Harper review: choice at the heart of public service delivery

By Stephen Easton

Wednesday April 1, 2015

Consumer choice should be placed at the heart of government service delivery, through policies to encourage diverse and competitive markets populated with innovative and responsive providers, according to the Competition Policy Review led by economist Ian Harper.

Echoing other economic advice like the Productivity Commission’s aged care and disability care inquires of recent years, the review panel urges governments to recognise consumers are best placed to make decisions about their needs. The role of governments should be to ensure equitable access, minimum quality standards and the availability of relevant information to help consumers exercise choice.

In sectors where exercising choice is complicated or difficult, the Harper review panel (pictured) found it should be made easier by “intermediaries or purchase advisors” who are incentivised to act in the consumer’s interests, and disadvantaged groups should get special assistance. Default options should be available as a general rule, and the cost of switching service providers minimised wherever possible.

Competition-policy-review-report_online_Page_001The weighty tome that emerged from the review yesterday also argues that in both provision and procurement, governments need to put clear space between their separate interests as a policymaker, funder, regulator and service provider.

Remaining public monopolies should be unbolted from contestable service elements, which should in turn be separated into “smaller independent business activities”, and no government business should enjoy a competitive advantage as a consequence of public ownership. According to the report:

“Designing markets for government services may be a necessary first step as governments contract out or commission new forms of service delivery, drawing on public funds. Over time, a broader, more diverse range of providers may emerge, including private for-profit, not-for-profit and government business enterprises, as well as co-operatives and mutuals.

If managed well, moving towards greater diversity, choice and responsiveness in government services can both empower consumers and improve productivity.”

Social Services Minister Scott Morrison has been conspicuously quiet on the subject of public service mutuals and cooperatives since taking on the portfolio this year, especially in comparison to his predecessor Kevin Andrews, who lauded the concept as a pure embodiment of Liberal Party ideology.

The Harper review focuses on the massive and heavily government-funded human services sector in particular, where it finds that “deepening and extending competition policy … is a priority reform” and argues:

“Regulation and policy decisions that are independent of government provision can encourage a more certain and stable environment, which can in turn encourage a diversity of new providers. But governments cannot distance themselves from the quality of services delivered to Australians. An ongoing market stewardship function means that governments will retain responsibility for overseeing the impact of policies on users.”

The review panel acknowledges that its guiding principle, consumer choice, is not the be-all and end-all of human services:

“Equity of access, universal service provision and minimum quality are also important to all Australians.”

To encourage innovative service delivery throughout the federation, governments are advised to:

“…encourage experimental service delivery trials whose results are disseminated via an intergovernmental process; and encourage jurisdictions to share knowledge and experience in the interest of continuous improvement.”

The Harper review emphasises the importance of “careful commissioning” that is sensitive to individual and community needs, and does not edge out the contributions of smaller community-based not-for-profit and volunteers. Targets, benchmarks and incentives must focus on outcomes and there must be “credible threats” that poorly performing service providers will be replaced. One challenge will be getting the right balance between certainty for providers and competition, in conditions of service agreements.

University of Melbourne associate professor of public governance Helen Dickinson has argued public servants in Australia need to develop a better understanding of commissioning, which she says is more art than science and goes far beyond simply contracting out services or outsourcing.

The Harper report quotes Rethinking Public Service Delivery, an academic text by public management professors Janine O’Flynn and John Alford, in which they build a compelling case that depending on the situation, it may be best for services to be delivered directly by government agencies, handed over to the private sector, or a combination of the two. Nevertheless, the debate around privatisation remains a political battleground.

The panel took heed of warnings in many submissions, including from human services organisations that support vulnerable Australians, that governments must retain a “stewardship” role, and the Harper review’s recommendations “…should not be seen as bolstering simplistic arguments for privatisation or contracting out of public services, nor giving comfort to a philosophy of ‘private good, public bad’.”

Stewardship must include co-designing the frameworks for diverse and competitive markets with existing providers, as they are in touch with the users of such services, the report adds.

New institutions for a new competition policy ecosystem

The Harper review also recommends the creation of two new taxpayer-funded bodies: an “access and pricing regulator” to take over some functions of the Australian Competition and Consumer Commission (ACCC); and the Australian Council for Competition Policy (ACCP), which would also take some functions away from the ACCC, along with all of the National Competition Council’s (NCC) now “considerably diminished” role.

The report recommends how the access and pricing regulator should take shape and what functions it should take over:

• the telecommunications access and pricing functions of the ACCC;

• price regulation and related advisory roles of the ACCC under the Water Act 2007 (Cth);

• the powers given to the ACCC under the National Access Regime;

• the functions undertaken by the Australian Energy Regulator under the National Electricity Law, the National Gas Law and the National Energy Retail Law;

• the powers given to the NCC under the National Access Regime; and

• the powers given to the NCC under the National Gas Law.

“Other consumer protection and competition functions should remain with the ACCC. Price monitoring and surveillance functions should also be retained by the ACCC.

“The Access and Pricing Regulator should be constituted as a five-member board. The board should comprise two Australian Government-appointed members, two state and territory-nominated members and an Australian Government-appointed Chair. Two members (one Australian Government appointee and one state and territory appointee) should be appointed on a part-time basis.

Decisions of the Access and Pricing Regulator should be subject to review by the Australian Competition Tribunal. The Access and Pricing Regulator should be established with a view to it gaining further functions if other sectors are transferred to national regimes.”

As for the ACCP, the report explains it is envisaged to have a “broad role” including as an “an independent assessor of progress on reform, holding governments at all levels to account” starting with the priority areas for reform highlighted by the review:

“In particular, the ACCP should advise governments on how to adapt competition policy to changing circumstances facing consumers and business. The ACCP should therefore develop an understanding of the state of competition across the Australian economy and report on it regularly.

The Panel sees advocacy for competition as a central function of the ACCP. Too often this has fallen by default to the Australian Competition and Consumer Commission (ACCC), which can be an uneasy role for a regulator to fulfil.”

The role of the ACCP is recommended to encompass:

• advocacy, education and promotion of collaboration in competition policy;

• independently monitoring progress in implementing agreed reforms and publicly reporting on progress annually;

• identifying potential areas of competition reform across all levels of government;

• making recommendations to governments on specific market design issues, regulatory reforms, procurement policies and proposed privatisations;

• undertaking research into competition policy developments in Australia and overseas; and

• ex-post evaluation of some merger decisions.

Top image, left to right: Michael O’Bryan QC, Su McCluskey, Professor Ian Harper and Peter Anderson.

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