promise to the Australian electorate.
The modest members have been around since 1981, formed in recognition of C.R. “Bert” Kelly, a federal Liberal backbencher who extolled his then somewhat heretical anti-protectionism view in The Australian Financial Review under the byline of the The Modest Member, and later at The Bulletin and The Australian as The Modest Farmer. Kelly, now 84 and living in Adelaide, remains the patron of the society. The battle that he started was taken up by Liberals Jim Carlton, John Hyde and Peter Shack in the early 1980s and although the argument about tariffs has been settled, largely in line with Kelly’s view, winning government gives the new generation the opportunity to move on to other items on the dry agenda.
Unearthed: During the past few years in opposition, the society had unearthed some new champions, including Liberal senators Brian Gibson and Jim Short as well as Kemp. All three are now senior players in the new government: Gibson is parliamentary sectary to Treasurer Peter Costello, Short is assistant treasurer and Kemp is minister for schools as well as assisting Finance Minister John Fahey on privatisation. Costello and the deputy prime minister and National Party leader Tim Fischer are also members. The influence of the modest members is not too hard to assess.
Gibson, in particular, has a good working relationship with Costello, having been one of his parliamentary secretaries in opposition. A former chief executive of Australian Newsprint Mills and chairman of Tasmania’s Hydro Electric Commission, the 59-year-old Gibson has pushed for using accepted corporate practices for dealing with the budget. Last May, in a detailed submission to Costello, Gibson advocated the introduction of accrual accounting, a commission of audit to lay out mid-term economic priorities and a charter for budget honesty, which was a version of Richardson’s fiscal responsibility legislation. Soon after, during his first headland speech, Howard gave an undertaking to implement all three interrelated measures.
Under the proposals, the full picture of the government’s revenue, expenditure, assets and liabilities will be documented for every department using the same accounting method corporate Australia has used for years. The Audit Commission will report back to the government in June and is expected to recommend where some budget cuts can be made. It will also look at potential areas of fiscal responsibility legislation that could be included in a charter for budget honesty. The charter will include a pre-election statement on the budgetary position but it may also impose broader reporting responsibilities on the government and the establishment of long-term budgetary objectives. The New Zealand act also lays down “responsible fiscal management” principles for the government to follow, such as reducing debt.
In the scheme of election promises, the charter of budget honesty was probably well down the list of voter appeal. But the modest members now have a voice and it seems to be getting louder. “It’s the gravitational force out there,” says one.
Mindset: The society grew out of a need to provide moral support for those MPs in federal or state parliament who spoke against the prevailing political and economic mindset. There are still state MPs who count themselves as members and former NSW premier Nick Greiner as considered one of the faithful, even if he did not formally belong. The membership list also includes current industrial relations minister Peter Reith, National Party senator David Brownhill, South Australian Liberal senator Grant Chapman and Victorian Liberal senator Rod Kemp. There are about 40 federal MPs who count themselves as modest members, but the numbers are likely to swell with the influx of 28 new Coalition MPs this month.
One of the society’s leading figures, John Hyde, believes that the society has changed. The protectionism demon, for example, has been slain. “The organisation began as a support for those who were courageous and correct … there’s more proselytising now,” he says.
Being in government provides the society with the opportunity to advance its causes, Hyde says, “Modest members didn’t have a lot of influence in opposition,” he says. Or so it seemed. In retrospect, the society and especially Gibson were industriously pushing a new view of government financial responsibility.
In November 1994, seven members of the federal parliament bi-partisan Public Accounts Committee were invited to New Zealand for a week to look at the changes that Jim Bolger’s National Party had implemented, including the Richardson reforms. Gibson, who is on the PAC, had only a vague idea of the details of the reforms but the trip convinced him that they were worthwhile. Less than a year later the PAC had established an inquiry to look at the commonwealth’s financial reporting, following on in part from former finance minister Ralph Willis’ announcement in 1992 that commonwealth agencies would use accrual accounting for the first time in 1994-5.
The morning after Richardson had spoken to the modest members, she made a similar presentation to the PAC. When the PAC’s report, sub-titled “Towards greater transparency and accountability”, was released in November, it endorsed the adoption of accrual accounting, or “whole of government” reporting, but stopped short of supporting fiscal responsibility legislation. The Labor-majority committee decided that the New Zealand model was inappropriate and recommended instead fiscal reporting legislation. “In the model of fiscal responsibility legislation envisaged by the committee, the transparency of fiscal reports — and the informed debate these reports will generate — will be the real discipline on the fiscal performance of the government of the day,” the report said.
Cost: Labor members of of the committee were concerned about the social cost of the New Zealand legislation because it may have led to cutting government programs in search of a balanced budget. Key sections of the federal bureaucracy were also sceptical. Finance secretary Steve Sedgwick told the PAC: “New Zealand introduced the legislation because they faced a particular set of circumstances. They were in really big trouble … They begain in circumstances that were rather more desperate than ours.”
But Richardson sees no reason why Australia should not follow her lead. “The model has to represent a very attractive option for a new government,” she says. “There is economic appeal and the high moral ground.” She points out the Australian election campaign debate about the true extent of the budget deficit would not have occurred under her legislation because it would have had to have been divulged before the campaign. “The legislation moves the debate away from short-term-ism to the medium or longer-term frame,” she says. “It changes the nature of the political debate.”
It also has some quantifiable benefits, according to Richardson. Earlier this year, Bolger was able to promise $2 billion tax cuts to New Zealanders over the next two years on the basis of regular surpluses derived from widespread economic reform.
Hyde says the modest members’ current preoccupation with financial accounting is in keeping with the society’s traditional priorities. “We used to speak of fiscal and economic rectitude, but we never contemplated anything like Richardson introduced in New Zealand. To have a government forced to be honest, like a corporation, is pretty radical,” he says.
Gibson does not believe that the government’s proposals necessarily indicate that modest members are becoming more influential. “It’s a fairly informal and friendly group … to get people thinking,” he says. “I doubt if it’s going to be a major influence [on government policy].”
Kelly firmly believes that, regardless of the extent of its influence, the society has a role to play. “There’s always a need for someone to tell people what they don’t want to hear,” he says. “You need it in any government and in any party.” Almost 20 years after Kelly lost his seat, the modest members may become the voice of the faithful rather than the sound of the heretics.
