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Delivering better government: speech to the APSC



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SENATOR THE HON PENNY WONG

MINISTER FOR FINANCE AND DEREGULATION

SPEECH

Parliament House, Canberra ACT 2600 Australia  Tel: (02) 6277 7400 Fax: (02) 6273 4110

PW 60/11 27 March 2012

APSC

DELIVERING BETTER GOVERNMENT

***check against delivery***

Thank you for that introduction, Steve.

It‟s a pleasure to be here today and to have this opportunity to speak directly with senior

members of the public service.

As we all know, dialogue between the APS and Ministers is central to improving the

workings of government.

Today I‟d like to outline how I see the public sector contributing to the delivery of better

government, and how this fits within the Government‟s broader policy agenda.

Because „better government‟ can mean many things.

And, as we implement measures to achieve better government; as we look for ways to

increase government efficiency, improve service delivery, have better frameworks and

decrease duplication, it‟s important that we are clear about our objectives.

For me, as the Minister for Finance, it quite simply comes down to better services,

delivered more efficiently.

But underpinning this seemingly simple statement is a substantial body of work that is

being pursued by the Government to improve the services we provide and the manner

in which they are delivered.

And this work contributes across the entirety of the Government‟s agenda.

It contributes to the delivery of our fiscal strategy, how we provide services both directly

and with different non-government providers, how we develop policies in the long-term

interest of the public, and how we can make taxpayers‟ dollars go further.

„Better government‟ is more than just a phrase or a tagline.

Not only is it a policy objective in and of itself, but it is key to the effective delivery of all

policy objectives across government.

„Better government‟ means we work more efficiently and we deliver more effectively.

Importance of Better Government

The importance of a strong and sustainable public sector cannot be overstated in the

current international environment.

As sovereign debt concerns linger and leave an adjustment task that will be painful for

many countries, particularly in Europe, the capacity of governments to carry out and

fulfil their core functions is being called into question.

Financial markets are increasingly acting as the litmus test on governments and

whether their ability to govern is up to the task.

For better or worse, the confidence of investment in a country‟s finances through

sovereign ratings provides a proxy for the credibility of governments.

As Europe has shown, a Government that is not financially sustainable risks its own

political legitimacy.

Against this backdrop, Australia‟s position is one of strength.

We charted the course through the GFC where we avoided recession through swift

action that saw hundreds of thousands of working Australians keep their jobs.

The high demand for Australian government bonds reflects our strong fundamentals,

our low public debt and our strict fiscal rules.

Australia remains an attractive destination for investment.

Underpinned by a strict fiscal strategy, this Government is determined to return the

budget to surplus in 2012-13, notwithstanding the damage to budget revenues caused

by the GFC which has seen a $140 billion in revenue write downs over five years.

Indeed, we are making decisions now that will contribute to the fiscal sustainability of

government finances for decades into the future.

Across the public sector, this Government has reshaped the approach to public sector

spending through an ongoing commitment to efficiency.

Efficiencies driven by the Government and by managers like yourselves, have seen a

$10 billion saving in operating expenses since we came to Government.

That is equivalent to all government spending on pharmaceuticals this year.

And these efficiency savings have been re-directed to meet other government priorities

in areas like health and education.

The Better Government agenda, and the drive to achieve efficient government, sits

firmly within the Government‟s broader fiscal strategy.

A strong budget underpins all other actions and establishes the capacity of government

to deliver services to the community.

And the better government agenda is not only about efficiency, it is also about

effectiveness.

How we improve service delivery is equally important.

Because we know that expectations of governments inevitably continue to grow.

We also know that in the decades ahead, the fiscal capacity to respond to these

expectations will be under increasing pressure as the ageing population impacts on

government revenues.

In response to these forces, agencies need to be innovating and looking at new models

of service delivery to ensure that the standards this generation have come to expect are

available to all generations that follow.

This requires looking at the frameworks within which government operates, improving

the way we interact with the not-for-profit and business communities, and enhancing the

governance and the management of risk of program delivery.

And it is an ongoing process.

We can always improve; we can always find new ways to be more efficient; we can

always do things better.

