Speak out, Robert Manne: Ken Henry silences dissent

Bookmark and Share Economics & Deregulation and Governance & Service Provision | Tim Wilson
The Spectator 25th June, 2010

If Australian bureaucrats were bound by baseball rules, Treasury secretary Ken Henry has had his three strikes, and it's time to go back to the bench. Australia's bureaucratic tradition mirrors that of Westminster. Mandarins are supposed to sit atop impartial process driven mounds dedicated solely to implementing the policies outlined by their ministers. And Kevin Rudd's Canberra would probably be Sir Humphrey's wet dream. Especially if he were Ken Henry.

Henry was first appointed secretary to the Treasury in 2001 under the guidance of the then Treasurer Peter Costello, who had been in the job five years. And whether Henry liked it or not, Costello was no Jim Hacker. But it would be hard to argue that's the case for Ken Henry during the Rudd government.

Instead of being a policy facilitator, Henry has been the fount of economic and tax wisdom in a government whose politicians are sufficiently economically illiterate that they think you can consistently be an economic conservative and oppose conservative economic reform. And because of his new status, Henry has gone from public servant to media spokesperson.

This transformation is clearly enjoyed by the actual Treasurer, Wayne Swan, as he has struggled to shake off the Treasurer training wheels because they are re-attached every time he confesses to a packed media conference that he needs a pesky economic acronym explained to him. And in the absence of their own economic reform agenda, Rudd and Swan have adopted Henry's policy recommendations that they like and even allowed him to publicly sell them.

But with such an important job comes criticism. And Henry isn't coping well. According to his foreword in the 2007 book, Silencing Dissent, La Trobe University academic Robert Manne argued the preceding Howard years were a neo-Dark Ages, absent 'spirited, honest and intelligent debate'. Manne's claim is that Howard's 'faithful followers' pursued 'systematically silencing significant political dissent'. And following the enlightenment of the Rudd government's election, the same voices hypocritically called for the new government's critics to be cleansed from the airwaves and opinion pages of newspapers.

To cope with his critics, Henry is now channelling similar sentiments. Following a speech to an ATAX conference in Sydney this week, Henry called for economists and tax experts to 'put down their weapons' and impose self-censorship when they are spirited to scrutinise Henry's government adopted policies. Reportedly, he laments the lack of 'consensus position' on anything economic and finds the public debate about the merits and failings of government policy 'unbelievably frustrating, incredibly frustrating' because of a 'handful of academics who will contest it'.

But what's surprising is that he feels the need to silence anyone. The dissenters aren't exactly an extensive well-organised opposition. Admittedly, since the stimulus plan's implementation, the number of critics has risen, including Henry's Reserve Bank Board colleague, Warwick McKibbin, who this week declared Treasury 'an arm of political policy' responsible for a 'panicked' package.

But during the global financial crisis, Henry attracted less than a handful of economic opponents, led by RMIT's Sinclair Davidson and Steven Kates and Griffith University's Tony Makin. To be fair to Henry, his critics have been particularly effective. On an economics blog normally catering to those excited about debating the pros and cons of fractional reserve banking, Catallaxyfiles.com, Davidson bas caught the Treasury misleading the government and the public. Following the delivery of the 2010-11 Budget Papers, Davidson exposed a concocted Treasury graph designed to give political cover to the government regarding the effectiveness of its stimulus package. The graph designed to show a correlation in DECO countries between expansionary fiscal policy and GDP growth during the financial crisis excluded unhelpful countries that didn't support the Treasury's thesis.

Armed only with relevant OECD and IMF data, Davidson secured a humiliating climb down from the Treasury as it admitted the inaccuracy and replaced the graph with a new one that excluded data from only four relevant countries. While the Treasury had an explanation for keeping these countries - Greece, Hungary, Iceland and lreland - out of the data set, the most likely reason is that because when they are included, the Australian Treasury's standards start to resemble that of Greece in managing its debt levels.

Not that dodgy graphs are the only legacy of Henry's tenure. During the debate to make Australia a world leader in ritual suicide through the introduction of an emissions trading scheme, Henry's Treasury modelled its economic impact to back up the government's agenda. But an analysis by former ANU academic Alex Robson found that the Treasury's conclusions required the reader to believe in Santa Claus and the Easter Bunny. Robson found that in supporting the government's policy, the Treasury didn't model the actual design of the government's emissions trading scheme but relied on 'unrealistic but crucial assumptions'.

The assumptions? That an international climate change agreement that wasn't delivered in Copenhagen will be implemented. That every other country in the world will adopt an equivalent emissions trading scheme. That mitigation technologies that barely exist would be diffused and widely used.

Even by political standards these aren't assumptions. They're a fairytale wishlist. Henry may not be personally responsible in all cases. But they have all occurred on his watch. And in his own review into Australia's Future Tax System, Henry was caught red-handed misleading Australians by using an
out-of-date academic paper by PhD candidate Kevin Markle and his professor to claim resource companies are only paying a tax rate of about 17 per cent.

And even Henry's former boss has joined the fray. In a recently published opinion article, former Treasurer Peter Costello argued that 'Treasury is not seen as independent and trustworthy on this tax', highlighting that under Henry the Treasury has been using 'misleading' evidence to support its arguments.

Creating dodgy graphs and ETS modelling: that's two strikes. But being exposed using an out-of-date academic paper in your own review should amount to three strikes for Henry as he's shown the Commonwealth Avenue-facing front door. But none of this criticism appears to bother him. Following recent commentary from the IPA and the federal opposition, he claimed criticism no longer causes him 'grief and that his 'scar tissue has hardened sufficiently after 25 years'.

But Henry's future doesn't look bright with a faltering government. In a budget reply speech to the National Press Club, shadow treasurer Joe Hockey was asked about Henry's future if the opposition snares government from Rudd's clutches later this year. Rather than giving a definitive answer, Hockey waffled that he's 'always got on very well' with the Treasury secretary. But tenure in politics doesn't lend itself to such niceties. And the risks to Henry aren't likely to come only from the opposition.

He's the bureaucrat responsible for offering up and supporting many of the Rudd government's major policy bungles. Even if Rudd wins the election, Henry is a political liability. And his future may be blowing in Canberra's cool spring wind.