How the Commonwealth plans to lose the bloat — and keep it off

By Harley Dennett

Tuesday May 3, 2016

federal budget 2016
federal budget 2016

A blunt-force efficiency dividend is only one tool in Treasurer Scott Morrison’s agenda for a lean, innovative public service — and not all of them can so easily have their impact measured.

Efficiencies should allow agencies to reallocate resources to functions better aligned with the policy priorities of the government, Finance Minister Mathias Cormann explained:

“The government will seek new opportunities to modernise and transform public services so that they are better prepared for the challenges ahead. In doing so, it will not lose sight of the need to keep the cost of administration affordable, including by managing the size of government.”

Public servants’ wage ‘restraint’

Enterprise Agreements were notably glossed over in the Australian Public Service workforce management review, released last week, but not so in Treasurer Scott Morrison’s 2016-17 budget. The government has recommitted to the controversial public sector workplace bargaining policy that has driven enterprise agreement take-up to a near-standstill.

The government says its bargaining policy has provided a strong framework to ensure responsible and appropriate wage restraint in Enterprise Agreements, following a sustained period when Commonwealth public sector wages grew strongly (since at least 2005).

Under the policy, wage rises in proposed EAs must be offset by productivity gains to ensure that they are affordable, sustainable and in-line with community expectation.

The Australian Public Service Commission on Tuesday announced that 52 EAs have been accepted in 49 agencies. Hold-out EA groups that have failed to vote yes on an agreement represent additional savings for the budget – including eight of the federal government’s 18 departments.

Outsourcing and contestability

On the contestability front, more government business activities will be opened to fair competition from other sectors. Cormann highlighted several examples on Tuesday, including infrastructure and corporate and IT services.

The delivery of the Inland Rail project by the Australian Rail Track Corporation will be one such flagship. Cormann says the government will undertake market testing to explore options for greater private sector involvement.

Another canary for whether the private sector can efficiently deliver services currently run by agencies will be the Australian Securities and Investments Commission Registry. ASIC was already planning an upgrade for its ageing IT system which is subject to the same tender.

Shared services

Where it doesn’t outsource directly to the private sector, the APS will remove more duplication and inefficiencies through economies of scale.

The Shared and Common Services Program will be continued and build on the $40-odd million in savings estimated in the most recent Mid-Year Economic and Fiscal Outlook papers published last December. The next phase will further consolidation into fewer shared service centres – like the SSC jointly run by the Employment and Education departments.

The government will assess whether whole-of-government electronic invoicing is one such business process that can be modernised though leveraging economies of scale and standardisation.

Streamlined grants

Fragmentation in service delivery will be targeted for waste by removing unnecessary complexity in program rules where they undermine policy effectiveness. Currently, 13 agencies that administer grants are being scoped for rationalisation down to two grants administration hubs. The Streamlining Government Grants Administration Program will ensure a simpler, more consistent grants administration across government, it hopes, with a more user-focused experience.

The remaining 11 granting agencies (minus the two who will run the hubs) will transition their programs to one hubs from July this year. The government says this reform will result in a reduction in red tape for grant applicants and recipients, and administrative efficiencies for government.

Operation Tetris and rationalising property

The government is still in the process of divesting some 160 surplus properties with an asset value of approximately $65 million. That program of rationalisation in the property portfolio is continuing and expected to return more savings to the budget, as well as the reduction of ongoing property management and maintenance costs.

Vacant and leased holdings are also a source of tension between agencies and the budget overlords. Operation Tetris, which aims to simplify those holdings and reduce the amount of vacant office space in Canberra, is expected to save almost $200 million over the next 10 years. The strongarm comes from blocking new leases or renewal of leases if there is vacant leased office space already in the ACT. This coordinated approach has already ensured that over 42,000 square meters of previously vacant space has been filled. A further 55% of government leases are scheduled to end over the next three years.

Rethinking risk management

Risk reduction red tape has been simplified since the introduction of the Public Governance, Performance and Accountability Act, known across the public sector as the PGPA.

Disproportionate compliance burdens and inflexibility are making way for less prescriptive measures that require officials to manage risk sensibly rather than over-invest in unrealistic efforts.

Admittedly there is one area where reporting red tape is actually increasing: performance against the purposes they pursue. The government doesn’t want wastage on programs that aren’t delivering the results it expects, and the new reporting requirements, that will be included in annual reports alongside financial information, will allow judgements to be made by the taxpayers and the Parliament on benefits generated by public expenditure.

Transparency to fend off future bloat

The Australian Government Organisation Register is a new public record of this government that lists all public entities of the federal government.  While of obvious benefit to the public and Parliament looking to see the size and scope of government, it will also help with assessing progress of the Smaller Government agenda. To date, those efforts to rationalise agencies and activity reform are estimated to have delivered $1.5 billion in savings.

Cormann says the government will continue to closely watch the size and shape of its bureaucracy, including reviewing the purpose fit of agencies as they hit their periodic sunset date.

“Keeping the number of government bodies as small as possible helps to maintain clear lines of accountability and makes our public sector agencies better able to address changing pressures and government priorities.”

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