Changes to the financial details included in NBN Co’s Corporate Plan 2021 were made to protect the government from embarrassment over a “sushi train of blowouts” that pushed NBN Co’s annual losses to $7.4b, Labor has claimed in the wake of a fiery Senate Estimates hearing.
The allegations emerged amidst questions why NBN Co’s latest Corporate Plan failed to mention that a $6.1b loss – which was dutifully published in the previous year’s plan – had ballooned out to $7.4b a year later.
Arguing that details of the company’s debt position are fundamental to understanding its long-term strategy, Labor Senator Louise Pratt spent half an hour of the hearing pushing Richard Windeyer – deputy secretary of the Department of Infrastructure, Transport, Regional Development and Communications – to explain why NBN Co failed to report the new losses as it had done in the past.
“I would argue that that information was omitted for political purposes because it relates right back to the backflip that the government did regarding copper,” Pratt said, noting that the new corporate plan was delayed by three weeks – and released just as the company was making a massive “backflip” in which it embraced a fibre-to-the-premises (FTTP) policy echoing Labor’s original NBN design.
“The evidence indicates that the initial NBN rollout had gone over its revised $51 billion budget,” she said, “however, that is not visible in the 2021 corporate plan at the same time as there's a significant technology change.”
Omitting the increased financial losses, she said, “conveniently enabled the government to point illegitimately in the wrong direction, saying ‘there’s no cost blowout here’”.
Cost blowouts remain a politically sensitive issue given repeated historical increases in the cost of the Coalition’s NBN plan, as well as recent revelations in leaked documents that the Coalition was advised in 2013 that Labor’s all-fibre model would have cost $10 billion less than originally forecast.
With the cost of the Coalition’s model increasing yet again, Shadow Minister for Communications Michelle Rowland said, the current $7.4b loss had been hidden to “shield” Minister for Communications, Urban Infrastructure, Cities and the Arts Paul Fletcher from embarrassment – and that the new FTTP policy “was done, in part, to avoid the indignity of confessing to another cost blowout”.
Is losing money relevant or not?
Simon Atkinson, secretary of the Department of Infrastructure, Transport, Regional Development and Communications, cited general Department of Finance government business enterprises (GBE) Resource Management Guides that he said give companies latitude to decide what information must be included in corporate plans.
“Changes to what NBN publishes in its corporate plan are done to be consistent with the requirements,” Windeyer explained in arguing that detailed financial figures were better left for annual reports, “and relevant to and appropriate for the nature of the organisation at that point in time.”
This explanation didn’t sit well with Pratt, who called the NBN “a sushi train of cost blowouts” and blasted the company’s decision to hide its reporting changes behind “arcane” guidance that, she alleged, had been changed by the Department of Finance “to suit NBN Co not having to disclose” an uncomfortable truth.
Kylie Brown, NBN Co’s general manager and legal counsel for People, Property & Governance, rebutted that allegation, noting that the guides “have probably been out for a number of years”.
“Companies are encouraged to present their corporate plans in a manner that best demonstrates how they intend to achieve their purposes,” says RMG133, which specifies the contents and structure of corporate plans for Commonwealth companies.
“Each company needs to decide how its internal planning processes will inform the development of its corporate plan,” the guide notes, adding that “this will involve determining what aspects of its internal planning give the best insight into its purposes, key activities and intended results.”
The guidelines specify that companies “must” elucidate risks including financial issues – specifically, “failure to maintain financial controls, including over expenditure and self-generated revenue.
They must also summarise “how the company’s performance in achieving the company’s purposes will be measured and assessed, including any performance measures and any targets that will be used in the measurement and assessment.”
“It is important that the performance measures across the [Corporate Plan and Portfolio Budget Statements] are consistent and work together to enable a coherent set of performance results to be included in the annual report,” the guide says, citing the need for corporate plans to enable “the presentation of meaningful information to the Parliament and the public”.
By intentionally omitting information about a significant cost blowout, Pratt said, “this documentation absolutely covers that up and hides a whole lot of fundamentals about the corporate strategy and the costs associated with it.”
“What is the purpose of a corporate plan if not to understand these fundamentals?”