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Address to ANZSOG and ANU Crawford School, Canberra



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JIM CHALMERS MP

SHADOW MINISTER FOR FINANCE

MEMBER FOR RANKIN

LABOR AND THE PUBLIC SERVICE

ADDRESS TO ANZSOG AND ANU CRAWFORD SCHOOL

CANBERRA

THURSDAY, 9 AUGUST 2018

***CHECK AGAINST DELIVERY***

For almost two decades I’ve been going back and forth between Brisbane’s south

and Logan City - the lands of the Yugumbir and Jaggera peoples, the suburbs I

now represent - to Ngunnawal and Ngambri land in Canberra. I begin by

acknowledging their elders and customs of the traditional owners - and all the first

Australians.

I first came here for work in 2000. It was a big deal - my first time working

interstate, and the first time I needed to buy a second suit. I was a researcher in

the Queensland Premier’s department, working for the Director-General, Glyn

Davis, known to many of you. We came to meet with then PM&C Secretary Max

Moore-Wilton. It was a fascinating tutorial in federal-state financial relations and a

first glimpse of the influence and prestige of central agencies in the “triangle”.

The Commonwealth public service I met in 2000 was better funded and more

integrated than today. Even with a PM&C Secretary nicknamed “the axe”, there

were relatively more resources, less outsourcing, and more consistent policy skills

across agencies. Officials could build long-term careers in a service less prone to

the loss of talent and politicisation of contemporary public administration.

That first trip also coincided with the 25th anniversary of the now defunct Canberra

Bulletin of Public Administration. Glyn and I co-wrote in that anniversary edition of

an Australian “talent for bureaucracy” springing from “the necessity to provide

services over such vast spaces” and relying on “a community of people who care

about public administration”.

That community is very well-represented in this room - thank you for coming - and

to ANZSOG and Crawford friends, for getting us together.

Two decades on from that first interaction, my fascination with the public service

and the machinery of Government persists.

I’ve been really fortunate to have worked with some of the greats. I’ll always

remember the excitement and possibilities of the first meeting with Wayne Swan,

Ken Henry and his senior Treasury officials the day after the 2007 election. And I’ll

never forget the sober professionalism of the Treasury under Ken and then Martin

Parkinson, along with Finance and all the key agencies involved in Australia’s

response to the Global Financial Crisis.

The GFC response required political leadership, but it was also one of the APS’s

finest hours: clear eyes, cool heads, corporate memory, policy courage, and with

ordinary Australians front and centre.

That’s how I approach the purpose of the APS, the challenges it faces, and the

review currently underway. Today I want to sketch the direction in which Labor

would take the public service, and share some initial plans we’ve decided to

implement if and when we take office. Our proposals are all about better services

for Australians, better advice to governments, and better value for money for

taxpayers.

Purpose of the APS

The first question to answer is what do we want the public service to do?

This isn’t straightforward. Terry Moran said as much when he was Secretary of the

Department of Prime Minister and Cabinet:

“The formal role of the APS is not chiselled neatly onto a stone tablet. Interpreting

the role of the service is more like navigating using the stars.”

That said, I’m attracted - as was Terry - to the clarity of Geoff Gallop’s

characterisation of four core functions: service delivery; policy development;

financial management; and law enforcement.

We expect our public servants to deliver quality programs and services like

Medicare and Centrelink. We expect them to play a key role in developing policies.

Considered, independent advice to Government, based on expertise and

experience. A longer-term perspective, above the political fray of the day. We

expect our public servants to do all of these things professionally, ethically, and

with an emphasis on value for money. And in recent years, we’ve added more and

more expectations, like a National Disability Insurance Scheme.

State of Play

The APS is a century-old institution long defined by change. The Coombs Royal

Commission of the Whitlam era, the Lynch Review in 1981, the new Act in 1999,

and the Ahead of the Game report in 2010, offered big rethinks and reviews and in

some cases seminal legislative change. Those big changes have been most

successful when they have found ways to strengthen those core functions in the

light of well understood contemporary challenges.

In 2018 then, I think it’s useful to look at the challenges in three main categories.

One is the changes common to workplaces everywhere; the second is fiscal; and

the third is imposed by this current Coalition Government.

In the first category: rapid technological change at work and in society; less secure

employment, low wages growth and increasing casualisation; and globalisation,

with weaker sovereignty operating in a very unpredictable world economy and

security context.

The second set of challenges: a fiscal environment which constrains even

essential funding for services and could lead to other forms of inefficiency and

ineffectiveness.

This pressure comes from the fact that:

• Net debt has doubled in the past five years to sit at around $350 billion;

• Gross debt is now more than half-a-trillion dollars, and expected to remain

there for the next decade; and

• Both kinds of debt are growing faster on average under this Government than

they did under Labor.

