Water report provides the ‘systemic fix’ but damage to the public service lingers

By Stephen Easton

Tuesday September 12, 2017

Yesterday’s report on water management failures in New South Wales exposed by the ABC will shift some authority from government to a somewhat independent regulator and could have consequences for other jurisdictions. Its author says the “systemic fix” is urgently needed to restore trust in the NSW public service.

The government has agreed to consolidate its currently “dispersed” compliance and enforcement functions from the state-owned corporation WaterNSW and the water office in the Department of Primary Industries, and hand them to a new Natural Resources Access Regulator.

The regulator will sit within a new division of the Department of Industry and eventually take over responsibility for other natural resources. The report from lead investigator Ken Matthews says it must stay at “arm’s-length” from the DPI, which also sits under the vast Industry umbrella.

Matthews has given Department of Industry secretary Simon Smith a “complementary package of administrative and operational reforms” to go with the new structural arrangements. It’s up to Smith to build a new system of NSW water regulation that is not only more effective — with simple fixes like mandatory use of actual meters instead of log books — but also more transparent and independent.

The ABC program appeared to expose a textbook case of regulatory capture. A senior official, DPI deputy director-general Gavin Hanlon, was secretly recorded in a phone conference apparently offering confidential information to lobbyists. A transcript of the call is appended to the report, and Matthews thinks Smith should investigate whether it was one of his staff who recorded it illegally, so he can root out another public servant who believes the end justifies the means:

“At risk is public confidence in the ethics, trustworthiness, and high standards of personal conduct expected of professional public servants.”

Matthews leaves it to the “appropriate authorities and processes” to investigate the specific allegations, such as those against Hanlon, who has been stood down while a misconduct procedure is completed.

“Whatever the outcome of those processes the public response to the Four Corners program has highlighted the continuing public expectation that the public service should conduct itself to the highest standards of ethics and professionalism,” Matthews writes to Smith in his letter of transmissal.

“My interviews with members of staff involved in water management suggested a culture of tolerance for expedient work practices in the interests of “outcomes”, but at the expense of due and proper process.

“I saw examples of possible failures to confront unethical behaviour. I heard public servants clearly deficient in their understanding of the Westminster conventions. I observed a group culture diverging from the best traditions of Australian public administration.”

Some staff in Smith’s department and many others across the public service were “deeply concerned” that the ABC story was a black mark against the whole bureaucracy, according to the former federal mandarin who was the first chair and chief executive of the now-defunct National Water Commission and, the report notes, grew up on an irrigated farm in NSW.

“I know you, as Secretary, wish to re-build the professionalism, reputation and self-respect of the agency. To provide the necessary focus on ethics and public service professionalism I would encourage you to consider a new program of staff leadership training, mentoring, and, importantly, staff selections that take account of the ethical example officers set to others,” he writes.

In contrast to the federal Minister for Agriculture and Water Resources, Deputy Prime Minister Barnaby Joyce, who seemed deeply ambivalent to any regulatory reform that might be catalysed by the Four Corners investigation, the NSW government is taking the issue very seriously. Despite it only containing interim findings and recommendations, with a final version due by the end of November, the NSW Minister for Regional Water Niall Blair received the hotly-awaited report with open arms and said he had “immediately” begun acting upon it.

Blair promises to get water meters installed to get a read on all large water users in the state within a year.

The report also gives the federal government’s Murray-Darling Basin Authority and authorities in other states some things to think about. Matthews basically wants to see the MDBA’s role in compliance and enforcement “more clearly articulated and made public” and all the Basin states putting similar amounts of funding, towards a goal of achieving similar standards of compliance, with various assurance reports, audits and public reporting.

“Of course, these proposals are subject to independent consideration by other basin states and the authority itself,” he notes. “However, if they were to be picked up, many of the reforms now proposed for NSW would be carried also into other states — with benefits to the basin as a whole.”

Matthews is particularly worried about how badly the scandal has damaged public trust in the fairness of the NSW system across the board. Environmentalists, irrigators, other state governments and any other interested members of the community all want assurance that illegal over-consumption of water will be dealt with firmly. “The industry’s ‘social licence to irrigate’ is at stake,” he writes. Later in the report, Matthews comments:

“There is no doubt that the Four Corners program has led to a sudden and sharp loss of public confidence in compliance and enforcement arrangements in the Barwon–Darling region, and NSW more broadly.

“There is scepticism about the integrity and efficacy of water metering arrangements in the Barwon–Darling region, and perhaps more broadly across NSW. There is doubt in the minds of the community that certain public servants involved are committed to the compliance task and doubt that it is being performed effectively.

“It is important that public confidence is restored. A trusted compliance and enforcement system is essential if the new Barwon–Darling Water Resource Plan is to be accepted by all parties, and if the wider Murray–Darling Basin Plan is to succeed.”

The former federal water commissioner’s investigations led him to share the “significant public concern” about the actions of supposedly impartial public servants that arose from the ABC report.

“It raised serious questions about the professionalism of officers of the NSW public service,” he adds in his letter to Smith. “It prompted doubts about the even-handedness of the department’s consultation arrangements with different groups of stakeholders about water management throughout the state.”

Matthews said he was careful to make sure his interim report didn’t interfere with any of the other reviews, proceedings and inquiries that have resulted from the shocking revelations, delaying it a week to allow “maximum possible disclosure” of his findings and recommendations.

It is always more difficult to regain trust than to lose it, so matter how well the proposed reforms are implemented, the public cynicism fuelled by the fiasco will linger.

Transparency is one of three keys to turning the situation around — acknowledging water is owned jointly by all members of the community, and therefore even those who don’t use vast amounts of it to grow cotton still should be able to see where it is all going and why.

The new system for monitoring and enforcing compliance in NSW obviously needs to be a lot more effective than the current one, too, which requires a mix of “techniques and technologies such as remote sensing, meter telemetry and targeted covert operations” and firmer rules, like mandatory use of metering.

It also needs to be more independent of both government and the various interest groups involved. Matthews thinks the new regulator should be sufficiently independent if it is governed by a board with independent decision-making powers.

“The regulator would be governed by a board appointed by the relevant portfolio ministers but not subsequently subject to ministerial direction,” he explains in the report.

“The legislation would empower the board to oversight the delivery of compliance and enforcement activities, make decisions on the handling of serious alleged offences, and report publicly on plans and performance. The locus of compliance responsibility would be clear and leadership and decision-making authority would be unambiguous.

“That is not the case now.”

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