In Search of Good Government

by Laura Tingle

  The practical implications of this change go something like this: policy proposals would once have been largely developed by departments. Policy might be anything from how you pay unemployed people to the government’s position on building a road, imposing taxes or going to war. A minister would have asked the department to tell him (in those days) how to go about putting an idea he, or the government, had about policy into action. Alternatively, a department might independently identify an issue that had arisen and put up a proposal to a minister. Before it went to cabinet, the department/minister’s proposal would have been circulated to other departments for debate and input. There would be further debate in the “coordination comments” of departments when the matter got to the stage of a cabinet submission. The discussion would consider the pros and cons of proceeding with a particular idea, including its budgetary cost but also its positive and negative impacts on other groups. There would be data and summaries of what stakeholders thought about it. Much of this work was done by the “line” departments – the departments with direct responsibility for areas such as social welfare, health, resources and industry. The “central agencies” – Treasury (and later Finance) and Prime Minister and Cabinet (PM&C) – were responsible for providing advice on the implications of these policies from a “whole of government” perspective.

  The department was the minister’s main source of detailed advice about a policy area. There were experts in particular areas – health, say, or the aged pension. But there were also experts in other departments who had slightly different briefs to consider and whose expertise could be brought into the discussion. An example might be the crossover of perspectives on agriculture, environment, foreign investment and resources in the coal-seam gas extraction debate. The rise of the ministerial adviser not only meant that there were now alternative sources of advice, but that ministers would, increasingly, “work up” proposals that departments were cut out of, or would be asked to comment on, or provide supporting material for, only at the last moment.

  Ministerial advisers – who increasingly did not come from a public service background, but were often faithful servants of the party that was forming government – might have limited expertise in making or executing policy, but a particularly political, or ideological, perspective. From the Hawke government onwards, legislative change gave advisers in ministerial offices a clearly defined, separate and much more flexible role than that of their public service colleagues. Bureaucrats – even working in a minister’s office – had constraints placed on the tasks they could do, designed to ensure that they did not get involved in working on party-political matters.

  As one long-serving bureaucrat observes, “everyone thought the world would go back to ‘normal’ after Whitlam: that these presumptuous ministers who had astounded them by not just doing as they were told would disappear. Instead, Malcolm Fraser took exactly the same position.” The suspicion of the bureaucracy was still there when Bob Hawke came to office in 1983. A detailed secret brief was prepared within Labor for the new prime minister on the bureaucrats then heading government departments, outlining their strengths and weaknesses, but also their likely political allegiance.

  Crucially, though, Hawke insisted his ministers should have bureaucrats in their offices, specifically as chiefs of staff. It kept open the links with the public service in both directions. Ministers’ offices understood the public service. The public service understood their ministers. The suspicion was reduced. The two arms of government were largely able to work successfully together. Paul Kelly tells in The End of Certainty how Paul Keating went into the Treasury after the 1983 election and said, “I want a strong Treasury. It’s an important national institution.” There was a two-way benefit:

  The situation was ripe for the development of the Keating–Treasury relationship which became central to the government’s character. The Treasury’s relations with the outgoing Fraser government had virtually collapsed … It found in Keating a clever novice but fast learner who possessed both personal candour and Cabinet clout. The Treasury was sick of being beaten in Cabinet during the Fraser years. Now it had a minister who would restore its authority.

  But the era when executive government and the bureaucracy still worked cooperatively – often with creative tension – to get policy outcomes that were both politically and practically successful ended in 1996, when John Howard won government and sacked a raft of department heads in what became known as his “Night of the Long Knives.” This sent a shockwave through the public service and, in combination with a series of radical reforms to the public sector, accelerated a decline in its ability to make policy.

  Ironically, perhaps, John Howard’s most successful years coincided with the times when a former public servant, Arthur Sinodinos, was running his office. There were still bureaucrats seconded to, and even running, the offices of many of his senior ministers. But over Howard’s time in office, there was an inexorable shift towards policy being developed and made in ministerial offices, not the public service. “We’ll do the thinking, you just implement it,” was how one senior bureaucrat described the Howard government’s attitude in its later stages.

  Public service sackings, the tendency to run policy from ministerial offices and just get departments to implement it, and an increased willingness to make public servants the subject of “show trials” in parliamentary committee hearings, gradually cowed much of the public service and helped build a toadying culture.

  Tony Abbott’s sacking in 2013 of more public servants, including the head of Treasury, because of their association with policies on climate change and asylum seekers, to which the Coalition was hostile, raised even more questions. One senior bureaucrat said after the sackings that he found himself at a loss to know how to respond to more junior officers when they observed that the clear message was that you shouldn’t stick your head up for any policy assignments that might later become contentious. Instead of being a place to make your name, new policy papers and areas were now a killing zone, it seemed.