The third set of challenges flow from the first two and could be characterised as

“false economies”. These are largely government-imposed and very troubling in

my Finance portfolio because they make our Budget challenges even more acute.

When it comes to false economies, you can’t go past the Liberals’ arbitrary public

service staffing cap. As a prospective Finance Minister, I understand the fiscal

rationale behind the Average Staffing Level (ASL) cap, especially given the state of

the Budget Chris Bowen and I would inherit. But its consequences are damaging,

and significant.

Blind adherence to an arbitrary cap hasn’t just compromised services and advice.

The ASL cap is now a perverse incentive for more spending on external providers.

Departments are forced to rely on contractors and labour hire, often at greater cost

to taxpayers than directly employing full-time staff.

My colleague Julian Hill discovered in the course of his forensic work on a recent

Parliamentary inquiry the ABS has revealed contracted ICT staff cost

“approximately double” that of internal staff and had “a significant impact on ABS

costs and budgets”.

Across the service, it’s no better. The Government has more than tripled labour

hire spending, according to an analysis of its own AusTender website. Up from

$307.6 million in its first year in 2013-14, to more than $1.1 billion in 2017-18. The

Finance Minister has tried to argue these numbers on his own website aren’t

reliable - a stunning admission. If that is the case, he needs to fix his own site and

make the amount of Government spending on contractors and consultants more

transparent.

The point here is that one saving on public servants ends up costing taxpayers

much more in consultants, contractors and labour hire. It doesn’t make sense to

move to a cheaper phone plan only to end up paying more in data usage charges

- and there’s no point hitting an arbitrary short-term headcount target if it just

means building higher consultancy costs into the Budget in the future. And it isn’t

right to unnecessarily spend more taxpayer money to use labour hire firms, who

then take their cut and leave less money in workers’ pockets than if they were

permanent staff.

A similar argument can be made about the efficiency dividend that has been

applied since 1987: it’s useful for keeping costs in check, but the regular additional

dividends have compromised the public service’s ability to meet expectations and

have outlived their purpose. I am of course aware that the previous government

imposed its own additional efficiency dividends. Different people will have different

dates to demarcate when these became unproductive, shall we say … but I think

we can agree they have gone too far.

The costs of these perverse incentives, along with poorly thought through and

ideologically driven changes from the Government, have hurt service delivery

badly.

Recently, Chris Bowen and I spent some time in central Australia with Warren

Snowdon. In his electorate office in Alice Springs, people who’d trekked in from all

around the area queued up to use his phone to get in touch with Centrelink. Then,

in a tiny side room, they sit on hold. Ideally, improved technology could help here

but again there’s been much disappointment. A recent Senate committee report

exposed a lack of coordination, performance measures and leadership across

Government digital projects. Consider three facts:

• In 2016-17 there were 55 million unanswered calls to Centrelink, more than

double the 22 million in 2014-15;

• The ATO website has repeatedly crashed, the roll out of My Health records is

chaotic and the 2016 online census notoriously failed.

• And of course, the robo-debt debacle. 20,000 people were issued with false or

incorrect debts.

Many of my colleagues, I think particularly of Linda Burney, Andrew Leigh and Ed

Husic have exposed these bungles and are working to ensure they won’t be

repeated under Labor.

These bungles, and perverse incentives like the ASL cap and the additional ED,

don’t just hurt service delivery. They also lead to the loss of vital experience and

corporate memory that should inform quality advice. The result is the “political

amnesia” Laura Tingle dissects in her compelling 2015 Quarterly Essay of the

same name:

“With memory goes what is often the most powerful weapon in a bureaucrat’s

armoury when trying to influence a minister - or a 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.”

I witnessed the power of memory in 2008, when Ken Henry’s famous advice “go

hard, go early and go households” was very specifically grounded in his

recollections of policy errors in the early 1990s recession. Our fiscal stimulus

response to the GFC, based on that advice, was so successful in protecting

Australia from the worst of the crisis there isn’t really a true appreciation even now

of what the consequences might have been if we failed to act.

Corporate knowledge is also lost as lessons learned in outsourced services are not

shared with policy advisers and opportunities for performance evaluation and

design improvements are diminished.

The Liberals exacerbated all of this just yesterday when Michael Keenan expected

a pat on the back for his announcement to privatise Centrelink even further. Of

course, they failed to mention that the outsourced, temporary jobs they’ve

announced won’t make up for the 2500 permanent roles they’ve axed in the last

two years alone. And no mention of the lack of training for staff on contracts and

concerns around the security and privacy of information.

It’s no surprise these failures frustrate public servants and damage morale. They

also have to worry about losing their jobs in the next round of outsourcing, or sitting

next to colleagues doing the same work for different pay. The CPSU has done a

great job raising these issues. Through their tireless work not only advocating for

change in the public service, but highlighting the concerning consequences for

public servants and the impacts on their work and well-being, they’re an important

voice in the debate.

