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JOINT COMMITTEE OF PUBLIC ACCOUNTS - 07/08/97 - Review of Public Service Bill 1997

DEPUTY CHAIR —Welcome, Mr Volker. In what capacity are you appearing before the committee today?

Mr Volker —I am appearing in a private capacity.

DEPUTY CHAIR —Mr Volker, I invite you to make an opening statement to the committee on your concerns about the Public Service Bill 1997 before we proceed to questions.

Mr Volker —There are a few things I want to add to my submission. Reform of the Public Service Act has been under consideration for some years. A good deal of the contents of the bill now before this committee derives from processes begun under the previous government.

It is important that there be broad agreement about the roles, functions and status of the Public Service. It is a fundamental part of the governance of Australia, and the people, the parliament and the executive cannot be well served if we do not have a public service which is confident about its roles and functions, which has non-partisan professional and competent leadership and membership and which is adequately resourced.

The Public Service has faced massive change over the last decade and a half. It has been reduced sharply in size, but its functions overall have increased and become more complex. It is subject to unprecedented scrutiny and its decisions are open to review and appeal. The fact that it has continued to do a competent job in an environment of doing more with less, waves of fashionable management initiatives and a convoluted and outmoded Public Service Act demonstrates the resilience and the strength of an institution which has been based on an ethos of a non-partisan, professional career and fair, equitable and incorrupt administration.

If the Public Service is to continue to be effective, it needs certainty about the legislative framework within which it has to operate. It is important that a new Public Service Act and the complementary legislation be passed as quickly as possible, but it is also important that the basis for the legislation be broadly supported in the parliament and that some significant issues be debated, clarified and resolved—even to the extent of amending the bill.

In my view, the bill overall is a reasonable basis for determining the composition, ethos and operations of the Public Service in the new environment of contestability and continuing change where flexibility in appointments, terms and conditions of employment

and operations of the Public Service are required. This flexibility is fundamental to the development and maintenance of a high performance Public Service in the age of information technology and of resource constraint. With some amendments, the bill should enable that flexibility to be achieved, while maintaining the values of the service and affording opportunities for scrutiny of performance through accountability mechanisms.

Having established overall support for the bill, I would like to raise some areas where I believe the parliament and this committee ought to look closely at what is proposed. The bill does not refer to the Public Service as a career service. Indeed, overall it gives the impression that the Public Service, at least in terms of top level and SES appointments, is the servant of the government of the day—not the government, but the government of the day. This is an important issue since, at least as someone who may be somewhat conservative in respect of the role of the Public Service, it is crucial that there be a career service which serves the community and which is primarily responsive to government but is not simply the instrument of the government of the day.

In that respect, I would just like to make a few comments about some things that Sir Lenox Hewitt said this morning. I might add that I think it is very desirable that people with a distinguished history of experience and reputation such as Sir Lenox should contribute to this very significant debate. It is to be hoped also that the media will afford this debate and the content of the bill the sort of attention that it deserves.

As regards tenure of secretaries, I think the simple fact is that the horse bolted some time ago—probably about 1984—and it is very difficult to put that horse back in the stable. As from that time, the permanent heads of the day were no longer permanent heads but rather departmental secretaries. If anything, the trend has been fairly consistent since then to make the tenure of departmental secretaries even less certain.

I think those of us who did take term appointments in 1994 did so with our eyes open and in the knowledge that we could continue to give frank and fearless advice. What happened at that stage was that secretaries in effect had no tenure—or very, very little tenure—and most of us took the view that we might as well have a loss of tenure allowance seeing we had no tenure. That might be a cynical approach, but I think it was a very realistic one in circumstances where there was virtually no opportunity of increasing secretaries' salaries except by some mechanism such as that. There was a strong view that, if secretaries' salaries did not increase, there would be a very great difficulty in attracting good quality people and in retaining people who were competent at that level.

I might also add that they were not really contracts that we are talking about; they were term appointments. It was very interesting that, when some of us left in something of a hurry last year, nobody could actually find a copy of the term appointments around the place. I suspect that in many respects secretaries may be better off having contracts with fairly well defined provisions relating to the circumstances in which they are to go and the arrangements which apply rather than having the very uncertain and ill-defined

arrangements that apply under the term appointments arrangements.

In my view, there was no difference in the advice that was provided under those arrangements. In fact, I could see no difference in the advice and the performance given by the very few people who remained under the old arrangements compared with that given by those who took the term appointments.