Efficiencies

Under this Labor Government, significant progress has been made to drive efficiencies

in the public sector.

From the outset I want to make clear that an efficient public service is - in its own right -

a policy outcome.

It is government policy, and it is one we strongly support.

And we have runs on the board, with over $10 billion in efficiencies realised since we

came to Government.

While it is easy for some to run around saying they‟ll „end the waste‟, such a slogan

doesn‟t actually measure up to methodical and consistent savings.

An embedded approach to behavioural change is a far superior long-term policy than

threatening to abolish a department of state.

We all have an obligation to see that taxpayers‟ money is spent efficiently.

Since 2007, this Government has systematically pursued efficiencies in the public

sector.

These reforms have been achieved through top down reform, as well as bottom up

efficiencies.

Taking different approaches delivers the best outcomes in efficiency; in getting the best

outcomes for less.

Efficiency Dividend

The primary mechanism for driving efficiencies is the „Efficiency Dividend‟ - although

many in this room may not see it as entirely a “bottom up” measure.

The Commonwealth operates a devolved financial framework, with agencies and

Ministers in control of their own spending, subject to operating within the financial

management framework.

This model - embodied in the FMA and CAC Acts - is a product of its time, when

government shifted from centralised control, to principles-based devolution.

The principle of letting managers manage saw the introduction of a framework that saw

control pushed from the centre to agencies.

Quite rightly, this approach saw senior managers like yourselves put in charge of

budgets, program decisions as well as implementation.

And this approach has served us well.

The Commonwealth public sector is without doubt more responsive and flexible than it

was 10 years ago.

The programs are more innovative, the approaches more targeted.

This same logic applies to the Efficiency Dividend.

While there are areas where specific policies and actions of government can yield

significant reform, as a Government there are also significant efficiencies that can be

achieved when we let managers who are closest to the operations seek out those

efficiencies.

Decisions over staffing numbers and IT spends are rightly the domain of managers in

government agencies.

And that makes sense.

Because you know what you need in terms of resources - you and your staff are at the

coalface, if you like.

So, in setting the whole-of-government Efficiency Dividend - the Government is tasking

managers to achieve policy outcomes through the most efficient means.

Just as the Government takes tough decisions on what its priorities are through the

annual budget process, so too agency heads are required to prioritise spending across

their organisations.

One example is the decisions that have been made by the Secretary of my own

Department, Mr David Tune, who, in a message to all Finance staff, outlined the

approach to be taken in operating within the Efficiency Dividend, and still delivering high

quality advice to the Government.

By primarily focusing on non-staffing expenditures, Finance will be targeting reductions

in the cost of recruitment, advertising, hospitality, travel and the use of consultants.

These efficiencies will be added to by examining the functions across the Department

and looking at the sensible consolidation of functions, and reducing duplication where

appropriate.

This is just an example of one Department.

And I‟m sure similar moves are being made elsewhere.

Essentially, the Efficiency Dividend is the Government tasking Departments to be

innovative in delivering high quality services through more streamlined processes.

Coordinated efficiency processes

In addition to the bottom up approach to efficiency, there have been a number of

specific areas where a concerted and centralised push has yielded significant returns.

We have achieved significant reforms since coming to Government and will continue to

do more over the coming years.

There are areas where Government has identified waste and inefficient practices and

has acted to change the practices of the public sector to realise savings.

Underlying several of these measures is recognition that the devolution of some agency

functions passed the point of optimal efficiency, and that at a whole-of-government level

there was benefit in coordination.

Across services that are common to all agencies - travel, recruitment advertising or

ICT, for example - a devolved contracting and purchasing framework meant that

agencies were not benefiting from being part of a much greater whole.

ICT is the obvious example.

When each agency is contracting and procuring Microsoft products individually there is

an inherent inefficiency, as the Commonwealth‟s purchasing power is diluted.

The Volume Sourcing Arrangement introduced by this Government saw all

Commonwealth agencies receive favourable pricing and licensing conditions through

whole-of-government contracting.

This Government has also responded to what were seen as differing expectations

across government in terms of property use and contracting.

Using a principles-based framework, the Government is moving all agencies towards

the same density target over the coming years.

