In Search of Good Government

by Laura Tingle

  It wasn’t as if governments weren’t being warned about the structural risks of these declining capabilities. In 2009 Gary Banks, the former head of the Productivity Commission, famously warned the Rudd government that the bureaucracy no longer had the expertise to provide the “evidence-based policy” advice the prime minister was demanding. He lamented the decline in the number of public servants with the necessary quantitative and analytical skills, and warned about the varied quality and motives of the consultants involved in developing policy. While there were highly professional consultancies, he said, there were also consultants who cut corners, provided superficial reports and second-guessed what ministers wanted to hear. The contracts tended to go to business consultants rather than academics.

  The problems that arose in the response to the global financial crisis were a reflection of the modern mix of public and private delivery systems, of the contracting ethos. The same was in part true of the National Broadband Network (NBN). Part of the rationale for the NBN lay in trying to fix a previous policy mistake: the decision in the Hawke–Keating years not to separate the “wholesale” and “retail” sections of the telecommunications market. Building an entirely new wholesale telecommunications framework – taking advantage of the need to upgrade the national technology – was one way of addressing this. But the sheer scale of the project, the difficulties of managing thousands of provider contracts, saw it flounder, along with the inevitable disruptions of politics. There was an immense hostility to the NBN from the Coalition from its very beginnings, in part because it represented the re-emergence of the public service as a major service provider. The Coalition in government had spent years trying to wrangle communications out of Telstra’s clutches. Ironically, this only seemed to become harder when Telstra was privatised.

  In a speech in June 2015, Malcolm Turnbull reflected on the fact that both private and public megaprojects always seem to have their problems:

  The history of megaprojects is such that no matter how sophisticated the technology, or how great our advances in accounting practices, we have essentially not gotten any better at avoiding serious cost overruns. One of the leading experts in the field, Bent Flyvbjerg, looked at 111 megaprojects conducted between 1910 and 2000 and found that cost overruns have continued in fairly consistent magnitudes throughout the period. He concluded: “No learning seems to take place in this important and highly costly sector of private and public spending.” Projects dealing with public spending typically tend to perform worse. Different publicly funded projects typically compete with each other for a set pool of discretionary funds, meaning there is an incentive to overcook the benefits and undercook the costs; politicians and project managers feel the need to become “advocates” to win public support for the project; and there is a natural tendency for “empire building” without adequate cost controls.

  The lessons that Turnbull felt came out of the NBN experience went first to accountability, that “the architects and managers of projects need to be accountable for the things that they can deliver on and less focussed on the things they can’t.” Second, “risks should be assigned to those parties best equipped to deal with them.” Finally, he emphasised the need for transparency and independent oversight.

  If you apply Turnbull’s arguments to the public service and the work of government as a whole, you have to ask yourself whether these matters of accountability, risk, transparency and independent oversight are now even remotely arranged in the best possible way, whether from the perspective of taxpayers or that of the executive government – that is, the ministry – of the day.

  Intriguingly, Turnbull’s response to what has happened with the NBN has not been to argue that everything the public service does is bad. It is to argue for a careful assessment of who are the best people – or organisations – to do any particular job. And that doesn’t necessarily mean the private sector.

  What we have to do in government in my view is stop panning public servants and do more to ensure that they do their job better. And one of the ways to do that is to make sure they do the work that is their core responsibility, as opposed to outsourcing everything. Of course, that will show up people who aren’t any good too: clearly it’s a lot easier just to send out a brief to McKinsey than it is to actually do the work yourself. Most people work for the public service as much for the psychic wage as they do for the financial wage. Most of the very smart people in the APS could earn a lot more money somewhere else. One of the things we’ve got to do is respect the public service – respect it, expect more from it, and make sure that it has more challenging and interesting work to do.

  You might think that, if only for reasons of self-interest, politicians might pause to contemplate the lessons of the fiscal stimulus: that they might see beyond the attacks that attributed the problems solely to the incompetence of their political opponents. Yet in its first two years back in government, the Coalition showed few signs that it had learnt these lessons, or that it valued memory either.

  Changing political fortunes meant the Coalition ended up overseeing the implementation of the largest new public sector–driven social initiative of recent decades: the National Disability Insurance Scheme (NDIS). In time, the NDIS will be a government organisation on a par in its spending, staff and spread with Australia Post or NBN Co. Yet to the puzzlement of many of those involved – including state governments – the Coalition was so determined to get its own people on the board of the NDIS that it was prepared to overhaul the scheme’s entire membership, with the potential loss of memory of all those who had been there at its beginning. Even the management consultants brought in to advise the government, Korda Mentha, said board terms should be staggered, “so that there is a rolling program of board appointments. This would ensure that fresh perspectives, skills and experience can be brought onto the NDIA board, whilst maintaining a degree of corporate knowledge and history of the organisation.”

