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Economics Legislation Committee
04/06/2014
Estimates
TREASURY PORTFOLIO
National Competition Council

National Competition Council

CHAIR: Good afternoon and welcome Mr Feil from the NCC. I invite you to make an opening statement, if you would care to.

Mr Feil : No, I am happy just to go straight to questions.

Senator MARK BISHOP: I want to talk about the secretariat of the NCC. I understand that the secretariat for the NCC will be merged into the ACCC as an efficiency saving, owing to the sporadic and irregular nature of the NCC's work. Is that correct?

Mr Feil : Yes, that was a decision that the council itself initiated to deal with our very up and down and intermittent workload. We thought it was a far more efficient way of doing it. The secretariat will merge. The council will remain. They will get their advice from people operating as staff members of the ACCC, but we have put in a number of steps to make sure that that advice is directed by the council and in accordance with the council's approach to the issues it deals with.

Senator MARK BISHOP: You said that the council initiated that approach and advised the government. I think that is what you were saying.

Mr Feil : Yes.

Senator MARK BISHOP: When did you come to that view?

Mr Feil : It would have been towards the middle of last year. We have been concerned for some time that our workload was very up and down. I guess we looked forward and thought, 'At some point that is going to create some real difficulties in retaining that staff that we need.' It was much better to be proactive ourselves and initiate some changes.

It was discussed amongst the council. We looked at what other options there might be. We scouted around for which agencies might have a complementary capability in their staff. We landed on the ACCC. We have always outsourced a number of our functions. We have always outsourced IT, in this case, to Treasury. The ACCC already did our accounting and finance. They were a logical place to look.

Senator MARK BISHOP: When did your council come to a final decision on that?

Mr Feil : It would have been towards the end of last year. We have been working in this direction for some time.

Senator MARK BISHOP: What I understand is that, within your council and within your stakeholders, the key concern is that the ACCC should not be involved in determining which infrastructure services it is able to set prices over, as it may have an incentive to then empire-build and overreach. Is that a legitimate concern?

Mr Feil : In the way the act is structured, the council is responsible for advising the government—or governments, because on occasion it is the states and territories—about the scope of regulation under part 3A. Once something is regulated, then it falls to the ACCC to arbitrate an arrangement. The roles are separate. We think that is quite important and it was one of the factors that we were conscious of when we made this change.

Senator MARK BISHOP: When you get 'subsumed' into the ACCC, if that is the right word—is 'subsumed' not the right word?

Mr Feil : The way the council looks at it is that we are purchasing services from the ACCC. There is an amount of money paid; there is a memorandum of understanding that sets out how we will operate. It is a purchase of services. We merge some of our staff. Some of our staff have gone across to the ACCC and others with us will not.

Senator MARK BISHOP: In that context, then, with it being a purchasing of services and a fee being paid for such services by the ACCC, and you keep your governing council, do you then say to the committee that your independence is maintained and guaranteed by that process?

Mr Feil : The council is very conscious of its independence and it will certainly be looking to maintain independence. We have put a number of steps into the arrangement with the ACCC to bolster that independence. In a perfect world, we—

Senator MARK BISHOP: Tell me about those steps.

Mr Feil : We have arranged for a particular person within the ACCC—one of its senior managers—to be designated as the executive director. That person will work a proportion of the time for the ACCC. We have an arrangement that, if there were to be a conflict, the NCC would have first call on that person. The ACCC has got a big enough staff that we can pick and choose. For example, if we were looking at removing regulation of a pipeline, it does not really make sense, if only from the point of view of the optics of it, to have someone who has been involved in regulating that pipeline advising on that particular piece of work. We have done some separation of work.

Regarding who will be the executive director, the president of the council has the final say, with the chair of the ACCC. Initially, we will largely rely on the staff that have transferred to the ACCC from the NCC, although, in relatively short order, that will broaden out to give more flexibility. Essentially, having a dedicated staff within their organisation would have exactly the same problems as we face now with the up-and-down workload.

Senator MARK BISHOP: I note that the Commission of Audit recommended that the NCC be merged into the Productivity Commission rather than the ACCC. Why did your council choose not to run with that particular recommendation?

Mr Feil : We were working on a parallel process. The council decided separately from the Commission of Audit. The Commission of Audit came out after we had made the decision. The PC was one of the organisations that we looked at—whether they had the fit of capabilities. Our view was that the ACCC was a better fit. Our work involves a mix of economics and law. Clearly, the PC is fine on the economics—it is not full of lawyers—whereas the ACCC has a—

Senator MARK BISHOP: You have not been persuaded by the argument from the Commission of Audit that you should reverse your decision?

Mr Feil : No.

Senator MARK BISHOP: That answers that. You say the PC is not as good on the law. It is certainly good on the economics, but it is not as good as the ACCC on the law, and you get both sets of advice there. Of course, once the marriage is consummated—for want of a better description—how are you going to resolve this potential conflict between the advisers in the ACCC?

Mr Feil : The potential conflict is more an impression than a reality. The council makes the decisions. I and my staff work to their direction and within a set of policies that they have expanded over a number of years. In reality, the conflict of interest is a remote issue. As I said, there will be a person within the ACCC who is directly responsible for how the work is allocated and the quality of that work—doing the job that I do. We think there is some strength in that. We are also not talking about an enormous number of pieces of work, which is part of the problem. If we got half a dozen in a year, that would be a very big year.

Senator MARK BISHOP: Okay, you have answered that. We might revisit that issue of whether there is integrity in the independence in future estimates sessions. Thank you for your assistance, Mr Feil.

CHAIR: Thank you for assisting us today. I now call to the table the Productivity Commission.