Madam Speaker, when this Government was sworn in just over six months ago, we said we would set about delivering our long-term plan for the future, which we have.
We said we would deliver on all of our election commitments, because they form a critical part of our plan, which we're doing.
And we said that we would put the Budget back onto a sustainable path, which we are.
Madam Speaker, putting the Budget back onto a sustainable path is not an easy task, but this Government regards fixing the Budget and strengthening the State's financial position for future generations as one of its most important commitments to the Tasmanian people.
The previous Government delivered deficit after deficit, put the Budget into an unsustainable position and put the State on track for cumulative deficits of more than $1.1 billion.
We simply cannot allow the Budget position to get worse. If we don't start to fix the problems now, the actions that will need to be taken in future years will be even more severe.
Madam Speaker, the Budget which passed through both Houses supported by all Members contains a plan to nearly halve the cumulative deficit over the next four years and return the budget to surplus within six.
We know that as a result of the election of a majority Liberal Government and the first Budget we handed down, business confidence is the highest in the nation. There is an air of quiet optimism in the community as retail sales recover, visitor numbers increase, jobs are created and the economy begins growing again for the first time in years.
We need to maintain the momentum and it is critical that we do not change tack.
Madam Speaker, earlier this month I updated this House and the Tasmanian public more broadly on the progress of achieving the savings task we set ourselves in the Budget.
In that Statement I outlined that the Budget contained total savings and revenue measures of $993 million. Included in that total were $567 million of agency savings including a reduction this year of 361 FTEs out of a total of 700 FTEs over the forward estimates.
This savings task is progressing, and I can inform the House that in the last few weeks the number of public servants who have voluntarily expressed an interest in either the Work Place Renewal program or the voluntary redundancy program has grown substantially.
Madam Speaker there have been 823 expressions of interest in these programs.
There have been 644 expressions of interest for the Workplace renewal program and 179 for voluntary redundancies.
The Government's aim was to reduce the public service by 361 FTEs over this financial year and we are well on the way to achieving this saving.
However, in the Budget we included and committed to additional savings in order to start the task of repairing the State's finances.
The most significant of these was the temporary pay freeze. The savings that would have been delivered by the pay freeze, around $50 million in a full year and a total of $178 million over the Budget and Forward Estimates are embedded into the Budget that has been unanimously supported by this Parliament.
The pay freeze was significant because it tackled the significant growth in public sector wages that the state has witnessed over the last decade.
In just the past six years, the total wage increases for some Tasmanian public sector employees has actually ranged from 26 per cent to 42 per cent. In total, public sector wages have increased by an average of 5.7 per cent per year over the past decade.
Over the same period, the average annual growth in consumer prices, as measured by the Hobart Consumer Price Index, was just 2.6 per cent. Public sector wages were increasing, on average, at twice the rate of the consumer price index over the past decade.
It's clear that if we are going to get the Budget back on track we need to address the spiralling wages bill.
The Government has made its position perfectly clear: $50 million a year will be saved, either through a temporary pay freeze, or through reducing the size of the public sector.
We could not have been clearer about the consequences of not supporting the pay freeze.
Madam Speaker, those opposed to the pay freeze have had their chance to offer up their alternative.
Two weeks ago, when the unions made a sudden about face and claimed that after months of opposing the wage freeze they suddenly supported it, we made it perfectly clear that we would not accept 'straw man' proposals and we would only be willing to consider a genuine proposal that would assist in achieving the required $50 million per annum in savings that were embedded into the Budget bottom line.
Unfortunately, what the unions proposed would not deliver the savings required.
Treasury has calculated that the unions' pay freeze proposal would deliver just $17 million in total savings, leaving more than a $160 million shortfall in the Budget over four years.
With only a once-off saving in 2014-15, followed by two pay increases next financial year, which would totally wipe out any savings made this year, the proposal provided no path to financial sustainability.
And, Madam Speaker, it contained a condition that the Government commit to no more than the 361 FTE savings already announced in the Budget, despite providing only $17 million in savings.
It simply did not add-up.
We are not prepared to accept the proposal, because it would compromise the Budget bottom line.
However, I am pleased to confirm that the Police Association has been reasonable and sensible, and has put forward an in-principle proposal that will deliver their share of the savings required.
If endorsed by the broader Police Association membership, we will quarantine frontline police services from any additional savings required.
In other words, through acting maturely and responsibly, the Police Association has effectively saved the jobs of around 40 employees.
Madam Speaker, the Government will take a strategic approach to implementing the remaining alternative savings initiatives needed in the absence of the temporary pay freeze.
We will not be applying a "blanket" one size fits all approach of requiring all agencies to find all of the savings necessary to offset those from the pay freeze that were factored into their agreed agency allocations.
Rather, we will allocate savings across agencies on a basis that balances the areas of highest priority, the need to minimise impacts on the frontline, and the ability of agencies to deliver higher levels of efficiency.
