Make politicians issue prospectuses

The problem is not that the government is going to introduce a new tax, or perhaps several of them; that's a good idea. The problem is that Tony Abbott promised “no new taxes” in order to win government. He also promised not to break promises. Absolutely, definitely won’t do it, he said.

Tomorrow, as always happens with the first budget after an election, we will learn which of the promises will be kept and which will be ditched.

Because the budget has been comprehensively leaked, which always happens now as well, we know there will be at least one new tax in contravention of the Abbott promise.

Australia has developed a tradition of politicians saying anything at all in the lead up to an election and then disregarding some of it in the cold light of government. As a result, there is a bitter cynicism surrounding election campaigns that will be reinforced once again tomorrow.

It used to happen when entrepreneurs tried to raise money from the public, until prospectuses were invented that carry heavy civil and criminal penalties for any false or misleading statements.

Statements made on initial public offering roadshows or in advertising to support it were given the same penalties as if they were made in a prospectus. Promoters are rightly terrified of making any verbal predictions that aren’t strictly in line with the forecasts in the prospectus.

Electing a national government is, you'd have to say, more important than a corporate IPO. Yet there are no restrictions on what is said during the “roadshow” and no penalties for false and misleading statements.

Part 7 of the Charter of Budget Honesty Act 1998 requires a pre-election fiscal outlook statement from Treasury within 10 days of the issue of the writ for a general election, and Part 8 says any party leader “may” ask the Prime Minister to request Treasury to cost any of its policies. The opposition leader or a minor party is not obliged to make the request, and the Prime Minister is not obliged to pass it on.

As a result, each election is preceded by a careful policy costing dance, in which the opposition says it will get an accounting firm to do it instead of Treasury and then releases it at the last minute before the election.

In the meantime there is a frantic national roadshow, otherwise known as an election campaign, in which each party leader makes at least one new promise every day, often off-the-cuff.

If anything, the Charter of Budget Honesty and the PEFO from Treasury have only made things worse because whenever a law is passed, anything that’s not specifically mentioned is specifically OK.

Election promises are not mentioned, and policies are not required to be costed; it only says they “may” be.

Politicians campaigning for election should be required to issue prospectuses as if they were floating a company, along with stiff penalties for false and misleading statements.

It won’t happen, of course, because those who would have to pass such a law are the same people exploiting its absence.

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