In 1985 a young Ken Henry peered around the corner of a cubicle he occupied in the basement of the Treasury building, where the officials working on Paul Keating’s tax reform options were housed. “What are you working on?” he asked the man at the next desk. “I’m designing a capital gains tax!” an equally youthful Martin Parkinson responded enthusiastically.
Tax policy is one of the best ways of telling the story of changes in public policy-making in the last thirty years. It remains an area of great contention and public interest. It is one of the few remaining areas of economic decision-making that has not been lost to government by deregulation – as has, say, wages policy or interest-rate regulation. It was an area where, as a joint project with the government of the day, the public service – Treasury – had a massive influence throughout the 1980s and 1990s. Tax reform saw the introduction of a comprehensive (if mild) capital gains tax, the fringe benefits tax, dividend imputation, a drawn-out debate about federal wholesale taxes and their replacement by a federal consumption tax (or GST) and the elimination of less efficient taxes. It saw a range of new ideas, such as international competitiveness, building national saving and new tax bases that made the most of changing technologies. Tax policy was also transformed by technology shifting the way money moved around the globe. Between the 1980s and 2015, the debate gradually got bogged down in brawls over smaller changes to the tax mix, rather than the brave new world of new taxes and major tax shifts contemplated by Parkinson and Henry in the Treasury basement. There was, inevitably, a massive expansion in the size of tax legislation, rulings and case law. This created its own problems for the bureaucrats.
Martin Parkinson was there at the beginning of the tax reform discussion. He remembers all the brawls and policy modifications along the way. But thirty years later, Treasury has a lot of trouble recruiting people into its tax division. Recruits contemplate their prospects if they go into tax policy: the sheer complexity means several years’ investment in getting up to speed before you can give any decent advice – if, that is, the government of the day is prepared to listen.
In the dying days of the Gillard government, Treasury was hit by the harsh redundancies imposed across the public service by a government desperate to meet its pledge to return the budget to surplus. Staffing levels were slashed. Among the voluntary redundancies, it tended to be the older staff who left. Most of them were in tax – known as the revenue group. Many of the older and more senior staff in this area were the last of those who had come through the ranks during the era of big change under Paul Keating and Peter Costello. A total of sixty-two staff took redundancies or were made redundant over the three years from 2012 to 2014. Even as Treasury was being asked to prepare for a new round of tax reform – in conjunction with a group in Treasurer Joe Hockey’s office – its tax division had a third less staff than it had three years earlier.
This is just one example of serious, continuing, real-world implications for the way Australia is governed, flowing from what has happened to the public service in the past thirty years. It is not just about politicisation. It is a result of politicians failing to value and preserve our institutions.
Numbers, as always, can tell a story. My Australian Financial Review colleague Verona Burgess has pointed out that, according to the Australian Public Service Commission, the median length of service of “ongoing” public servants in mid-2014 was 9.4 years. “So only about half the core workforce had a working life in the [public service] extending back as far as the last couple of years of the Howard government.” Similarly, almost 40% of public servants are aged below forty, so that “the 1975 dismissal is beyond ancient history, the Fraser government barely, if at all, a memory and the Hawke government probably background noise to their childhood.” In other words, about half the public service doesn’t remember the place working any differently to the way it has worked from the Howard era onwards – cannot recall a time when policy-makers in departments had a real role to play and there was a vital and active engagement with executive government.
The problem isn’t the youth of the public service now. The Seven Dwarfs at the height of their influence were young and dynamic and full of new ideas. It is the lack of mechanisms by which talented up-and-coming recruits can gain access to the experience of their elders: it is that the public service, despite losing much memory through change and falling numbers, doesn’t have the processes in place to keep those institutional memories alive. Ultimately, it is as though we as a community have ceased to recognise what a valuable repository of memory, and what a valuable institution, the public service is.
This is an edited extract of Laura Tingle’s Quarterly Essay 60, Political Amnesia: How We Forgot How to Govern, $22.99 quarterlyessay.com