Giving frank and fearless advice has been said really to be a matter of character rather than of the form of appointment or tenure. I think there is something in that, but I must say that I am afraid that the proposed arrangements are at the stage where some secretaries must be wondering if their reward for maintaining strength of character by giving frank and fearless advice will come in the private sector or in heaven.

There is a risk, in my view, that what is proposed in the bill—where decisions on appointments and termination of appointments of secretaries will be taken by the Prime Minister rather than the Governor-General in Council—could lead to routine wholesale changes in secretaries, agency heads and SES employees whenever there is a change of government or even a change in Prime Minister. We have seen the Secretary to the Department of the Prime Minister and Cabinet depart following each of the last two changes in Prime Minister—only one of which was following an election.

We see secretaries depart in a continuing stream to the extent that, if there were to be one or two more mass departures, the thread of continuity of experience and knowledge—which is crucial to protect the community interest and, for that matter, the interest of government—will be frayed virtually beyond repair. This concern would still exist but would be lessened if the provision for reviews of APS actions in clause 33 of the bill unequivocally were to apply to SES employees.

In 4.41.5 of the explanatory memorandum, it is proposed that employment matters relating to the SES be excluded from review by the regulations. This is a mistake. It appears to be intended to cover the relatively few situations where inconsistent or inefficient SES officers are absolutely intransigent about leaving. Unfortunately, what is proposed could be used to remove any SES employee without recourse to a review. I would hope that this committee would see the sense of ensuring that SES employees can use the review mechanisms.

I do not understand the reason for, and particularly the timing of, departing from the substance of section 67 of the constitution in respect of the appointment and termination of secretaries. As far as I have been able to find, the reasoning for the change has not been made public. It may be claimed that it is a matter of form and not a matter of substance, but I believe there is a very significant symbolism attached to the present arrangements.

I can see why some people may want to move in that direction, largely related to

responsiveness to the policies and approaches of the government of the day, and that is an objective which should not be dismissed. However, the change is of such symbolic significance that it ought to be considered closely by parliament and the community. What is proposed involves a head of government taking over the longstanding role, even if it is largely a nominal one, of the head of state.

A couple of republicans have actually told me of their dilemma about what is proposed. While they see merit in removing the Queen's representative in Council from such a key area of decision making, they think it preferable to look at the issue in the context of overall arrangements under a republican constitution.

I wonder also whether the government has considered the prudence of the Prime Minister making secretary appointments and terminations. It could open a Pandora's box in respect of action under the Administrative Decisions (Judicial Review) Act. It may well be that no disappointed potential secretary or secretary whose appointment was being terminated would take action under this act or be able to afford to do so, but moving away from appointments by the Governor-General in Council opens the possibility, as I read the legislation.

A related point is that, as far as I can see, there is no exemption from the AD(JR) Act where the Prime Minister rather than the Remuneration Tribunal takes decisions about remuneration and conditions of secretaries. Indeed, section 13 of the AD(JR) Act, in my view, would apply. So there could be action taken to seek to obtain findings of fact and also to seek reasons for decision which would open all sorts of possibilities in such circumstances as where some people felt disgruntled about the actual arrangements made in respect of their terms and conditions.

I might just add by way of digressing slightly that the issue about actually taking some legal action was raised by some former secretaries last year, and they were actually talked out of that as not being in the interests of sound governance and so forth. But, with the increasing recourse to litigation in this country, one wonders how long it would be before in fact somebody did take action under the AD(JR) Act. The circumstances could involve, for example, the Prime Minister having to appear before the court, which does not seem a sensible arrangement.

The other worry about the AD(JR) Act is that in certain circumstances it could delay appointments of secretaries or changes in personnel at a very crucial time—for example, after a change of government.

I note also that some of the changes which apply and which are connected with the provisions about which I am talking—for example, the non-retention of section 92 of the present Public Service Act—do seem to require some attention. It may well be that the whole question of gazetting appointments, promotions, transfers and terminations will be covered in the regulations but, as far as I can see, in the present bills before the committee

and before the parliament there is nothing that actually requires gazettal of such decisions.

I have made in my submission some points about particular provisions in the bill and some suggestions which may be of interest. The only ones to which I want to refer now include, first, that it is not clear to me that secretaries are actually required under the bill to comply with the values. The second reading speech says they will, but the bill itself uses the words `uphold and promote the APS Values' under the heading of `Agency Heads must promote APS Values' rather than using words which involve complying.