Austerity weakens service delivery and institutional memory - and politicisation

makes this much worse. Jenny McAllister has been vocal in her advocacy for an

impartial head of the Public Service Commission, as has Penny Wong in Senate

Estimates. Others have pointed out that machinery of government changes to suit

ministerial ambitions have damaged real efficiency and effectiveness.

And just recently three political staffers were appointed to senior positions in the

bureaucracy, including Scott Morrison’s own chief-of-staff to head up Treasury.

Of course, there’s a difference between these three - staffers who have spent

most of their careers in political offices with some time in departments - and long-time public servants who spent some time advising ministers, like Ken Henry or

even Peter Woolcott, who does come from the PM’s office into the Commissioner

role, but with a lifetime of experience in the bureaucracy.

The respected columnist Ross Gittins described the Treasurer’s appointments as

“the flouting of convention and good governance”. Same goes for the Treasurer’s

habit of dressing up dodgy figures generated in his own office as “Treasury

analysis” which jeopardises its reputation for his own political gain.

And when the Government allows a minister to move a key specialist agency to his

own seat it looks ridiculous. Joel Fitzgibbon and Stephen Jones have been

instrumental in exposing this blatant pork-barrelling and I know they’ll continue to

do so as we continue to work on a proper decentralisation agenda focused more

on service delivery in regional centres.

The Public Service Review

So those are the challenges: technology and globalisation; fiscal constraint; and ill-conceived Government decisions, which have generated such a false economy in

the past five years. Made worse by short-termism and politicisation. Given these

pressures, I welcome the APS Review announced recently and I’m pleased to see

something like 668 submissions were received by the deadline.

It’s a good idea. If the Government hadn’t already kicked off the Review, I’d have

proposed a similar course - perhaps even in this speech today. Ideally, the

Government should have approached us as partners in a bipartisan effort. But

we’re still keen to make the most of it so it’s useful to both sides of politics. I’ve had

productive discussions with Chair David Thodey last week and with individual

panellists over the past several weeks and months, and will continue to do so.

My starting point is that the Review shouldn’t be used as a stalking horse for more

ideologically-motivated cuts to services, or as an excuse to delay much-needed

action to get the public service back on track.

At its heart, the review is about how the public service is placed to improve

Australians’ lives. It should certainly look at the issues I’ve flagged today. It should

also consider the structural, management and cultural issues already identified in

some submissions, including a culture built around process for its own sake and

risk aversion, and a lack of diversity.

Panellist Gordon de Brouwer has spoken about a risk-averse tendency for

decisions to be elevated to senior managers, meaning more junior officers weren’t

getting the experience they should, and the importance of encouraging

bureaucrats to think outside the box. And, perhaps most critically, the need to gain

the public’s trust by talking to them differently and avoiding “bureaucratese” -

giving them the information they need to make informed judgements and

decisions.

But we don’t need the Review to tell us what we already know or to deal with the

obvious and more pressing blowouts in spending on contractors and consultants;

the APS travel budget; the ASL cap; and the gap in capability to deliver critical

services within the public service.

Instead, the Public Service Review should focus on what Australians need the

public service to do, and how to strengthen the way the public service does it,

focusing on people and technology.

Better services for Australians, better advice to governments, and better value for

money. These should be the goals.

Initial Proposals

There are important changes we need to make as soon as possible.

So today, I announce five ways Labor, if elected, will address the concerns that

have plagued the APS over the past five years and ensure the public service is

best placed to serve Australians.

Rein in wasteful spending on consultants and contracts.

Reduce spending on travel across the public service.

Add 1200 new permanent and full-time Department of Human Services staff

across the country.

Not proceed with the remaining 0.5 per cent additional efficiency dividend next

financial year.

And abolish the Liberals’ arbitrary ASL cap.

First, we’ll rein in wasteful spending on consultants and contracts. Of course,

there’s a role for external expert advice, but it’s gotten out of hand, and it’s not a

radical idea to say that public service work should predominantly be done, where

possible, by public servants. The number of contracts for management, business

professionals and administrative services has blown out - we’ll rein them in.

Agencies will have to ensure APS employees take on a greater role in IT projects.

We will save taxpayers hundreds of millions of dollars that would otherwise go to

consultancy firms for work that public servants with expertise and experience can -

and should - do.

We’ll also make sure Australians know exactly how much money is being spent on

external contractors and consultants. Under our plan, government spending and

procurement data will be collected on a central database, including contract

reporting and consultancy spending, and we’ll require agencies to keep records of

sub-contractors used. We will clearly define “contractors” and “consultants” and

establish broader categories to ensure all data is adequately captured and

transparently reported. Future governments won’t be able to hide what this

government has hidden.

