Coalition plans $1.5bn APS budget cuts, promises to spare a few agencies

By Stephen Easton

Friday May 17, 2019

Prime Minister Scott Morrison and Minister for Finance and the Public Service Mathias Cormann. (AAP Image/Mick Tsikas)

A re-elected Morrison government would aim to extract $1.5 billion from departmental budgets over four years, “building to $5 billion over the medium term” to more than offset new spending commitments, according to an election-eve financial statement.

The Coalition would claim 2% annual efficiency dividends from departments for another two years, easing back to 1.5% in mid-2021 and 1% the following year, under a last-minute update to its budget plan published yesterday.

All agencies with an average staffing level of below 200 would be exempt from the efficiency dividend, as would the National Disability Insurance Agency, financial regulators and institutions that maintain Australia’s cultural and historical collections.

Along with the NDIA, the lucky few include the Australian Securities and Investments Commission, Australian Prudential Regulation Authority, Australian War Memorial, National Archives of Australia, National Gallery of Australia, National Library of Australia, and the National Museum of Australia.

All existing exemptions for government entities like the ABC, SBS and Safe Work Australia would continue, and temporary exemptions for the Australian Signals Directorate and Office of National Intelligence would become ongoing.

The Community and Public Sector Union estimates the $1.5bn efficiency drive would lead to at least 3000 job losses and is far happier with Labor’s plan to leave hundreds of millions of dollars in departmental budgets by scrapping the efficiency dividends, remove the cap on staffing budgets, add 1200 new permanent public servants to the Department of Human Services and provide above-inflation pay rises.

Read more: Labor promises above-inflation pay rises and APS-wide employment conditions

An extended APS enterprise bargaining deadlock that continued for most of the Coalition’s time in office caused an effective pay freeze, with public servants repeatedly rejecting offers made under a very strict policy that banned retrospective pay rises. The effective yearly pay increase for staff below senior executive level averaged out under 1% per year over a three-year period.

The government claims Labor would effectively cut more from the Australian Public Service by slashing back its supplemental workforce drawn from consulting and labour-hire firms, and cutting 10% from APS travel bills.

The Coalition claims the APS would have about $600m less to work with — getting to the figure by subtracting the $500 million Labor would leave in APS budgets, by forgoing the current 0.5% efficiency dividends, from the $2.6 billion it intends to save from contractors and consultants.

In the opposition’s view, agencies often pay more and get less from these private sector firms and its promise to remove the staffing cap could well see additional staff employed directly by the APS.

The beauty of the efficiency dividend is the government can “leave it to the judgement of departmental secretaries” as to where the cuts are made, according to a joint statement from Treasurer Josh Fyrdenberg and the Minister for Finance and the Public Service, Mathias Cormann.

“If departmental secretaries assess that these efficiencies can best be secured through reductions in expenditure on contractors, consultants and travel, because that makes sense from a value-for-money point of view, then, of course, that is what the Coalition would expect them to do,” they said.

“Efficiency outcomes will be better and more sensible by letting departmental secretaries make those judgements based on value-for-money considerations.”

The government argues Labor’s plan amounts to a “command and control approach” to the APS, suggesting that spending $2.6 billion less on additional staff members and expertise sourced from the private sector could be seen as equivalent to a 2.5% efficiency dividend.

These supplementary staff and high-paid consultants are unlikely to be CPSU members, of course, and the union firmly rejects their roles in supplementing the permanent workforce employed under public service legislation and subject to its employment agreements as well as its various rules, values and code of conduct.

“Labor has adopted detailed and sensible policies to rebuild public sector jobs, capacity and services, while the Liberal and National parties have now confirmed they’re promising nothing but more damaging cuts and dysfunction,” said national secretary Nadine Flood.

“These figures show the Coalition is planning to sack at least another 3000 people working in Commonwealth agencies, causing even more damage to essential services the Australian people rely on such as Centrelink and Medicare. The Abbott-Turnbull-Morrison Government has been pillaging the public sector for six years, selling it off to private interests piece by piece, and these 11th-hour costings show they’re planning more of the same if they’re re-elected.”

With no time to beat around the bush on the eve of an election, Flood said the aim was to line the pockets of big consulting firms through “dodgy deals” at the expense of good quality public services.

“They slash essential services and the jobs to provide them, causing disasters like robo-debt and over 40 million unanswered calls in Centrelink, then use that money to funnel generous contracts to the big end of town.

“Even in the handful of agencies that would be exempt from these Coalition cuts, like the NDIA, their arbitrary cap on staffing numbers will continue to do tremendous damage and hold these agencies from providing the decent services that the general public needs and deserves.”

“It beggars belief that this mob is criticising Labor for its plans to cut off the billions of dollars the Coalition has siphoned from Commonwealth agencies into the pockets of multinational companies like EY, Deloitte, PwC and KPMG.

“These consulting firms have tripled the amount they’re reaping from Commonwealth contracts since the Coalition came to power, and their political donations to the Liberal Party reflect that fact.”

The big four consulting firms all donate a lot to Labor as well, but generally not quite as much as they provide the Coalition. In 2017-18, only Ernst and Young donated equal amounts to both.

The Morrison government claims its approach would allow it to “re-direct those savings into funding for services and infrastructure” and, according to Cormann, yesterday’s last-minute financial update was just “a very small set of additional measures” to go with its April budget.

Labor has also outlined $1 billion in new funding for local government, including $15 million to establish a National Waste Commissioner. “This is in addition to the $9.5 billion dollars in Financial Assistance Grants, $2 billion Roads to Recovery Funding and $419 million for the Bridges Renewal Program,” explains the opposition’s plan to put federal funds into municipal matters

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