Second, there could be some problems associated with the use of the word `coercion' in clause 13(3) under `The APS Code of Conduct' heading. As I understand the word `coercion', it could include coercion in accordance with the law. The current wording could give rise to some problems with respect to action taken by officers of some departments and agencies to give effect to legislation—particularly, say, in Social Security and perhaps even in the Department of Employment, Education, Training and Youth Affairs, the Australian Taxation Office and so forth. One wonders how it would apply in respect of the position which officers at present or employees under the new bill would be placed in with respect to, for example, action taken in relation to the work for the dole legislation, which certainly involves coercion.

Third, clause 27(1) enabling the Public Service Commission to move an excess APS employee to another agency without anyone's consent seems to me to be completely unwise and not in the interests of an efficient Public Service. Finally, the committee may wish to look at the words `inside information' in clause 13(10). I have suggested some words which might cover that situation.

Senator FAULKNER —Could I ask you, Mr Volker, about this issue of the salaries of agency heads, which you touched on in your contribution a moment ago. Apart from the mechanism which you talk about and the possibility that it would be subject to review in a way that perhaps had not been anticipated by government, if I could go back a step and just ask you about the principle. In other words, in your view is it a good thing that the salaries of departmental secretaries are set by the Prime Minister? Is it a good thing that the salary of the Public Service Commissioner is set by the minister responsible for Public Service matters? Is it a good thing that the salary of agency heads are set by the responsible agency minister as opposed to the situation where they would be independently set by, let us say, the Remuneration Tribunal?

Mr Volker —I think as a matter of principle, at least in my view, it is sensible and desirable that terms and conditions of appointment of the people you are talking about be set by an independent body. One can speculate about the reasons why this particular change has been included. Really, I should not speculate because I do not know what the reasons are, but it may well be to do with the move towards contracts in a meaningful sense where that would be facilitated by the proposed change. But it does not necessarily follow that it is a necessary change in order to be able to move to contracts since, even if

the remuneration and conditions of employment were fixed by the Remuneration Tribunal, that could be taken into account in whatever contracts were being negotiated or determined.

I think as a matter of practical politics there is a lot to be said for having an independent body actually setting the terms and conditions. It does, I would have thought, bring the Prime Minister into a situation where he or perhaps she in future is faced with a whole range of demands for action to be taken in respect of the terms and conditions, particularly salaries and allowances, of a whole range of people who at present have their terms and conditions determined by the Remuneration Tribunal.

You do not need to reflect too far to see the complications that would arise if, for example, it became known that particular secretaries were receiving a substantially larger amount of money than other secretaries, that that was considerably more than the amounts being received by judges, other statutory office holders, ministers, members of the parliament and so forth. That is not the sort of situation which is likely to lead to the Prime Minister being able to sleep very easily at night. But also I think we have to bear in mind that that power under the bill is able to be delegated. I am not aware of any statement which indicates that in fact the Prime Minister would not delegate that power or indeed a number of other powers that are seen, at least by some of us, as being very important in terms of what is in the bill.

Senator FAULKNER —The explanatory memo for the bill states that, as a matter of practice, the Prime Minister or minister would normally make such a determination only after consultation with the Remuneration Tribunal. What I am interested in in that situation is whether that would leave any obligation with the decision maker to take any account of whatever advice might be received by the tribunal.

Mr Volker —I think the committee would need to get legal advice on precisely the situation. But at least at first sight it would appear that the Prime Minister would not have to take account of the advice obtained in actually reaching the decision or making the determination.

Senator FAULKNER —I have asked the Public Service Commissioner on this very point how the consultation with the Remuneration Tribunal in these circumstances fits with the transitional amendment bill, which actually includes amendments to the Remuneration Tribunal Act to specifically remove from the tribunal the function of providing advice on remuneration for secretaries and the Public Service Commissioner. Is that something that you have had a look at?

Mr Volker —Yes, I did see that. I do not follow what is in the explanatory memorandum in respect of that particular provision; it does not seem to make sense to me. I am not quite sure what the question was.


Senator FAULKNER —The decision maker, the Prime Minister in the case of departmental secretaries, would normally, according to the explanatory memorandum, make such a decision only after consultation with the Remuneration Tribunal. But specifically in the transitional amendment bill there are amendments to the Remuneration Tribunal Act which remove that function of providing advice on remuneration for secretaries and the Public Service Commissioner from that act.