  Similarly, in the most complex and difficult area of government policy – indigenous affairs – a lack of experience seems only to have been exacerbated by decisions taken over the past couple of decades. When Tony Abbott became prime minister in 2013, he announced that he would be a prime minister for indigenous affairs and that responsibility for this area would be moved into the Department of the Prime Minister and Cabinet. Yet PM&C had no substantial infrastructure for developing or delivering indigenous policy – one of the most difficult areas of public policy. PM&C is a department that specialises in coordinating the work of the rest of the public service, not in running a major area of spending in its own right. To start with the basics, PM&C doesn’t have offices around the country, let alone in remote locations. So it immediately had to assign the delivery of indigenous services to other parts of the bureaucracy.

  But there is a more fundamental problem. For much of the past twenty years, since the demise of the Aboriginal and Torres Strait Islander Commission (ATSIC), there hasn’t been a model – or even an organising principle – for the delivery of indigenous services. Overarching responsibility has been thrown around among departments, split up, then brought back together.

  In 1996 John Howard launched a war on indigenous organisations, starting with ATSIC. The charge was financial mismanagement. ATSIC certainly had its problems, but Howard not only brought down ATSIC but also systematically broke the institutional structures of black Australia by cutting funding to bodies such as the land councils and health and legal services. Since then there have been the “interventions” and the embrace of the policies pursued on Cape York by Noel Pearson. But the approach and delivery has become erratic and utterly non-transparent. Writing in the Monthly in May 2015, Pearson described a new “Aboriginal Industry” that has grown up in place of ATSIC, which he said “is largely not comprised of black-fellas, but a vast parasitic industry of government and private-sector players”:

  Consultants and service providers, ranging from Work for the Dole programs and employment programs, to child welf
are protection organisations, have now colonised the entire indigenous landscape … The burgeoning of this industry has largely taken place under the radar, and without critique. Because the majority of this industry is not indigenous, there is no controversy. There are no allegations of misuse and waste of money. There are no lurid media stories about misappropriate of funds.

  Yet, for example, “when child protection organisations offer safe houses and foster-care homes for children, they can charge up to $5000 a week per child.”

  All of this remains largely invisible to us as voters and taxpayers. It is not just a matter of money, or of scandal rendered invisible. The lessons being learnt every day about the way policy works – if in fact they are being learnt – are also not being captured for future reference through the direct experience and involvement of the public service.

  In total, we are talking about a massive amount of money – and policy. Pearson notes that while the Productivity Commission estimates Australia spent $30 billion on behalf of indigenous Australians in 2012–13, “indigenous-specific” funding is just $5.6 billion. The changes in the public sector mean we are spending $30 billion on a bureaucracy that is not only largely invisible to the public, but where there are no grounds for confidence that what might be learnt along the way is being documented and passed on.

  Similarly, there are the mega-spending departments like Health, which itself directly administers around $40 billion of government spending. These run on more traditional public service lines and have more transparency to their operations. But it is not clear that they necessarily have any greater focus on, or memory of, policy. In 2011 the Australian Public Service Commission began systematic reviews of government agencies to assess how effective they were.

  The review of the Department of Health, released in December 2014, has become a minor classic of the genre. It is written in the strangled modern language of the public service – an excruciating blend of bureaucratese and managerialism – but even so, a disturbing picture emerges. The review team regularly heard examples of risk aversion, tight control of information and micro-management, coupled with the reluctance of a number of employees to report potential risks or mistakes due to fear of being blamed for failures. This had created “blind spots” to risk. The report noted an “excessive focus on issues management” and said:

  internal and external interviewees commented on the department’s centralised and elevated approach to decision making, which they identified was the product of a command-and-control leadership style and a risk-averse culture. While this approach may be useful for emergency or crisis management, employees and a number of external stakeholders observed it has disempowered the SES [the department’s senior management], created vertical work silos, limited ownership of direction setting and decision making, and stifled innovation.

  Regular weekly meetings convened with the Secretary, deputy secretaries and first assistant secretaries … largely focus on managing issues, reputational risk and matters related to corporate services and systems. There was little evidence in Executive Leadership Team meeting agendas provided to the review of high-level discussions on organisational strategy or policy.

  A picture emerges of a department that is so busy sorting out its own issues, and dousing fires for ministers, that it has little time to think about ways to improve the health of the nation. In all that long critique, you may have noticed that the word “policy” appears just once.

  Whatever the shortcomings of the health department at the time of the review, it has changed further since then, in ways which make you wonder once more about the institutional memory of those running the department. The then secretary of the department, Jane Halton, was promoted to the Department of Finance at the end of 2014. Around the same time, the government announced it was merging the immigration and customs departments into the militaristically minded Border Force. Many of the people working in Immigration were underwhelmed by the change and voted with their feet. Many followed their former department head, Martin Bowles, to the health department. The Canberra Times reported in July 2015 that Immigration “now faces the public service’s greatest executive brain drain since the 1980s with a quarter of its upper ranks either shown the door or turning their back on the department since its takeover by Customs.”