And, of the savings achieved through this process, one third was returned to agency

budgets to be re-allocated to higher priorities within agencies - whether they be

improved IT or additional staff.

The introduction of Guidelines on Non-Campaign Recruitment Advertising has also led

to significantly reduced expenditure.

Recruitment advertising expenditure has reduced from approximately $44.0 million in

2007-08 to $30.0 million in 2008-09, $17.0 million in 2009-10, and $14.8 million in

2010-11.

Shifting agencies from half-page colour ads in the weekend papers to standardised

advertising has reduced unnecessary spending.

In a competitive job market, the majority of agencies were using bigger and brighter ads

to compete with each other and ending this practice has seen recruitment advertising

drop by two-thirds since we came to Government.

As Minister, I have built on this work to achieve further reforms to recruitment

advertising.

From 1 July this year, recruitment advertising - with some limited caveats - will move

online, with pages of ads in the weekend newspapers a thing of the past.

This is a common sense reform that will save agencies money, and better respond to

the needs of the employees.

These examples are an indication of the broader body of work that is underway across

government.

And it is an ongoing process, and one that requires ongoing attention both from public

sector managers and government.

It is methodical, and it is getting real results.

Throughout this year I expect to be announcing further efficiency reforms that we want

to take forward.

It will require new ways of thinking and pushing the boundaries of existing practice to

deliver a more efficient government.

I have tasked my Department to actively reach out to the private sector, as well as to

draw from international experiences to test what additional ideas there are in this area.

Some of these will have application in Australia, others will not.

But we need to keep an open mind.

Indeed, many of the obvious opportunities to increase efficiencies have already been

explored.

Now we need to look more broadly for further potential efficiency reforms.

But ultimately that it is only half the equation of delivering better government.

Better Government also means that we need to improve how we deliver programs to

ensure that the services we provide the community are top class.

And key elements to this are better service delivery, better engagement, better

frameworks and better risk management.

Better service delivery

Key to delivering better government is improving the interaction between the public

sector and other sectors in the community, and the governance frameworks that ensure

risks are well managed and delivery is robust.

Technology and innovation will drive improvements in the areas of health, education

and social inclusion.

The National Broadband Network will be the backbone of the digital economy, just as it

can be the backbone of improved service delivery.

Harnessing its capacity in delivering services to the community will increase the

efficiency of government operations.

But technology alone is not sufficient.

The ability to translate the latest thinking into new policy responses and then into

program design and implementation will underpin the improvement in services over the

coming decades.

Bridging the gap between policy work and frontline delivery will also be vital.

Often, policy work may not fully grasp the diversity and complexity of real life

implementation.

There is a significant body of literature that delves into this gap, and the various means

of overcoming it in practice.

Looking at it from another angle, it is argued that what is needed in the policy

development stage is the citizen‟s perspective.

Indeed, in terms of service delivery, we need to flip the traditional approach on its head

and focus our policy responses on achieving simpler and better targeted frontline

service delivery for citizens.

This will likely require new ways of looking at policy development and service delivery,

but should provide a more holistic response.

However, new program design also needs to be supported by the right framework; one

that provides flexibility to agencies and assurances to government that the innovation is

tempered by appropriate risk management.

It also requires working better with other sectors of the economy to achieve public policy

outcomes.

Better engagement

We also need to recognise that government is not always best placed to be the provider

of certain services, and that government may not hold all policy answers.

This is not a criticism.

Indeed, far from it.

This recognises that government programs should be delivered to achieve our policy

outcomes in the most effective and efficient manner.

In community services, it is entirely appropriate to look to service provision in areas

where not-for-profit groups have specific skills and expertise.

Because this capacity is unlikely to be found in the public sector, and in many areas it

would not be appropriate as it would be unnecessary duplication of services that already

exist.

So, embedded in this approach is the need to improve engagement between

government and non-government sectors.

I recognise that „more engagement‟ may seem commonsense, but it is something that is

sometimes overlooked as an area that can improve service delivery.

Evidence of these benefits can be seen in the work that Minister Butler is doing on the

not-for-profit sector reforms, encapsulating various streams of work from across the

Government to improve the delivery of services in this field.