  Yet the role of the public service in government has not changed just because of the way ministers and public servants relate to each other. What has complicated and changed the relationship over time are the structural and managerial shifts. Departmental secretary was once a permanent appointment, but in the 1980s this started to change. Instead of staying on as the head of a department, moving about was preferred. Instead of holding your job until you retired, you took a fixed-term appointment. There was a lot to be said for the changes, but there were also risks. Governments now had the ability to appoint the best person for the job, but they also had the ability to sack people if they didn’t think they fitted a particular political mould, or even because of personality differences. Significantly, senior public servants were not necessarily appointed because of their policy expertise in a particular area. They might have absolutely no knowledge of the history of a policy and how it operated.

  Private-sector management techniques also arrived in the public sector: all the jargon about organisational goals, KPIs, performance reviews and a focus on outputs. As a result, the public service historian John Nethercote says, “scientific management has given way to business management as the inspiration for new thinking on operations.”

  As the fashion for spending restraint and greater efficiency arrived, the public service restructured what it did to concentrate on its “core” functions. Work that was regarded as subsidiary or administrative was contracted out to others. It started with things like property maintenance, personnel and legal services, but eventually grew under the Howard government into the wholesale transfer of government service delivery to the private sector, first with services to the unemployed through the Job Network. (The idea that the federal government would engage in actually planning or delivering capital works had hit the dust years earlier as an early victim of the Hawke government’s spending cuts. The days of the federal government building the Snowy Mountains Hydro-electric Scheme
, or Tullamarine Airport, or the telephone network, or hospitals and schools in the territories were now well and truly over.) Some of the Howard-era change was reasonable, but quite a lot of it was spectacularly stupid. For example, the government announced it would sell off any government building that was not returning 15 per cent a year – a return most in the private sector could only dream of. Large swathes of government-owned offices were sold off, only to be rented back by government departments at rents that reflected (notoriously, in the case of the Department of Foreign Affairs and Trade) that the departments were working in purpose-built buildings that couldn’t easily be traded for others. The Australian National Audit Office reported in 2001 that: “the Department of Foreign Affairs and Trade advised … that the net lettable area had been re-measured and that the new owner had formally notified the Department that they were seeking a 38 per cent increase in the base rent for the … building.”

  One of the great ironies of public service reform in the past three decades is that the push to “contract out” went most spectacularly wrong in the place where it should have been most at home: the Department of Finance. In a move partly aimed at reducing the power of the Treasury, Malcolm Fraser split it into two departments in the 1970s, leaving policy-making in Treasury but creating the new Department of Finance to monitor spending by the bureaucracy. In the following two decades, Finance developed an expertise in all the policy areas of government. Public servants – and politicians – will tell you that the portfolio experts in Finance in the 1980s and early 1990s – the people who kept tabs on health, education and defence spending, for example – knew more about how their portfolios worked than the departments that oversaw them. Finance knew where all the money was hidden or buried and how the mechanics of a policy worked, or didn’t.

  Of course, Finance notoriously also hated spending money. When the new broom swept through government after the 1996 election, it was Finance that grasped it most fervently. Perhaps believing in leading by example, Finance melted itself down. It was stripped of most of its experienced staff and, with them, its institutional memory. Finance bureaucrats went off to advise other governments around the world on how to set up governance systems. Some were hired back on vastly inflated contracts for specific jobs. But the core work of the department was gutted. “People walked out the door with the entire capital stock,” one bureaucrat observes. A government that was ostensibly trying to find ways to cut back government spending, and completely reimagine how policy would be delivered, was robbed of the very people who could best tell them how to go about this. The public servant given the task of effectively dismantling the department was rather unkindly referred to by other secretaries as “Young Warwick” – a reference to young Warwick Fairfax, who had overseen a fiasco at the old family media business when he tried to buy it out just before the 1987 stock market crash, only to reduce the empire to debt-burdened rubble. The Howard government belatedly recognised the catastrophic nature of its error and sent in Ian Watt – who would later head the Department of Prime Minister and Cabinet – to try to rebuild Finance. “But you can’t just put people back in the room. The memory was shot. Twenty years later, we still don’t have a Department of Finance with the policy capabilities it had in 1996,” a departmental source says.

  What happened at Finance was the first real sign that contracting out had crossed the line and was affecting “core functions.” The question in this new era was: what are the core functions of the public service? In the past it had designed and advised on policies, then delivered them. For example, it had devised ways to help the unemployed get work, then implemented them through the Commonwealth Employment Service. Treasury would be given a brief to develop a package of tax-reform measures. Now it might find itself consulted at various stages about a tax package, but not involved all along the way. The rise of the adviser was increasingly seeing policy being made “up on the hill” at Parliament House. Government departments found themselves responding to requests to provide support material for policy formulated without their input. A new term – “issues management” (meaning a department’s capacity to help its minister kill off an unfavourable news story by 10 a.m.) – appeared on the scene, and was given great emphasis by many ministers. The public service was increasingly not delivering policies, but simply overseeing the contracts of those private-sector or non-government organisations that did.

