Moran: public servants, states need more autonomy

By David Donaldson

June 17, 2014

Public servants need to be given more freedom to innovate. That was the key message from a speech on public sector innovation given by Terry Moran, former secretary of the Department of Prime Minister and Cabinet, last week in Canberra.

Suggesting that public sector innovation to date had focused on policy over service delivery, Moran stated that although Australia has “one of the most economical public sectors in the OECD world”, there was still a lot of room to improve.

Offering support for organisational decentralisation, he argued that “unless we find a way … to devolve more responsibility to the local level and have clearer political understandings about who’s responsible for what … we will stifle innovation that might otherwise occur.”

The overarching message was increased autonomy: public servants should be given more discretion in applying funds, and a greater share of subsequent accountability. “Activity-based funding, linked to efficient pricing … was, for the public hospital system, the absolutely ideal way of giving people at the local level a bundle of resources, some outputs to deliver, some standard pricing arrangements, and thus a whole lot of freedom to operate,” said Moran.

Noting that the Commonwealth government had decided to “throw away” this form of funding, Moran added: “I hope that we don’t throw that particular baby out with the bathwater.”

Moran added that he thought the Commission of Audit’s suggestions that the states take over full responsibility for schools was “a good idea”. He also believes making changes to the tax system to allow states to run hospitals and city transport systems, including roads, would help improve service delivery. This should be funded in part by giving money from the fuel excise to the states to be spent on roads.

“If you’re looking at these issues from the state perspective, you can’t really trust the Commonwealth any more to stick by deals,” he said. “So it would be better if the states argue to have far more freedom in defined areas from the Commonwealth.” On transport, Moran advocates “the Commonwealth going back decades to what it used to do, which is worry about interstate roads, interstate rail links and airports, and nothing else”.

One of the reasons the public service needs decentralisation, says Moran, is that higher-level decision-making tends to stifle innovation: “The higher the administrative discretion is located, the more cautious are the choices.”

Allowing greater discretionary freedom to those at the coalface could help with the personalisation of service delivery, improving efficiency and outcomes. Striking a balance between effective risk management, the efficiencies of standardisation and the need for localised solutions is key. Public servants, Moran adds, need not be timid in proposing changes, given the speed with which government agendas are liable to change these days.

The flip-side of this increased autonomy is increased accountability at the local level. Moran believes this would involve shrinking ministerial departments’ reach so that organisations like schools and hospitals are given the space to be creative in their problem-solving, but also inducing a stronger sense of accountability for their decisions. Rather than waiting for ministers to step in when things go wrong, those at the local level should be prepared to own the outcomes of poor decisions.

“We’ve got to shift the role of ministers and get them back to a more traditional concept of what ministers do in the Westminster system. It’s bad for ministers to stretch themselves as much as they do, [and] it really mucks up service delivery in the public sector.”

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