O'Farrell makes a sham of government guarantees


During the Global Financial Crisis (GFC), the words 'government guarantee' were a source of great confidence to many Australians. In October 2008, the Federal Government guaranteed deposits and wholesale funding for banks and other financial institutions. That meant our banks would not crash, because we had the confidence to keep our funds with them and maintain borrowing arrangements. It was one of the factors that got us through the GFC.

It worked because Australians trust their politicians to honour government guarantees. The word 'guarantee' implies that what is being guaranteed is sacred. Government guarantees are not like election promises, which are playthings that voters regard with skepticism. Guarantees are fixtures.

Many may doubt the Government's competency in the day to day running of the country. Budgets blow out and cuts are needed. But a guarantee is something that sticks, whatever the circumstances. Having certainty around what we share in common is what binds us together into society.

The 120,000 NSW residents who signed up to the Solar Bonus Scheme of the previous Labor Government received a government guarantee. They would be paid 60 cents for every kilowatt hour of electricity generated by the solar panels on their rooftops, until the end of 2016. That is why so many signed up. They had absolute confidence that they would receive this amount, and relied upon it to pay for their panels during the course of the program.

But earlier this month, the new premier Barry O'Farrell announced that he needed to dishonour the 60 cent government guarantee. He would retrospectively legislate for the payment to be cut to 40 cents. Many more residents than expected had signed up, and honouring the 60 cent commitment would mean taking funds that would otherwise be used for things such as transport and health expenditure.

The premier maintained that using the money for these other priorities would represent a better use of public funds. But he does not appear to have factored in damage to the institution of the government guarantee, which is priceless.

While we cannot cost a government guarantee, we will have some idea of its monetary value — and the price of its dishonouring by the NSW Government — when there is another GFC and trust in the instrument of the government guarantee is discovered to have diminished. That moment could arrive sooner rather than later.

But more importantly there is the loss to the community of the spirit of public trust with the revelation that the government guarantee is a sham. In dishonouring the guarantee, O'Farrell is effectively and chillingly saying that there's no such thing as a government guarantee in a manner reminiscent of Margaret Thatcher's infamous assertion that there was 'no such thing as society'.

Michael MullinsMichael Mullins is editor of Eureka Street. 

Topic tags: Michael Mullins, government guarantee, gfc, public trust, Barry O'Farrell, Solar Bonus Scheme



submit a comment

Existing comments

Michael, did you write an article condemning Julia Gillard for breaking her word about not introducing a carbon tax? If I missed it, apologies. If you didn't write one, then why the double standard?

John Ryan | 30 May 2011  

Well er yes. I recall the statement 'There will be no carbon tax under the goverment I lead' - that was a lie from Julia Gillard. I recall those in small businesses ruined through the pink batts scheme and the 'pink batts on wheels' scheme - cash for clunkers. And these were schemes advocated by Labor and reneged on by Labor. At least O'Farrell shows some consistency in conviction in scrapping something he does not believe in. Labor scraps things it DOES claim to believe in.

Skye | 30 May 2011  

Do you feel as strongly about Gillard's commitment to us that there would be no carbon tax ?

john crew | 30 May 2011  

O'Farrell came to power because electors hoped for a change from the dishonesty of the previous government. As Michael points out, this is not just a breach of an election promise, not to enact retrospective legislation. We are used to breaches of election promises. It is breaching a guarantee. That is dishonest. He may think that by the time of the next election we will have forgotten this dishonesty. We won't. We will be reminded of it every four months when we get our electricity bill.

Alan Hogan | 30 May 2011  

And Julia Gillard said "there will be no carbon tax under the government I lead"

Ron Cini | 30 May 2011  

So, a bad government sells off an asset (tax payers' money) to a select group of people at a ludicrous valuation and the deal must stand, is that what you are saying? What does the ballot box mean in a democracy when bad policy is beyond reproach?

walter hamilton | 30 May 2011  

Sorry. Bad arithmetic. Make that every three months.