  The gradual change eventually hit the departments’ capacity to provide advice, starting in the line departments. Specialist policy or research units suddenly found themselves both figuratively, and later literally, redundant. In the “olden days,” even back in the 1980s, there was as much frisson in Canberra about the brawls between departments on a policy under development as there are now about a split in the cabinet. What happened at interdepartmental committee meetings – which powerful mandarin had done over another – was the stuff of legend. There were spectacular battles – even if they were conducted in the stilted language of the bureaucracy – that raged through the coordination comments of departments on cabinet submissions. But the crucial point is that there were, in fact, battles. Ideas were being debated and discussed at length by people with a memory of what had gone before. And, of course, they were being discussed outside the immediacy of politics. A senior public servant notes how the mission statements of departments changed during the 1990s, so that rather than saying something about maximising a particular outcome for the community, they emphasised the implementing of government policy. Ten years earlier, he says, the implicit meaning of the mission statement was that the department’s job was to come up with policies framed around the “national good,” not just the government’s. Echoing Martin Parkinson, another senior bureaucrat notes that at some point officials in Treasury and PM&C found themselves looking around and finding that, “We didn’t have anyone to talk to in other agencies.” There were not people in other departments with the capacity, or the brief, or the memory, to be able to debate, or contribute to making, policy. With memory goes what is often the most powerful weapon in a bureaucrat’s armoury when trying to influence a minister – or the cabinet – on a policy issue: the power of the anecdote; the power of a first-person recollection of what happened the last time something was tried. “Decades of experience is much more powerful than any considered reasoning in that sort of discussion,” one official observes.

  Among the central agencies, Treasury – because of the power it had gained under a series of influential treasurers – and PM&C remained immune for a lot longer. Defence, the national security establishment and Foreign Affairs were buttressed by the fact that they represent areas of policy that really are the preserve of the state.

  Treasury’s central role in the budget, taxation and economic forecasting allowed it to retain its stature as a policy-making body through all the economic and political travails of the last thirty years. This was despite the blow to its prestige when the recession of the early 1990s hit. But Treasury’s actions in the wake of the recession – when it made a concerted effort to come to terms with, and document, the policy errors and consider what should be done in the future – show how the public service has subsequently changed, and just what gets lost in the change. In the late 1990s, the department did an extensive post-mortem on what went wrong and developed a “war-book” for how it should respond if confronted by similar circumstances in the future. The department started a process in which older officials discussed previous episodes with younger ones. Different economic scenarios were war-gamed. This was important, for even by the middle of the first decade of the century, few people were left in Treasury who had experienced the 1990s recession. What’s more, as one official notes, a “belief in government intervention had been largely put beyond the memory of the current generation of politicians.” In other words, Treasury went about ensuring that there was a well-documented institutional memory of what had happened for those who came afterwards.

  It was Treasury’s post-recession pr
eparations that set the scene for the response to the global financial crisis in 2008. Armed with its memories of the causes of the 1990s recession and what had worked – and not worked – in getting out of it, Treasury warned the Rudd government in 2009 that big infrastructure spending and complicated projects had not worked in the early 1990s. They were too slow, and too complex and uncertain in their impact. It counselled cabinet to stick with cash payments to keep confidence up and activity ticking over. But best-laid plans can still go astray. Kevin Rudd embraced Treasury’s advice on the need for a cash stimulus. But he had also become enamoured of the idea of a “double dividend” on policy, which he had picked up from Barack Obama: the idea that you could get two bangs for your buck. He looked for policies that would not only stimulate the economy but also achieve environmental outcomes. The lessons of the 1990s, documented by Treasury and delivered to the government in 2009, were not fully heeded. “He didn’t want to hear it,” one official says. “Double dividends were the flavour of the month.” The “pink batts” scheme was born. In the tumultuous days of the global financial crisis, there may have been people sitting around the cabinet table asking questions like, “Do we have enough home-insulation installers?” But no cabinet ministers had the authority of personal war stories with which to counter Rudd’s enthusiasm for the double dividend.

  It is telling that the tsunami of criticism of the Rudd government’s fiscal stimulus arose from the way services and spending were delivered, and the lack of experience of the federal public service to oversee this. Years of contracting out service delivery meant there was simply no memory or experience of doing major capital works at the federal level, or of how to run a consumer-level scheme like the pink batts program. Canberra was also reliant on the states to implement the school-halls building scheme.