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This budget won't eliminate waste - it will breed it

Date

Markus Mannheim

Labor's cuts to the public service are too rapid to succeed, MARKUS MANNHEIM writes

In truth, we've had a tough budget coming for a while. Canberrans lapped up the many perks that sprang from a decade of public service growth, much of it far more rapid than was sensible. It was great for many of us, but it was never going to last.

Throughout the 2000s, the ACT's jobless rate was a mere fraction of the national figure - it still is. Promotions in the bureaucracy were relatively easy to come by. The Australian Public Service's middle-management ranks - executive level 1 and 2 officers - ballooned to the point where, in Canberra offices at least, they now almost outnumber the staff they supervise.

Sure, there was an ''efficiency dividend''. However, in reality, it was a weak brake that merely slowed excessive growth, particularly during the Howard government's last two terms. And as much as the dividend drew complaints, and was unfair on smaller government agencies in particular, it rarely worked the way it was designed to work.

Agencies ran over budget, but their ministers always managed to find spare cash. IT firms nudged the size of their government contracts ever higher, and no one dared say ''no''. The Finance Department repeatedly ordered departments to use teleconferencing instead of air travel, yet only a handful of agencies heeded the call. The Defence Department ignored it entirely.

After then Liberal leader John Howard won office in 1996, he began a three-year purge that claimed the jobs of about 30,000 public servants. It was ideologically driven, unnecessary and ultimately wasteful. His government had not only re-employed those 30,000 before it lost office, it had added an extra 12,000 on top.

Organisations that grow that quickly never grow well, regardless of whether they're businesses or government agencies. American management scholar Professor Larry E. Greiner wrote about these problems back in the 1970s. ''[Management], in its haste to grow, often overlooks such critical developmental questions as: where has our organisation been? Where is it now?'' When an organisation's budget grows rapidly, its managers tend to focus on spending the money as soon as possible, when they should be asking themselves how they can best spend the funds (or even if they should spend them). The APS is no different. As much as it's often unthinkingly and unfairly maligned, it did have some fat to trim as a result of Howard's excesses.

Yet just as rapid growth inevitably leads to inefficiencies, rapid cuts cause the same problems. That's what's wrong with this budget. The government should be trimming back the bureaucracy with secateurs; slowly and diligently eliminating waste as it's found. Instead, it's wielding an axe, taking an almighty swing and hoping for the best. (The Coalition, it should be mentioned, has learned nothing from its past, and is urging the government to swing harder.)

Finance Minister Penny Wong likes to trumpet Labor's achievements since it won office, pointing to the billions of dollars in public service spending it's already supposedly ''saved'' in areas such as IT, travel and advertising. The trouble is, many of those ''savings'' are yet to actually happen: they're built into future budget allocations. In other words, agencies are yet to adapt, administratively or culturally, to the budget cuts announced in previous years, let alone the new ones that they now face.

Wong's expectations are simply too high, and the time frame to meet her demands is too short. Many mistakes will be made. Programs or teams will be abolished before the ramifications are thought through. Good public servants will leave the bureaucracy (a few of them with handsome pay-outs, no doubt), while the more challenging task of weeding out underperformers will be put off, as it always is.

Labor deserves some credit. It slowed the APS's growth immediately after it won office. It also reports, in more detail than any government before it, on how much it spends on legal services, advertising and parliamentary staff - voluntarily exposing itself to far greater scrutiny. The government's changes to public administration were heading in the right direction, even though Labor repeatedly baulked at replacing the very inefficient efficiency dividend with a more genuine and thoughtful attempt to reduce waste.

Yet this budget undoes a lot of that good work that Labor had begun, because it's trying to do too much, too quickly. It will take years for the public service to sort itself out. All in the name of chasing a tiny surplus that no one will remember.

Markus Mannheim is a staff journalist who edits The Public Sector Informant.

Twitter.com/MarkusMannheim

5 comments so far

  • It's true that irrespective of whether it is the private or public sector, mass layoffs do result in mistakes being made. Often it is remedied by re-employing what was an FTE as a contractor at double the cost or more. This is counters the objective of the layoff which is to reduce expenditure.

    One key differentiator between the private and public sectors is that public sector management is penalised if they elect not to spend their budget: what happens is that their budget for the following year is reduced. This disincentive offers no choice but to spend the budget. In the private sector the manager would be applauded; in the public sector the manager is condemned.

    It would benefit the tax payer and the public service if the system could be changed such that managers who elect to put aside money for major projects or a rainy day are not penalised.

    Commenter
    Bennopia
    Location
    West Footscray
    Date and time
    May 10, 2012, 11:14AM
    • The continual criticism as to the growth of EL level ignores the fact that it has happened in part because the only way to attract good staff - particularly in technical or areas where there is also private sector work - is to pay roughly market rates, and the APS levels are way below market rates. So EL is really the new APS 6

      But, really, the only way to properly reduce the PS is to reduce what they do. Cut programs, then you dont need people running them, Cut the requirement to respond to every ministerial within a short time period, cut the requirement to draft PPQs, cut pandering to ministerial publicity needs.

      Do the same with less people and someone, or many people, will suffer in some way.

      Commenter
      asdf
      Date and time
      May 10, 2012, 6:10PM
      • I agree with you generally, 'asdf', but I take issue with your first point.

        The reason EL1s are "the new APS6s" is because the public service grew too quickly during the 2000s, and Canberra's labour market simply couldn't keep up. It's not so much of an issue outside the ACT.

        Agencies had to promote people, or employ them above their effective work classification, because Canberrans would easily find higher paid work in another agency. The fact that government agencies were ever allowed to compete against each other, offering different rates of pay for the same level, worsened the problem.

        The APS's pay and classification structure needs a complete overhaul. The government knows this, but it keeps putting it off.

        Commenter
        Markus Mannheim
        Location
        Canberra Times
        Date and time
        May 11, 2012, 9:38AM
      • Markus

        I agree with you in part, but I know that in some areas - law, finance and engineering - the APS used to have considerable difficulty in attracting and keeping staff. Even know, the DMO wants to pay its senior engineers pretty much what a grad engineer gets in the private sector (albeit outside Canberra). 10 years ago a 5th year lawyer would never move from private practice to govt without taking a drop in pay, now there is almost pay parity.

        However, I agree that outside these specialist areas, there is no need for agencies to compete with each other. Sure they may lose people to the odd private sector job or people will leave Canberra, but overall the govt has a monopoly on policy and program delivery jobs in Canberra, so where else will people go?

        Commenter
        asdf
        Date and time
        May 11, 2012, 2:32PM
    • The labour government simply lacks courage to accept from time-to-time a budget deficit is not that bad and has created an artificial environment for the sake of generating a surplus through slashing and burn strategies.

      Labour have not in my view created an environment of hope and have instead made Australia a no go zone for investment. Exporters all of sudden cannot compete on price compliments of among other things the carbon tax and workers won't work as hard because the concessions available to low income earners would be lost if you earn too much.

      Incentives to make something of yourself have been lost.

      Mr Swan you need to accept a budget deficit is what it is.

      Creating all this unemployment is not the solution for long-term growth and will take our economy years to recover from the loss of skills and distrust in government that has been generated.

      Commenter
      Fido
      Date and time
      May 10, 2012, 9:52PM

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