There is a difference between telling a lie and breaking a promise. Julia Gillard did the second not the first. And there is a difference between breaking an election promise and breaching a government guarantee. O'Farrell did the second, not just the first.

Alan Hogan | 30 May 2011  

The author is right to make the difference between an election promise and legislated guarantees which are law. Only the government has the power to break a contract and it should only do so in the most extreme of criminal circumstances. We don't get to extricate ourselves from poorly negotiated contracts so why should the Government? Especially over a failed social program where the Government got what it wanted... mass participation.

john | 30 May 2011  

Sorry Skye and Ron Cini, you've avoided the point that Michael is making. IF the former NSW government CONTRACTED with individuals to buy their output at a certain price, then that contract should stand. Can you imagine how the big end of town would react if the government reneged on a supply contract with them? That doesn't mean that the terms of those contracts were a good idea, or that the price set was not ridiculously high. All it means is that a contract is a contract, and if you want to get out of a contract then you have to negotiate your way out rather than abrogate it. That's what Michael is saying, and I agree with him. Do you?

Ginger Meggs | 30 May 2011  

Barry O'Farrell, by dishonouring a government guarantee is, ipso facto, a dishonourable person. While all politicians are known to break promises
when need be, dishonouring a Government guarantee
is like breaking a contract. If I pay a builder 10% of the cost to build a house and he does not do so, I could sue the builder in question.

Joyce | 30 May 2011  

Ginger Meggs, I can see the distinction that you are making and agree with it. Nevertheless, I still think that Michael is too willing to let Julia Gillard off the hook. Tony Abbott was condemned roundly by one contributor here and many posters for his candid admission that not everything politicians said should be taken as gospel.

As Michael is the editor of Eureka Street, I would have hoped for a more consistent policy on the expectations the writers have of politicians, regardless of their political persuasion.

John Ryan | 30 May 2011  

John Ryan, I understand the point you are making, but I'm not sure that the evidence supports a view that Michael or Eureka Street are politically biased such that they let Gillard (or the left) off the hook while castigating Abbott (or the right). When I look down at the list of previous articles by Michael (at the foot of this page) I don't see any political bias on the part of Michael.

And the lead article for today by Binoy Kampmark certainly does treat Gillard kindly. Sure there are examples of rank political bias by some posters, but as long as ES doesn't filter those for one side rather than the other (and I don't think that happens here) one can't criticise ES or Michael for them. In fact, when I compare the breadth and depth of the articles and the mostly civilised posting on this site, with with what one sees on both the Murdoch and Fairfax press, and even sites like New Matilda, I think Eureka Street performs very well.

Ginger Meggs | 31 May 2011  

Not only has BOF repudiated contractual arrangements for those accepted into the Solar Bonus Scheme, he has flouted his (and his colleagues) publicly stated election commitments that a LNP government would honour those arragements. If he is allowed to get away with such blatant disregard for his promises and the integrity of government contracts, it will licence others to push the boundaries further. We can only hope that the upper chamber takes a stand for integrity and honesty. [Yes, I am one of the 120,000 or so affected.]

EdC | 31 May 2011  

Similar Articles

How Islamic law can protect Australian cows

  • Fatima Measham
  • 02 June 2011

On Monday evening, Four Corners viewers reeled at images of Australian cattle being slaughtered in Indonesia. Since Indonesians are predominantly Muslim, perhaps an appeal to change their inhumane practices can begin with an appeal to the concept of halal: that which is permissible under Islamic law.


Labor's poor political antennae

  • John Warhurst
  • 30 May 2011

The Government's free set-top box scheme is facing community and Opposition claims that it is wasteful and will tempt rorters and shysters. What should be a feel-good scheme has become a cavalcade of the disgruntled. This tells us a lot about politics and policy-making.



Subscribe for more stories like this.

Free sign-up