Fact check: Did the Victorian Coalition cut a billion dollars from health when last in office?

Updated

The claim

Victorian Labor has warned voters to brace for budget cuts if the Coalition wins the November 24 state election, with accusations the former government slashed health spending during its term.

Claiming cuts were "in the Liberals' DNA", Health Minister Jill Hennessy released a statement on October 12, 2018 which said that "the Victorian Liberals cut a billion dollars from health when they were last in office".

The following week she repeated the charge:

"[T]he former Liberal-National Government cut a billion dollars from health when they were last in office, and will do it again if they get the chance."

Is she correct? RMIT ABC Fact Check investigates.

The verdict

Ms Hennessy is wrong.

Under the Coalition, health spending grew from $7.4 billion in 2009-10 to $8.7 billion in 2014-15.

The average annual increase over the five years was $264 million, while the cumulative extra spending over the period was $4.1 billion.

These figures factor in the effects of inflation in the health sector and refer to spending on both recurrent health services and one-off capital expenditure in the health portfolio.

They also show health spending grew faster than population growth.

Ms Hennessy's office provided Fact Check with figures summarising the projected effects of savings measures announced by the Coalition.

But these numbers, drawn from the state budget papers, do not show what was actually spent.

And while Labor's figures illustrate Coalition efforts to reduce expenditure in some areas of the health portfolio, they do not acknowledge new spending measures announced at the same time.

When were the Liberals in government?

The Liberal-National Coalition held office between December 2010 and December 2014, led initially by Ted Baillieu and later Denis Napthine.

In its time the Coalition government handed down four budgets — the first for financial year 2011-12, delivered in May 2011, and the last for financial year 2014-15.

Though 2010-11 was a Labor budget, the new government delivered that year's mid-year budget update, promising to produce $100 million annual budget surpluses and to "act immediately to implement its substantial savings agenda".

Once in office the Coalition announced a range of government-wide measures to reduce costs, with revenue forecasts progressively downgraded by several billion dollars in the face of worsening economic conditions.

Fact Check has assessed the Coalition's record relative to Labor's last full budget year, which was 2009-10.

What's a cut?

As experts have previously noted, budgeted savings may never eventuate, meaning the only way to reasonably assess a cut is on what actually happened.

Fact Check has also argued that a "cut" is not a cut if funding continues to rise — though that growth may shrink as a result of savings measures.

Getting an accurate picture of this requires taking into account the effects of inflation, or rising costs.

And assessing whether funding went backwards means looking not only at total funding but also spending per person, which factors in population growth.

Sourcing the data

Experts said the Australian Institute of Health and Welfare produces reliable figures for spending on health services by the Victorian Government.

These include both recurrent expenditure, which covers the cost of wages and services, and capital expenditure, or spending on infrastructure.

Health spending figures are also published in the budget papers for each year.

However, as Fact Check has previously written, they include Commonwealth contributions.

By contrast, the institute's latest data isolates spending by the State Government for each budget year.

The institute has produced figures adjusted for inflation in the health sector, meaning any spending increases will appear smaller over time.

What actually happened

Ms Hennessy claimed the Liberals "cut a billion dollars from health".

However, the health institute's inflation-adjusted data reveals spending by the state government rose over the Coalition's term in office.

Annual spending was $7.4 billion in 2009-10, Labor's last full year in office.

It was $8.6 billion in 2013-14, the Coalition's last full year in office, and $8.7 billion in 2014-15, when the government changed mid-year.

The average annual increase over the five years was $264 million and the cumulative extra spending over the period was $4.1 billion.

Over the same period, recurrent spending increased from $7.2 billion to $7.8 billion.

That was an average increase of $122 million per year, or a cumulative increase of $1.5 billion.

Not everything was rosy ...

Still, not every Coalition year saw increases. Recurrent spending decreased in 2011-12 and 2012-13, relative to the previous year, by a combined $26 million.

This will have affected health services in those years.

In fact, 2012-13 also saw a decrease in Commonwealth funding for Victoria's hospitals and a funding fight erupt with the state government over a $107 million repayment of federal funds.

At the time, associations representing doctors, nurses and hospitals told a senate inquiry that Victorians were dealing with bed closures, increased elective surgery wait lists and reduced staff and services.

Capital expenditure by the state government also fell by $137 million in 2012-13, producing a decrease of $155 million in total health spending for that year.

Accounting for population growth

Although Ms Hennessy's claim referred to total spending, Fact Check also considers per person spending to be an important measure.

As the Grattan Institute's Dr Stephen Duckett told Fact Check, referring to his time as chair of Melbourne's Alfred Hospital:

"At the end of each financial year, we knew that if we were to do the same amount of work this year as we did last year, it was going to cost us more money."

From 2009-10 to 2014-15, Victoria's population increased by 1.9 per cent per year, on average. Health spending outpaced this, rising by an average 3.4 per cent per year.

Checking Labor's figures

To support the claim of cuts worth "a billion dollars", a spokeswoman for Ms Hennessy told Fact Check that "when last in government the Liberal Nationals imposed cuts characterised as 'savings' and 'efficiency dividends'".

She supplied Fact Check with a list of these measures she said had been prepared by the Department of Health and Human Services.

The list, she said, "summarises the funding reductions" announced between 2010-11 and 2014-15. It included footnotes pointing to relevant references in budget papers and budget updates.

For example, one set of figures corresponds with a line in the 2011-12 budget called "election commitment savings". These figures total $358 million over five years, beginning in 2010-11.

But this methodology is problematic. For one thing, the budget table used by Labor does not show whether these savings were ever implemented.

The list also ignores new spending measures, contained in the same budget table.

One of these, called "hospital operations growth funding — including 800 new hospital beds election commitment" was worth $1.07 billion over five years.

In fact, the 2011-12 budget shows net spending on health department initiatives (total spending minus savings) was nearly $1.6 billion for the same period.

RMIT public policy expert Professor David Hayward told Fact Check that the important question was: "what's the net change?"

"Well, the net change is positive," he said.

"And it's not unusual for governments to say we're going to look for efficiency savings within a portfolio, but overall we're going to be increasing the amount going to new initiatives."

The effects of efficiencies

Ms Hennessy's figures also take in a range of Coalition savings measures that reduced spending by the government more generally.

These "efficiencies" were announced in the 2011-12 and 2012-13 mid-year updates, as well as the 2012-13 and 2013-14 budgets.

The budget papers do not say what portion of total government savings would apply to the health portfolio, but the department has included estimates in the figures cited by Ms Hennessy.

The department refused to answer Fact Check's questions about how these were apportioned, saying it was inappropriate to comment "given where we are in the election cycle".

Included in its table were $246 million of efficiencies from the 2011-12 budget update — though at the time the government said these measures would "not affect key service delivery areas such as health".

According to the department, the 2012-13 budget announced health efficiencies worth at least $470 million over four years.

Dr Duckett told Fact Check this figure sounded feasible given the size of the health budget.

He also said the efficiencies would likely have affected health services, given how much of the health budget goes to service delivery.

Principal researcher: David Campbell

factcheck@rmit.edu.au

Sources





Topics: health-policy, budget, state-elections, alp, vic

First posted