Peter Harris' four-step plan for more effective governments

By Harley Dennett

October 25, 2017

Effective government may be a ‘tedious subject’ for some people, the inaugural 5-year national productivity review, ‘Shifting the Dial’, acknowledges — “The Productivity Commission begs to differ.”

There is little prospect of advancement in the living standards of Australians without renewal of public services, it warns. It’s work only comes to notice when it fails badly, especially in the complex interaction between the three levels of government.

Between elections, the final opportunity for the public to judge the results of a government, the community relies on political leaders and the public sector to care about sound processes and relevant capabilities, the report notes. But they are failing in many areas. The report looked at four.

1. Make COAG cooperative again

It’s not broken, but it does need renewal.

Income growth will languish without national agreement on reforms to shift the dial on productivity, warns the report. “COAG, the apex of intergovernmental relations, is currently not an effective reform vehicle,” similarly the tax imbalance and over-reliance on financial payments to incentivise reform lowers confidence in genuine cooperation.

To fix these problems, the report recommends a Joint Reform Agenda. The governments commit to tax changes as part of a reform agenda that would encourage all parties review collective commitment at COAG. It would require independent monitoring of progress and impacts (currently its self-assessment), and a practical division of responsibilities based on the nature of the policy problem at hand and the parties most willing to design effective change.

But don’t treat existing intergovernmental committee structures as sacrosanct, and if possible, try not to reform primarily through control of payments.

Doing these things, the report argues, will do more than just breath life back into COAG, but allow it to be an effective mechanism for addressing and lifting productivity and therefore Australian’s quality of life. Improved tax accountability would be a bonus.

As Productivity Commission chair Peter Harris told The Policy Shop:

“Not to put too fine a point on it, people who work within the system now and need to have ideas because the ideas can only be effective if they are coordinated nationally between the Commonwealth and state government. People who work within the system that we interacted with in the generation of this report, are the source of that conclusion about COAG not working.

“In one celebrated comment made to us, the way that COAG works today is ultimately entirely about short-term deliverables whereas it ought to be about the medium or long term. The more crude response has been, COAG is the place where good policy goes to die.

“Now, when from within the system you have that constant level of, I don’t want to say criticism because it’s more than criticism, it’s disappointment with a structure that it is so important if we are to have a nationally coordinated response to the kinds of initiatives that we propose in our Shifting the Dial report. That is that the institutions itself must change. And yet as we say in the report, this is almost a cost-free shift.

“In the case of COAG, the idea of refreshing the commitment to a level of co-operation across the medium-term national public policy requirements, that refresh of mindset is cheap. It rather requires something else which is a deep sense of commitment to a collective national response.”

2. Don’t give up on tax reform

There have been numerous failed attempts at tax reform, like the carcass of Joe Hockey’s abandoned white paper, but the problems aren’t going away. There’s little shock protection for the states and weak budget constraints, especially at the Commonwealth level.

The PC makes a few recommendations, but doesn’t seek to prescribe specific tax reforms. Rather, “tax reform must not be considered dead.” It recommends starting tax reform with government revenue-sharing arrangements. It also urges more accountability mechanisms such as more precise fiscal targets, longer-term projections on major programs and bolster the PBO.

“A joint commitment to change is required, lest the necessary cooperation between levels of government on matters such as (but not limited to) the reforms in this Report languish due to budget and service quality pressures — particularly on the smaller States and Territories.”

3. Follow through on capability promises

There is sufficient evidence from recent reviews of government performance to indicate that the continuation of approaches in several areas will not serve us well, the report observes.

For example: Ahead of the Game Blueprint for Reform of Australian Government Administration (2010). Report on large government policy failures (Shergold review) (2015). Independent Review of Internal Regulation (Belcher review) (2015). Capability Reviews of Commonwealth agencies (2011-2016). And the many independent reviews on programs such as the VET FEE‑HELP scheme; Victorian East West Link Project; Queensland’s shared IT services; NSW’s Learning Management and Business Reform project; Centrelink Online Compliance Intervention system; the Home Insulation and Building the Education Revolution programs, and management of contracts.

“Several reviews have noted that excessive risk aversion has led to provision of advice that is assumed governments want to hear, and a reluctance to report risks or mistakes for fear of being blamed.”

Other complaints are poor adherence to policy due diligence requirements, lagging skills, especially in risk management, and limited accountability for already accepted public sector reform initiatives. In other words, a lot of talk, a lot of promises, but little follow-through.

The Productivity Commission thinks the Australian Public Service Commission should be made accountability for ensuring national public sector reforms are implemented, with the Joint Committee on Public Accounts and Audit conducting regular checks on progress. The recommendations include:

  • require the entities responsible for implementing the findings of reviews to commit to deadlines for delivery and report publicly against implementation timelines
  • require the secretary of the Department of the Prime Minister and Cabinet to issue a charter letter to each department head at the start of government terms outlining expected agency capabilities and public sector reform priorities to lift those.

The PC also encourages that no policy areas should be immune from proper appraisal — ex ante and ex post — but “Regulatory Impact Statement processes should emphasise sound policy-making rather than simply adherence to rules.” Continuation of funding should be linked to regular evaluations, based on regular use of sunset clauses, and rectification of problems identified in those evaluations.


4. Better local government reporting before amalgamations

Does anyone really know how well local government performance is doing? That lack of transparency concerns the Productivity Commission too.

Before jumping into amalgamations, the inherent benefits of which there is mixed evidence the PC says, try simply improving reporting.

The PC recommends state and territories look to the experience in Victoria and require better performance reporting by local governments. It would improve accountability to residents and taxpayers, and provide an incentive for local governments to improve their performance. The more effective use of performance measurement would:

  • improve the accountability of local governments to residents and taxpayers;
  • identify best-practice methods in local governments for future policy development; and
  • provide an incentive for local governments to improve their performance by highlighting differences in performance between similar local governments.


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