The orthodoxy has been established: the Rudd Government faces major political trauma in its determination to cut spending. Its “horror budget” (splendid to see that phrase back in use – with any luck we’ll yet see the traditional “beer, cigs up”) will be the Coalition’s first big opportunity to inflict some damage on the Government. Brendan Nelson’s leadership may depend on it.

News Ltd is helpfully pointing all this out. Having run a thoroughly creditable campaign against the Howard Government’s big-taxing ways, now The Australian, along with the Daily Telegraph, is giving the Government heaps for thinking about cutting handouts to carers. “Rudd’s reputation in tatters,” shrieked the headline to Dennis Shanahan’s effort on Saturday. “PM backflips” declared the Tele yesterday

No doubt plenty of interest groups will vociferously protest cuts to government spending. Not all of them will be quite as deserving as carers. Seniors, the recipient of considerable and unmerited largesse from both sides in the election campaign, were portrayed as the next group in line for the chop. And today, the rent-seekers and shonks of the ethanol industry have emerged to complain.

The Financial Review has identified over $4b in one-off spending in the 2007-08 Budget in areas like welfare and superannuation. Not all of these are in the same category as the carers’ payment, but they all come with constituencies. Crikey also estimates that the previous Government committed a further half-billion dollars in one-off payments before the election (not including drought assistance), as well as several hundred million dollars in short-term programs over two or three years.

But cuts to all these payments need not translate into political damage. The Howard Government’s first budget, in August 1996, contained massive cuts, but improved their standing in both Newspoll and Morgan polling. Howard and Costello managed that by following the four simple rules of horror budgets:

  1. Establish the urgent need to slash spending. The Coalition, with the help of some creative arithmetic from the Department of Finance, quickly and effectively generated the myth of the $10b Beazley Black hole. Rudd and Swan of course have their own National War on Inflation.
  2. Demonise your opponents as spendthrifts. The Coalition was fortunate in having Beazley – who was almost as ineffectual a Finance Minister as Nick Minchin – as Opposition Leader. That’s why the Government has been suggesting that Nelson and Turnbull, neither of whom held central portfolios, were part of the Howard Government’s profligacy.
  3. Identify some particularly silly projects funded by the previous Government. A Fishing Hall of Fame is as good a place to start as any.
  4. Leak the worst of the cuts. By Budget Night, all of the nasties should be well-known, so the pleasant surprises – and even horror budgets have some goodies – can be emphasised.

Properly managed, a horror budget can both burnish a new Government’s economic credentials and boost its public standing. A vein of masochism runs through the Australian electorate, and we don’t mind being told once in a while that we’ve been slack and need to get into shape.

But it does help if the Treasurer and his office are actually coordinating this process. You get the impression the Government was caught out by the carers’ issue last week, until Rudd put his foot down from afar.

Swan and his staff should be briefing their colleagues on how to handle these sorts of stories in the future. And they should ensure that from now it’s they who are revealing the slash-and-burn stories, not journalists.