This is not only applicable to the social sector - it is also imperative to embed deeper

engagement with the business community.

In my portfolio we are facilitating this in the deregulation area through the Business

Advisory Forum, announced by the Prime Minister, Minister Bradbury and myself earlier

this month.

Seeking the views of senior business figures to feed into policy development -

specifically around deregulation and competition - will provide vital input to government

policy.

Over time, improving our engagement with non-government sectors will help shape

future policy reforms.

But for this to occur successfully, we need to put in place the right frameworks to

manage this change.

Better frameworks

As the expectations of government change, so too must the frameworks of the public

sector change.

We need to provide the flexibility and capability to meet the changing demands on

government.

Much of the thinking behind the current financial framework is nearly 20 years old.

And, while the current framework has met the needs of government to date, it is

insufficient to meet future needs.

That is why today I am formally releasing the Commonwealth Financial Accountability

Review Discussion Paper that has been prepared by my Department to kick-start the

process of reforming the current financial framework.

While not pre-empting decisions of Government, the paper examines current

arrangements, and poses a number of questions to generate debate.

Indeed, I would encourage all of you present today to be engaged with this process.

I‟d also ask that you encourage any stakeholders that interact with government to

similarly get involved.

This process will be inclusive, and assist government in getting the right financial

framework for the next twenty years and beyond.

The discussion paper will be available on the Department of Finance website.

Better risk management and delivery

Vital to the approaches I‟ve outlined today is appropriate risk management practices

because new approaches will inevitably present new risks.

This is unavoidable - but it is manageable.

For governments, and for the public sector, „risk-free‟ is a term that sounds appealing,

but is ultimately impossible to achieve.

The transactions of government, the interface with other sectors, the interaction with

citizens, presents far too many moving parts for it to all be free of risk.

Furthermore, attempting to eliminate risk can actually have the perverse impact of

stifling the very innovation that will improve service delivery and the intended outcomes

for all Australians.

That is why a renewed focus on risk, balanced with the need to innovate, is an

important area of decision making - and one which the Government looks to the public

sector to advise us on.

Getting this balance right is important and can mean the difference for how successfully

a policy is implemented and delivered.

We have already made some progress in this area through the introduction of a number

of tools to assist agencies.

The Risk Potential Assessment Tool, which aids in determining and communicating the

risk of a proposal to Cabinet, not only informs the decision making process but also

indicates whether additional assurance processes should be applied.

The Government has extended the application of the Gateway assurance methodology

to apply to programs, given the complexity and implementation challenges that can

accompany program delivery, particularly cross-portfolio programs.

Last year, we also announced reforms to strengthen the role of internal audit within

agencies, to ensure that internal policy discussions aware of and able to manage risks.

However, these important measures cannot displace the need to continually build the

capability of managers across the public sector to better manage risks in program

design and implementation.

Conclusion

This Government has made significant progress on delivering better government and I

believe there is still more that can be done.

Better government is about continued improvement.

The way government works has changed.

The expectations of governments have changed, the complexity has increased, and the

scrutiny heightened.

As we all know, a significant amount of work goes into bringing a policy concept to

fruition.

And as part of this, we need to look for ways to deliver these policies effectively and

efficiently.

We are now using non-government entities and the not-for-profit sector in service

delivery.

We are increasingly moving service delivery online.

We are working smarter and delivering more.

Now, there are those who will simplistically quip that waste is everywhere in the public

sector.

And this perception certainly isn‟t helped when rare instances of bad behaviour and

mismanagement of taxpayers‟ money occur and are aired in the public domain.

But as I said earlier, we all have an obligation to see that taxpayers‟ money is spent

efficiently and, while there is always more to be done, I think it is fair to say that this

Government is undertaking serious work on this front.

„Better government‟ is more than just an efficiency dividend, it‟s more than a catch-phrase.

It‟s not just about saving money. It‟s about saving time.

It‟s about cutting unnecessary processes.

It‟s about delivering better, and deepening our engagement.

It‟s an overarching approach to delivering good public policy that we - both politicians

and public servants - should follow and aim for.

Thank you.