Show me the money
7 Dec 2012|

A slice of pie for Defence?

In the film Jerry Maguire, Tom Cruise’s client Rod Tidwell believes that the only way a team can ever really demonstrate that they value him is to pay him more—leading to the famous ‘show me the money!’ scene. Of course it’s not strictly true that everything can be reduced to money. The moral of the movie is that love, happiness and friendship are also vital. Nevertheless, it’s the $11.2 million contract that Jerry eventually wins for Rod that makes the happy ending possible.

A recent column by Peter Layton questioned the tendency of many commentators to see Defence as being ‘all about the money’. He correctly points out that this runs close to assuming that the allocation to the three services is little more than risk management. But then Layton suggests that a ‘simple focus on money can distract from other matters that might be equally or even more important’.

No one can quibble with his argument. After all, it’s the way money’s spent or used to support a particular strategy that provides a far better measure of effectiveness than the simple quantum of funds allocated to Defence. But that doesn’t mean the bottom-line figure is irrelevant. In fact, rather the reverse.

The difficulty is that instead of allowing strategic needs to drive Defence spending (roughly $24.2 billion a year), the reverse is now the case. The analysts to whom Layton refers are simply pointing out that the military is increasingly left at the end of the line when the time comes to divvy up the funding. As Henry Ergas pointed out in a previous post, like everyone else, politicians use the allocation of fiscal instruments to demonstrate exactly where their priorities lie. This is becoming a major difficulty not just for the forces but for the very concept of strategy itself.

The Gillard government has repeatedly announced that its priority is returning the budget to surplus. Once this has been achieved, the politicians have announced that they want to fund significant initiatives in education ($6 billion) and the National Disability Insurance Scheme ($8 billion). At the same time, non-discretionary spending on issues such as health and Social Security consumes by far the majority of the budget. Both the government and opposition are committed to not increasing taxes, yet they’ve got all these other spending priorities. Although growth has picked up (slightly), new taxes such as the Resource Rent Tax have failed to keep pace with the government’s revenue requirements. And that’s why so many analysts have focused their attention on the broad funding envelope.

Both sides of politics have now indicated quite clearly that they’re very willing to raid the Defence piggy bank to fund other, more politically desirable programs. Yet there’s been no suggestion that our ‘grand strategy’ might have to change. Labor and the Coalition have indicated they are wedded to the US alliance; it’s just that neither seeks to make Defence spending a political issue. They know they can allow the overall funding allocation to fall while they reallocate money towards other priority issues. This is why it’s absolutely correct to focus our attention on the bottom line.

Theoretically, of course, the chosen strategy should dictate the funds allocated to Defence. The reality is that politicians have decreed other spending priorities to be more important. Yet neither side of politics is prepared to cut their strategy cloth to the funding parameters. Both are relying on the fact that the US can’t afford to leave us in the lurch.

This is what’s driving the renewed focus on money.

Nic Stuart is a columnist with the Canberra Times. Image courtesy of Flickr user pernillarydmark.