Madam Speaker, we have been clear in that we need to achieve full year savings of around $50 million and that these savings equate to approximately 500 FTEs.
As a result of the Police Association's sensible approach to the pay freeze, they have, as I have said saved 40 of these positions and the Government is now faced with finding savings equivalent to around 460 more FTEs this year on top of the reduction of 361 FTEs we have already committed to.
We will employ all of the measures available to us in the toolbox to get this job done: tight vacancy control, inter and intra agency transfers, workplace renewal programs and targeted voluntary redundancies.
We have been very clear that we will not employ forced redundancies and once again I want to ensure that is understood.
Madam Speaker, the Government agency savings announced in the Budget included savings equivalent to a reduction of 361 FTEs this financial year. In the absence of the pay freeze the Government must now achieve savings equivalent to a further 500 FTEs, meaning in total savings equivalent to 861 FTEs this financial year now need to be achieved.
These savings will be distributed as follows:
State Growth
After finalising the merger of the Departments of Infrastructure, Energy and Resources and Economic Development to form the Department of State Growth, the Government will take this opportunity to further streamline the new Department.
This is about making sure that the Department of State Growth is resourced to implement a significant part of our long-term plan and that the size and shape of the Department is relevant to that aim.
This initiative will deliver substantial savings and reduce the amount of savings that have to be made in other areas, such as health and education.
Other departments will still need to absorb additional FTE reductions, but State Growth will have the largest reduction, relative to its size.
As a result, State Growth will be tasked with delivering total savings equivalent to 174 FTEs as a part of its overall agency savings target.
Currently, the Department employs 3.3 per cent of all government FTEs.
This FTE reduction means that State Growth will contribute 20.2 per cent of the total Government savings from FTE reductions this financial year.
This, Madam Speaker, demonstrates the level we have gone to maximise savings in non-frontline agencies.
This will not be an easy task and will be unsettling for many staff in the agency. The Government will ensure that communication with staff is conducted in a clear and timely way that ensures that as quickly as possible the direction for staff within the agency is made clear.
Education
Madam Speaker, given that the Education Department makes up nearly a third of the entire public service, the Department will also have to play a role in achieving the extra savings needed in the absence of a temporary wage freeze.
We are working with the Department to make sure that there is as little impact as possible on the frontline.
There are nearly 8,000 FTEs in the Education Department. Education will be required to find total savings equivalent to 266 FTEs this financial year.
As a significant number of workplace renewal inquiries have been received by the agency already we expect that savings in the main will be able to be achieved with minimum impact on frontline services, and without increasing the current class size ratio target above the average of 25 students.
Health
Madam Speaker, the health system accounts for around 40 per cent of the public service, with nearly 10,000 FTEs, more than 2,000 of which are corporate or administrative services staff.
Health will need to find additional savings. However, while the health system accounts for roughly 40 per cent of all staff across the public sector, as a share of the total government savings task of 861 FTEs, Health will be asked to provide only 26 per cent of this total.
This means that across the Health and Human Services Department and the three THOs, savings equivalent to 224 FTEs are required this financial year.
By improving efficiencies across corporate services and areas that are not directly frontline I am confident that these savings can be achieved with minimal impact on the frontline.
Smaller Departments
Smaller departments will also be expected to provide savings.
There are nearly 5,000 FTEs in smaller agencies and savings equivalent to a total of 157 FTEs will need to be made this financial year.
Treasury, Justice, DPAC, DPIPWE and the remaining smaller agencies will all make a contribution to the savings task. Only Police will be immune as a result of their union's strong leadership.
Madam Speaker, I know that there will be some who will criticise any savings achieved from a reduction in FTEs, no matter how strategic it is.
Those critics had their chance to put forward reasonable and sensible alternatives to avoid reducing the public sector by an additional 500 FTEs, but have failed to do so.
They have campaigned against the pay freeze, and now they claim they support it.
They claim they oppose job cuts, but their very actions have made them inevitable.
This renders the noise that they will make over the coming days, weeks and months about today's announcements as just that – noise.
Madam Speaker, the Government inherited an unsustainable Budget position and we must take the necessary steps to fix it.
What I have announced today will be challenging for many people to accept. However, we have to get on with the job that Tasmanians elected us for.
And Madam Speaker, getting on with the job is exactly what this Government is going to do.
FTE reduction | FTE at start of 2014-15 | % of total GG FTE at start of 2014-15 | % of total 861 FTE reduction | % reduction in FTE from 2014-15 starting base | ||
Education | 266 | 7723 | 31.6 | 30.9 | 3.4 | |
Health and Human Services (incl THOs) | 224 | 9773 | 40.0 | 26.0 | 2.3 | |
State Growth | 174 | 814 | 3.3 | 20.2 | 21.4 | |
Police and Emergency Management | 40 | 1490 | 6.1 | 4.6 | 2.7 | |
Other Agencies | 157 | 4639 | 19.0 | 18.2 | 3.4 | |
Total | 861 | 24439 | 100.0 | 100.0 | 3.5 | |