Mr Volker —As I read the complementary bill, it does actually take away the power of the Remuneration Tribunal to take decisions and provides for the Remuneration Tribunal to provide advice to the Prime Minister in respect of terms and conditions of employment of secretaries and of some other people. But the point is that it does not require the Prime Minister to seek that advice and it does not require the Prime Minister, having sought advice, to take account of the advice or to act in accordance with the advice.

One just wonders how the procedure would operate. Would there be an opportunity, for example, for secretaries to make representations about what salary level there ought to be to adduce information about perhaps comparisons with industry if there were to be graduated levels of remuneration? In respect of allowances, what opportunity would there be, in accordance with the bill as distinct from practice, for secretaries to bring forward information to be taken into account in taking decisions? That is another reason why it is sensible to have a mechanism which enables a process to be in place so that information can be provided, including by the people directly affected, rather than a situation which is as uncertain as it appears likely to be under the arrangements pertaining to the bill.

Senator GIBSON —Clause 33 of the bill enables APS employees to seek reviews of action relating to their employment. The previous witness, Mr Rose, suggested that perhaps, rather than using the Public Service Commissioner for that role, you ought to consider using the Auditor-General. Do you have any views about that?

Mr Volker —It is not something that I had thought about. It seems to me to be likely to provide a very great deal of work for the Auditor-General and possibly to compromise what I think most of us would see as being the basic role of the Auditor-General. As between the two, I would have thought it would be more sensible to give that role to the commissioner.

Senator FAULKNER —I am interested in asking you specifically about the prohibition on patronage and favouritism, which is section 17 of part 3 of the act. We did not have time to canvass this really with Dr Shergold. Of course, the explanatory memorandum says that, if a person is exercising powers under the bill, they will be required to do so without patronage or favouritism. The rule is wide enough to apply to a minister, but of course it does not apply to the appointment of secretaries or heads of agencies. I suppose that must come as a bit of a relief, does it, Mr Volker, or not?

Mr Volker —I have to confess that, having been a secretary for 14[half ] years or whatever it was, I was not aware that under the existing Public Service Act in fact the prohibition of patronage and favouritism did not apply to appointments and other decisions in relation to secretaries. So I had gone blithely through a fairly long career not knowing that in fact there was no such prohibition in respect of secretaries.

I am not sure when that was included in the Pubic Service Act and it was one of the things that, when I read the bill, I immediately thought, `I must note that one down as being something I ought to bring to attention,' but unfortunately it is in the present act. There is not much one can say about that except to say that it is interesting, when one stands back from the whole situation, to think that the merit principle, as I read the bill, does not apply. Patronage and favouritism prohibitions do not apply. The guidelines in respect of secretaries are interesting, particularly in terms of terminations of the appointments of secretaries. I suppose that must be one of the things that is left to goodwill and good judgment on the part of ministers in particular.

However, it is a point that the constitution at present does provide that, until the parliament otherwise decides, appointments and terminations of other officers of the executive—and this clearly is intended to apply primarily to people now called secretaries—are to be made by the Governor-General in Council. The Public Service Act requires that, in making an appointment, the Governor-General in Council shall act only in accordance with a recommendation from the Prime Minister but it is interesting that, in fact, the Governor-General in Council could decide not to make an appointment. The Governor-General in Council cannot make an appointment other than in accordance with the recommendation of the Prime Minister but, strictly speaking, the Governor-General in Council could decline to make an appointment or to terminate an appointment.

DEPUTY CHAIR —The 1975 argument.

Mr Volker —Yes. It is an interesting point. Maybe I am being excessively finicky about the issue in this respect but it does seem to me that there is a very significant symbolism in terms of having appointments and terminations made by the head of state in respect of what is the role of the Public Service. That is something that I think ought to be considered, debated and the whole issue resolved and clarified. I hope that this committee might in fact give some thought to that particular issue. It is not just a matter of form. I think the symbolism is so strong that there is some substance in the actual arrangement that was set down in the constitution, particularly bearing in mind that the constitution itself says `unless the parliament otherwise decides'. This is specifically something where the parliament has to decide. It is an instance where the parliament ought to take the issue very seriously indeed.

Senator FAULKNER —I suppose the other aspect of this section 17 is obviously not applying to departmental secretaries but what the process would be for determining breaches and then what the sanctions would be. That is absolutely unclear to me and it

may well not be relegated to subordinate legislation.

