ACT government needs to get down to business of cost-cutting

Government needs to take a leaf from the private sector, writes ANDREW BLYTH.

In our budget submission to the ACT government, the ACT and Region Chamber of Commerce and Industry suggests three areas for particular scrutiny because public information is available, which raises questions about how prepared the government is to deal with cost-padding in service delivery.

The latest Report on Government Services shows the ACT spent $18,270 on each government school student in 2010-11. This figure is 30 per cent higher than in NSW. Everything else equal, costs should be lower in the ACT because NSW government schools service a ''more costly'' student demographic.

In fact, ACT government school costs per student are 35 per cent higher than in Victoria. Victoria also has a more costly student demographic than the ACT (although less costly than NSW).

Despite the ACT's funding largesse shown towards government schools, the ACT has the lowest share of government school students of any jurisdiction: just 57 per cent (in 2010-11), compared to 66 per cent in NSW and 65 per cent nationally.

The ACT would struggle to justify the largesse shown towards its government schools with claims that it buys outstanding student outcomes. Given the strong family advantages that most Canberra students start with (they have the most educated and highly skilled parents of any jurisdiction), our NAPLAN student outcomes are a little disappointing. Part of the funding largesse is explained by overstaffing in ACT government schools by about 5 per cent to 10 per cent relative to NSW and Victoria.

The same report found that, after making allowance for the number of patients and the type of procedures they underwent, ACT hospitals are from 10 per cent to 15 per cent more costly than those in NSW and Victoria. It seems that ACT hospitals aren't more expensive because they suffer from a lack of scale. ACT hospitals were found to be more expensive than ''medium-sized'' hospitals in NSW and were comparable in cost to ''small, acute'' hospitals in Victoria.


Spending on public hospitals is a large item in the ACT budget. In 2013-14, they were allocated $550 million. We don't know what drives this cost gap between ACT hospitals and those of nearby jurisdictions. Perhaps it could be worth engaging some health economists to scope the possibilities for reining in ACT hospital costs.

There also remains considerable scope for the ACT government to rein in ACTION bus service subsidies. These subsidies amounted to $91.2 million in 2013-14. The Auditor-General's report on ACTION bus services in 2010 noted ''Benchmarking studies showed that there was significant scope for ACTION to improve operational performance and cost effectiveness''. In addition, the Hawke report in 2011 noted that, ''Deanes Buslines, the privately owned Queanbeyan-based operator, employs 1.4 people per bus, while ACTION currently has over four people per bus.'' Hawke also noted that: ''The current industrial framework at ACTION is a significant obstacle to flexible and passenger-centred management of the public transport system. Deeply ingrained work practices including in relation to the ratio of full-time and part-time drivers, prohibition of a seven-day roster, and restrictions on workshop operations add significantly to ACTION's cost and inefficiency.''

The chamber questions whether ACTION subsidies might be greatly reduced if ACTION was operated with a private sector discipline.

The chamber suggests that, until the ACT government can demonstrate it is capable of putting public transport users' interests ahead of transport unions, it should avoid promoting yet another transport mode. Accordingly, Capital Metro should be ''put on ice'' until ACTION has been sorted out. We also suggest a relatively cheap ''real world'' test by restructuring part of ACTION's fleet to replicate the proposed routes and frequency of Capital Metro.

In addition to tackling bloated costs, we suggest an overhaul of business and industry development programs. Business and industry development received $10.6 million (not including tourism promotion) in 2013-14; that is, $1 for every $430 that the government spent on services.

The chamber acknowledges and supports the view of the Treasurer, Andrew Barr, that the ''ACT government places a high priority on market-based policies and actions to broaden employment, and increase business and economic performance''.

However, the implementation of the business development strategy amounts to a disappointingly long list of potentially high-admin, special-interest-focused elements unlikely to gain any sort of critical mass, especially given the small amount of overall funds. Worse yet, some elements don't appear consistent with market-based policies; nor does it seem likely the ACT taxpayer will get value for money from this strategy.

Small business knows that every dollar of costs counts against their continued survival. That is why Canberra businesses scrutinise costs and deal with poor performance and waste, no matter how painful that may be for business owners and their employees.

Businesses that rack up large debts for no great payoff will also not survive. The ACT government needs to take a leaf from small business and apply a business-like discipline to all of its activities, starting today.

Andrew Blyth is chief executive of the ACT and Region Chamber of Commerce and Industry.