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Warning on false economy in PS cuts

Minister for the Public Service Mark Dreyfus.

Minister for the Public Service Mark Dreyfus. Photo: Andrew Meares

The public sector suffers the plight of the anorexic, according to a think tank that is warning against further cuts to the public service in next month's budget.

''No matter how thin it gets, there are voices saying it's too fat,'' a report released on Tuesday by the Centre for Policy Development says.

The report was written by the centre's public service research director, Christopher Stone, who questions whether Australia really wants a size zero government.

''Every Australian needs to understand what politicians mean when they talk about the 'efficiency' of government,'' he says.

''This is our money, being spent on us and the things that matter to us. It makes sense to demand that it be spent well.''

On Tuesday evening, Public Service Minister Mark Dreyfus said the Australian Public Service did not grow last year.

"The 2012-13 budget papers showed a reduction in the general government sector for the first time in many years - 3300 fewer than the average staffing level reported for budget 2011,'' he said.

The cap on senior executive service growth had been extended for five years to the end of 2016 and the government had made more than $13 billion in public sector savings since 2007, he said.

Mr Stone examines the ''muddled thinking'' that can lead to ''false economies'', decisions made in the name of efficiency that end up costing more than they save.

''The word 'efficiency' is often misused to mean 'cuts', and some cuts to public services can end up costing us much more than they save,'' he says.

''When it comes to privatisation or outsourcing, too many of our politicians have tunnel vision. They can only see the private sector as efficient and are blind to when it fails.

''Our public services do a lot for us. They need to be efficient, effective and fair, but we won't achieve that by endless cuts or blind faith in market solutions.

''We need to consider results as much as resources, we need to think long term, we need to carefully consider the benefits and disadvantages of outsourcing and privatisation, and we need to be aware of society-wide costs, not just direct costs to government budgets.''

The report says its main message is that to know whether we are getting public value for public money, we must consider what government does as well as what it costs, to look at results as well as resources.

''This is true both of decisions to cut back on spending or decisions to privatise or outsource public services,'' it says.

''Too often, debates on the efficiency of government are conducted by a handful of expert economists in obscure language that excludes the general public, or they are skewed by politicians who want to promise more while taxing less.

''In public services the two most common kinds of false economies are inappropriate cuts or savings and inappropriate privatisation or outsourcing.''

The report says inappropriate cuts and savings can significantly damage dynamic efficiency, with the most obvious cases being cuts to research and education.

''Failing to invest in research will mean that new techniques and technologies are not created, and failing to invest in education means a reduced capacity to implement and adapt to new discoveries,'' it says.

''Other examples of cuts or savings damaging dynamic efficiency include skills loss from staff cuts.

''The Howard government cut Australian public service numbers by 32,000 in its first four years.

''It then found that it had too little investment in public service capacity. It hired 42,000 extra public servants in its next seven years.''

The report was funded by the Community and Public Sector Union, the Becher Foundation and Slater & Gordon.

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