Mr Volker —Again, of course, it is something that has been there for a very considerable time. I am not aware of what case law there is in respect of patronage, the meaning of patronage and favouritism or what sorts of precedents there are around the place. I think it is something that we had seen as being part of the ethos of the Public Service, that the merit principle applied, that you did not appoint somebody because they were from the same suburb or the same social club or, in the old days, a Mason or a Catholic, as the case may be, and so forth. I do not know how, in fact, that provision was applied in former days in the Public Service when one heard all sorts of stories about appointments and promotions on that sort of basis.

It may well be something that will be clarified in determinations by the Public Service Commissioner, but I think if I were the Public Service Commissioner that is an area where I would stick to the merit principle rather than trying to define what patronage and favouritism mean.

The more important point about this is the one I made about the exclusion of SES employees, as they are termed, under the bill from access to reviews of actions under clause 33. I really do think that in terms of motivation in the service, in terms of maintaining a career public service, that is something the committee ought to look at very closely. From what I can understand, that exclusion from the clause 33 review of actions is intended to deal with those very few occasions when there is a SES officer who simply will not go or who cannot be removed, even though they are clearly incompetent or extremely inefficient. But I think it is very undesirable from the point of view of maintaining a career service and maintaining strong motivation and the opportunity of moving up the ladder in the service not to have a means of review available to be able to cope with capricious terminations of employment or terminations of employment which really are not justified on an objective basis.

Senator FAULKNER —In your original submission, you talk about the issue of those who seek appointment to the Australian Public Service. At times the issue of remuneration and conditions—the salary package, so to speak—is not the only matter that ought motivate such a person. There are other issues involved—a commitment, if you like, to policy development, an interest in making a contribution to the general welfare of the community. I suppose it goes to, in layman's terms, what we might talk about: the more old-fashioned concept of the Public Service. In the arguments that we have before us, there is this attempt to say, `Well, the salary package of those heads of agencies ought to, in some sense, be placed on a par with salaries of their counterparts in the private sector.' Is there a real risk as we look at that issue that you really do undervalue what are the other quite unique aspects of the responsibilities of someone who is a senior public servant in this country?

Mr Volker —I think there is that possibility. I am not sure a lot of my former

colleagues would agree with what I am going to say, but I think there are some unreasonable and unreal expectations about salary levels for secretaries and for senior officers. Those of us who make the transition to the private sector can see some significant differences. It is a salutary experience to have to make money to justify your existence and survive and keep out of the gutter, as Sir Lenox mentioned this morning.

I think all of us who have joined the Public Service hoping to make a career there have done so in the expectation that we were going to be reasonably well paid, that we would have security in the old days, that we would have a reasonable superannuation arrangement. We recognised that with those very crucial things that provide security and a reasonable standard of living we were not going to get rich. In fact, I can recall, on the first or the second day I joined the Public Service, Sir Henry Bland saying to me, `Bear in mind that as a public servant you are not going to get rich. If you are, we will probably send the police around to find out why.'

The point is that you join the Public Service hoping to have a career there for the reasons I have given but, more particularly, I think it is because of the opportunity to work in very interesting places. You can contribute to the good government of the country, where you can be at the centre of things if you move up the line, where you can have some influence within principles of accountability and due process over the way in which the community operates. I think they are very important things that should not be lost sight of when the community is trying to find ways of ensuring that we have a framework for the Public Service which is going to mean that you have a high performance Public Service that is going to be flexible in terms of appointment and so forth and that is going to be able to cope with the massive change that is around the place and the complexities of modern life. We should not underestimate that and we should not undervalue it.

Having said that it is probably unrealistic to be looking to equate secretaries' salaries and conditions with those of what some may see as equivalent positions in the private sector, I think there is no doubt that the salaries have lagged behind far too far and that some mechanism has to be found to provide some reasonable increase that is not going to set off a whole train of all sorts of problems, where members of parliament, ministers, statutory officers and judges are going to feel badly done by. In many respects, I am very glad that that is the sort of task that presumably other people, who must be much more competent and intelligent than I am, are grappling with now.

Senator FAULKNER —Do you think that people in the Public Service, including people at senior levels, are motivated by factors other than financial remuneration? If you do, do you think there is a recognition of that by government, given the nature of these sorts of reforms?

Mr Volker —I think there is no doubt that just about all of my colleagues that I could think of had those sorts of motivations. They have recognised that, in fact, there is a great deal of merit and value in being able to contribute as a secretary or as a senior

officer of the Public Service.

DEPUTY CHAIR —Unfortunately, we are running out of time. We will miss our planes, so I might call it quits there. Thank you very much. That was very interesting. If we need to get back to you about any of those issues, we will.


[3.35 p.m.]