Second, Labor will reduce spending on travel across the public service by 10 per

cent. We have record and growing debt and public servant numbers have been

slashed, yet travel spending has climbed to well over half-a-billion dollars a year.

Of course, travelling and engaging with stakeholders across the country can be

beneficial, often necessary. Politicians and bureaucrats can better inform their

policy decisions by seeing impacts first-hand on the ground. But there should be a

greater focus on alternatives such as tele and video conferencing where

appropriate.

When it comes to fiscal responsibility, we have led the way in Opposition, having

already announced significant savings. These two measures alone mean we can

more than pay for new investments in the public service, and our final detailed

numbers will be provided in advance of the election.

Which leads me to my third announcement: a Shorten Labor Government will

invest in 1200 new permanent Department of Human Services staff around the

country. For too long, Australians have had to spend hours in queues, on hold, or

trying to use inflexible programs on a government website.

Unlike the Government’s announcement yesterday, these jobs will be full-time,

they will be permanent, and they will be APS roles; and they will go some way to

reversing the Coalition’s cuts. And, again unlike the Government, we can fund our

commitment thanks to our responsible fiscal approach to the public service, and

more broadly. Our plan improves service delivery, and it is decentralisation done

right - sharing the economic benefits of permanent public service employment

through towns and cities across Australia. Exact locations for the new positions will

be announced at a later date.

These are in addition to the targeted investments Labor has already announced, in

the ATO to implement our fairer plans for taxation; strengthening the competition

watchdog; implementing our FutureAsia initiative and our Advanced Manufacturing

Future Fund; and putting in place a National Integrity Commission.

Fourth, Labor will not proceed with the remaining 0.5 per cent additional efficiency

dividend next financial year. Our commitment will save an estimated 550-plus jobs

and ensure valuable experience and corporate knowledge is retained within the

APS. While the additional efficiency dividend may have served a purpose in the

past, it’s now had its day. It is a blunt instrument that hinders the public service’s

ability to deliver the services and policy advice Australians rely on. I make the point

that we don’t propose to reverse previous efficiency dividends or remove the base

efficiency dividend that has been in place since 1987.

Fifth, Labor will abolish the Liberals’ arbitrary ASL cap. This is not a free-for-all, it’s

contemporary best practice. Agencies’ funding levels will remain capped and they

will be able to set their staffing at the appropriate level within their budget to meet

Government priorities.

Abolishing this arbitrary staffing cap will be particularly welcomed by Australians

with a disability. As it stands, the NDIS has been forced to outsource much of its

core functions to labour hire staff and contractors. Overreliance on outsourcing has

led to poor-quality NDIS plans, and, understandably, a surge in complaints. Jenny

Macklin and Linda Burney have long advocated for this. As Jenny has stressed,

the cap is responsible for long service delays. In some areas, people are waiting

months to access the NDIS.

At a time when Australians expect more from Government, we have seen the

capability of the public service diminished, with the size of the public service as a

proportion of the population falling by a quarter since 2007. Value for money

should be at the heart of Government decision-making. But even in a fiscally

constrained environment a responsible government prepared to make the right

savings decisions can fund strategic and effective investments to ensure

Australians receive the services they need.

Concluding Remarks

The public service, and the direction I’m proposing today, is all about people.

Those who wear the lanyards bearing our coat of arms, and those served by them;

those who rely on Government services, and those who deliver those services

every day.

Today I’ve emphasised the supply side of the public service. But there’s another

aspect I want to mention too: the demand side. By that, I mean what the public

asks of Government, what ministers ask of their public servants, and what leaders

in the service ask of the service as a whole.

We need ministers who actively seek out expert advice from the public service;

who encourage ideas and policy capacity within the public service; and who go

about rebuilding the capability that has been lost to years of misguided changes.

And we need public service leaders who seize the opportunity that creates.

Labor’s ambitious for the country. I know that’s something the good women and

men of the APS share, and I think together we can be a powerful force for

progress. This might sound less concrete than the initiatives I’ve announced today,

but it is no less important: the public service needs ministers who are engaged and

interested, and above all, who are discriminating but avid consumers of advice.

I first set foot on the blue carpet of the ministerial wing during that first work trip to

Canberra in 2000 that I mentioned at the start. There have been some welcome

improvements to the APS since then, but overall I detect a sense among

commentators and practitioners we have lost much that was integral to the “talent

for bureaucracy” exhibited through the first century of the Australian federation.

I’ve been on that carpet plenty of times since, worked on it for more than five

years, and I’m keen to return as a Cabinet minister in a Shorten Labor

Government. Not for its own sake, but because that’s where I hope to work closely

with the dedicated men and women in our public service to help deliver the things

Australians need.

Thanks and I look forward to your questions.

ENDS

MEDIA CONTACT: NATHAN PAULL 0427 532 705