  The Canberra Times has confirmed the toll of departures, either already announced or coming up, has reached 30, from a senior executive cohort of 119 in June 2014. Four deputy secretaries, nine first assistant secretaries and 17 assistant secretaries have now confirmed their departures or are expected soon to do so. An unprecedented 10 of them have opted to follow their old boss Martin Bowles to the Health Department. Insiders have complained about the management style of the new regime and there has been unhappiness from veteran public servants forced to wear the military-style Australian Border Force uniform to work each day after a lifetime of civilian service. Many of the replacement executives drafted in have come from Defence, where new Immigration secretary Michael Pezzullo used to work.

  So Health is now being run by Immigration experts. Border Force is peopled by bureaucrats from Defence.

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  In 1985 a young Ken Henry peered around the corner of a cubicle he occupied in the basement of the Treasury building, where the officials working on Paul Keating’s tax reform options were housed. “What are you working on?” he asked the man at the next desk. “I’m designing a capital gains tax!” an equally youthful Martin Parkinson responded enthusiastically.

  Tax policy is one of the best ways of telling the story of changes in public policy-making in the last thirty years. It remains an area of great contention and public interest. It is one of the few remaining areas of economic decision-making that has not been lost to government by deregulation – as has, say, wages policy or interest-rate regulation. It was an area where, as a joint project with the government of the day, the public service – Treasury – had a massive influence throughout the 1980s and 1990s. Tax reform saw the introduction of a comprehensive (if mild) capital gains tax, the fringe benefits tax, dividend imputation, a drawn-out debate about federal wholesale taxes and their replacement by a federal consumption tax (or GST) and the elimination of less efficient taxes. It saw a range of new ideas, such as international competitiveness, building national saving and new tax bases that made the most of changing technologies. Tax policy was also transformed by technology shifting the way money moved around the globe. Between the 1980s and 2015, the debate gradually got bogged down in brawls over smaller changes to the tax mix, rather than the brave new world of new taxes and major tax shifts contemplated by Parkinson and Henry in the Treasury basement. There was, inevitably, a massive expansion in the size of tax legislation, rulings and case law. This created its own problems for the bureaucrats.

  Martin Parkinson was there at the beginning of the tax reform discussion. He remembers all the brawls and policy modifications along the way. But thirty years later, Treasury has a lot of trouble recruiting people into its tax division. Recruits contemplate their prospects if they go into tax policy: the sheer complexity means several years’ investment in getting up to speed before you can give any decent advice – if, that is, the government of the day is prepared to listen.

  In the dying days of the Gillard government, Treasury was hit by the harsh redundancies imposed across the public service by a government desperate to meet its pledge to return the budget to surplus. Staffing levels were slashed. Among the voluntary redundancies, it tended to be the older staff who left. Most of them were in tax – known as the revenue group. Many of the older and more senior staff in this area were the last of those who had come through the ranks during the era of big change under Paul Keating and Peter Costello. A total of sixty-two staff took redundancies or were made redundant over the three years from 2012 to 2014. Even as Treasury was being asked to prepare for a new round of tax reform – in conjunction with a group in Treasurer Joe Hockey’s office – its tax division had a third less staff
than it had three years earlier.

  This is just one example of serious, continuing, real-world implications for the way Australia is governed, flowing from what has happened to the public service in the past thirty years. It is not just about politicisation. It is a result of politicians failing to value and preserve our institutions.

  Numbers, as always, can tell a story. My Australian Financial Review colleague Verona Burgess has pointed out that, according to the Australian Public Service Commission, the median length of service of “ongoing” public servants in mid-2014 was 9.4 years. “So only about half the core workforce had a working life in the [public service] extending back as far as the last couple of years of the Howard government.” Similarly, almost 40 per cent of public servants are aged below forty, so that “the 1975 dismissal is beyond ancient history, the Fraser government barely, if at all, a memory and the Hawke government probably background noise to their childhood.” In other words, about half the public service doesn’t remember the place working any differently to the way it has worked from the Howard era onwards – cannot recall a time when policy-makers in departments had a real role to play and there was a vital and active engagement with executive government. The problem isn’t the youth of the public service now. The Seven Dwarfs at the height of their influence were young and dynamic and full of new ideas. It is the lack of mechanisms by which talented up-and-coming recruits can gain access to the experience of their elders: it is that the public service, despite losing much memory through change and falling numbers, doesn’t have the processes in place to keep those institutional memories alive. Ultimately, it is as though we as a community have ceased to recognise what a valuable repository of memory, and what a valuable institution, the public service is.