Fairfax’s Ross Gittins has written a very good critique of the Abbott Government’s $20 billion Medical Research Fund (MRF), which he argues is one giant Budget “con job” designed to stealthily cut health spending, whilst giving the appearance that the Budget is in better health than it actually is:
I’ve never seen a con as audacious as the proposed medical research future fund.
…since the government is in deficit, it doesn’t actually have any money to put into its medical research future fund account. So to its normal borrowing to cover the deficit it will have to add borrowing to finance the money it puts into the research fund. This extra will add to the size of its gross public debt, but not to its net debt…
However, when the government spends the interest on the medical fund on medical research, this spending will be recorded above the line and so will add to the deficit.
Once the dust has settled, however, I expect to see a second leg of the trick brought to fruition. In a subsequent budget the government may decide that, now it’s spending more on medical research via the future fund, it’s able to spend less on medical research via the National Health and Medical Research Council. This brilliant con job will be complete.
…[The fund is] designed to allow the government to break its election promise not to cut health spending while claiming it hasn’t broken it, just “reprioritised” health spending.
Finally, the underlying reason for the MRF has come to light. We had initially argued that it was a ‘thought bubble’, since the MRF was only a late addition to the Budget – health department officials only began working on the policy in April, just weeks before it was announced – and the Australian Chief Scientist, Ian Chubb, was not consulted.
But now it appears that it was a deliberate attempt to: 1) distract the electorate from the Coalition’s planned co-payments on medical services, as well as the cuts to state hospital funding announced in the Budget; and 2) provide a backdoor way of cutting health expenditure.
Like the Government’s $8.8 billion transfer to the Reserve Bank of Australia (RBA), which was provided without a request from the RBA and against Treasury’s recommendation, and clearly designed to inflate the former Labor Government’s final deficit, whilst reducing future Coalition deficits (via higher dividend payments from the RBA), the MRF is yet another recent example of budget trickery by federal governments – both Labor and Liberal.
