Grylls facing some tough spending choices

11/03/2009 - 22:00

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BRENDON Grylls has had a dilemma before.Back in September last year, he was sitting pretty, holding the balance of power and able to decide who formed a government.

Grylls facing some tough spending choices

BRENDON Grylls has had a dilemma before. Back in September last year, he was sitting pretty, holding the balance of power and able to decide who formed a government.

They were heady times, no doubt, for the Nationals WA leader.

Mr Grylls (pictured) talked long into the night with Labor leader Alan Carpenter and Liberal leader Colin Barnett, as well as his own state and national leaderships, trying to determine which way to go.

It was a tough choice, one many thought would define the party's future, in Western Australia and across Australia.

In the end, he chose Mr Barnett and was able to carve out a big commitment from the new government - 25 per cent of state royalties, amounting to about $675 million, to be spent outside the major population centre, on top of existing regional spending and promises.

The so-called Royalties for Regions policy of the Nationals had delivered for Mr Grylls and his party, giving regional WA political clout for the first time in ages.

Just six months later, Mr Grylls again has a dilemma.

This time Royalties for Regions is being labelled as an unaffordable albatross for the government as the state's finances deteriorate and it scrambles to find ways to save the budget and earn financial credibility in its first real test.

The government's own Department of Treasury spells this out in its recent Mid-Year Financial Projections Statement, the first major release since the election.

"The deterioration in the operating outlook since the PFPS (Pre-election Financial Projections Statement) totals $5.2 billion over the forward estimates period, with $1.5 billion of this due to weaker revenue (mainly duty on property transfers, interest income and GST grants), and $3.7 billion due to increased expenses (mainly associated with implementing the Government's election commitments, including the Royalties for Regions program, and associated borrowing costs)," the statement said.

While clearly not all of this is due to the Nationals' policy, it is clear that the introduction of such a scheme is unfortunate, given it comes after five years of boom times when the expenditure of this magnitude would have been less obvious.

In fact, Treasury estimates Royalties for Regions will redirect $2.4 billion over the next four years, about half of which is recurrent spending.

In this financial year alone, $229 million in Royalties for Regions recurrent spending includes: $100 million for the Country Local Government Fund; $40 million for the Regional Development Infrastructure and Services Grants Fund; $20 million for the Country Age Pension Fuel Card; $20 million for the Exploration Incentive Scheme; and $10 million each for the Northern Towns Development Fund and the Bushchange Housing Grant.

Opposition treasury spokesman Ben Wyatt claims Mr Grylls has made it known he will hold onto this revenue stream, which he oversees as the Minister for Regional Development.

"He has said, 'bad luck we are sticking to it'," Mr Wyatt.

But Mr Grylls is more circumspect and clearly understands the political dimensions of his new dilemma - one he most likely would have had no matter what decision he made back in September.

Like all political parties whose election promises suddenly come under pressure, the Nationals have to weigh up how they balance their interests with those of the state.

"We are either reneging (on election commitments) or belligerently jeopardising the state's finances," Mr Grylls said of the political labels given to the choices in front of him.

The Nationals WA leader does believe Royalties for Regions can coexist with a changed budget outlook.

"If it's framed in a way that makes sure the state's finances remain in good shape," he said. "Royalties for Regions will wear cuts commensurate with other areas of the budget.

"Across government, savings are being looked for and Royalties for Regions and other commitments will be part of that.

"We have not drawn a line in the sand."

However, he believes much of what the funding linked to Royalties for Regions is targeted at is important, not just to allow regional WA to catch up, but also because that is the engine room of the state's economy which will keep the economy afloat.

The Nationals have targeted numerous promised areas such as housing and hospitals, but are also looking at using the funding from Royalties for Regions to look at the possibility of an incentive scheme to assist minerals exploration.

Mr Grylls is pushing forward with legislation that will enshrine the targeted 25 per cent of royalties under the policy.

That legislation will divert the royalties to a fund.

It is at this point the potential for compromise exists, he said.

Spending could be delayed or the funds could be used to assist projects that failed to meet standards set by Royalty for Regions.

"How we would manage that would be subject to negotiation," Mr Grylls said.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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