Dearie me, there's something in here with a stench like the most putrid part of an excrement-processing facility. It's the government's public service remuneration policy [sic], something that's been left in the stocking for years and which has become more and more rancid as time has gone by. It's left about 40 per cent of staff without a pay increase for four years or so, wasted many tens of millions of dollars, damaged relations between managers and staff, and contributed to the serious economic problem of low wage growth. When charming Tasmanian Eric Abetz became minister for the public service, he thought there was going to be a wages explosion; on this at least he was comprehensively wrong: there's been a wages implosion.

The core problem is that the policy is based on the economic lunacy that the cost of improving pay should be entirely offset by productivity gains at the enterprise level. This is irrational for any enterprise but more so for public sector ones, where productivity can't be measured. Thus, negotiations on pay and conditions under this policy are so fraught because the basic facts about productivity simply cannot be established, leaving the parties with little to do but shout at each other.

Worse, with those agreements that have been reached, it is impossible to demonstrate they're fully offset by gains in productivity, and that's why the Public Service Commission refuses to release the details of agency certifications that they are. The policy is based on a pack of lies and the commission, an important guardian of honesty and integrity in the Australian Public Service, is left administering something that is shamefully fraudulent and damaging to the efficiency and effectiveness of agencies.

So let's flush this down the drain and see what else is in the stocking.

Here's a big one: it's Centrelink planning to get 1000 staff from labour-hire firms. It's wrapped up in cliche paper containing the words of an official spokesman saying the move is part of "measures which are strengthening the integrity of the welfare system". Maybe, but it's also a move that undermines the integrity of merit staffing in the APS.

Section 67 of the constitution says that "until the parliament otherwise provides ... the appointment and removal" of public servants will be "vested in the governor-general in council". In the case of the public service (of which Centrelink is a part), the parliament has principally only otherwise provided via the Public Service Act and the Members of Parliament (Staff) Act. These provisions exist to ensure proper merit-based recruitment and tenure, and to avoid patronage, nepotism and corruption.

Using labour-hire firms to provide staff to do work in the public service that otherwise would be done by public servants offends the spirit and quite possibly the letter of section 67 of the constitution and related laws. No doubt labour-hire firms are diligent in recruiting staff; however, they cannot be expected to apply the kind of recruitment assessments used in the public service that exist to serve public interest tests not relevant to the private sector. It's not good enough for a Centrelink spokesman to try to justify the use of labour-hire firms by saying: "The department has engaged contractors for many years for specialist services and to support day-to-day operations to help fill short-term requirements for finite periods." All the requirements the spokesman mentions can be readily satisfied by employment under the Public Service Act. Therefore, the Centrelink gift in the stocking must also be discarded.

Now what's this down at the stocking's heel, as it were? It's a brown envelope that seems to contain some coins. No hang on, it's the Treasury, which appears to have caught a dose of Joyce-Nash syndrome, a disease named after the public service decentralisation policies of the $40,000 man, Barnaby Joyce, and his former deputy, Fiona Nash. Yes, the Treasury is also moving staff out of Canberra, although not into the bush. Thus, according to its latest report, staff in Canberra were reduced by about 45, 22 of whom went to Sydney, seven to Melbourne and one to Perth. What's going on?

The Treasury's secretary, John Fraser, says these moves are intended to "foster closer ties with local stakeholders and attract talent from the private sector" allowing "us to engage more effectively with the private sector, other agencies based outside Canberra and people interested in the development of policy". It's to be hoped thinking of this calibre is not affecting the Treasury's advice to the government on economic policy.

Indeed, it would be more reassuring if Fraser were to show a keener appreciation of the fact that, as amorphous as it may be, the Treasury's key "stakeholders" are its ministers and the government and, through them, all citizens. There's nothing wrong with wanting to "engage more effectively with the private sector" but bunging 30 more people into Sydney and Melbourne gives the impression that those in the private sector in these centres may get the inside running. It would be interesting to know, for example, how much time Treasury staff in the two major cities have spent rubbing shoulders with those from the business community compared to those from charitable and voluntary institutions and unions. And what about "stakeholders" in Brisbane, Adelaide, Hobart, Darwin and Perth (assuming that one person in Western Australia can't do much) and, dare it be said, "rural and regional" Australia?

The Treasury's advice to governments should be based on a broad appreciation of the public interest as it affects all citizens. That cause is unlikely to be much advanced by having 70 people in Sydney and Melbourne where they can be duchessed by the self-interests that thrive there. In assessing public sentiment over and above that provided by ministers, the government and the parliament, the Treasury should, as much as possible, give all parts of the community equal chances to blow into its ears and not privilege those in some cities who already have stronger voices than most others.

Ross Gittins wrote recently that the Treasury's influence is on the wane. In particular, he said it "isn't up to speed on microeconomic reform" in health, education and infrastructure. It's hard to know if this is true but, if it is, the Treasury may be better off putting its eggs in these baskets rather than engaging more with elements of the private sector whose views on such matters as company tax and the bank levy are only too lamentably obvious.

As for luring staff into the Treasury's nest, it's often been difficult to attract people from Sydney and Melbourne to Canberra. However, it's a step too far to accommodate those who fail to appreciate Canberra's charms by locating Treasury positions in the two major cities, where they're separated from most of their policy colleagues in the national capital. Moreover, attracting top-notch people to senior positions in Sydney and Melbourne will always be tough at pay rates the Treasury can afford under the Commonwealth's crazy remuneration policy. So far as graduate recruitment is concerned, the Treasury had over 1000 applicants last year for 35 vacancies – not much of a problem there, it would seem.

So, all up, the Treasury can't be allowed to remain in the Christmas stocking this year. Sorry. That leaves only two items therein.

The first is a well-wrapped packet (possibly Janette's work) from former prime minister John Howard. It's addressed to those Coalition MPs keen for a royal commission on the banks. It contains a message in Britannic Bold font reproducing Howard's recent allegation that such an inquiry would be "rank socialism". Sorry, comrade, your gift must also be turfed out because, in this case, the real problem is not "rank socialism", it's "rank capitalism". Too bad.

That leaves only one item in the stocking: a small volume in the Wit and Wisdom of Secretaries of Commonwealth Departments series. It's from Mike Pezzullo, pro tem the immigration and Border Force supremo. This work would make an excellent Christmas beach book, especially if it could be waterproofed. Thus, when you're chased from the surf by marauding schools of hammerhead sharks, and the grandchildren who've been entrusted to your care have retired to the sand dunes for a few cigarettes, you could turn to Pezzullo, whose engaging bon mots can be taken as either wit, wisdom or a happy combination of both, according to your disposition. That is to say, you can laugh and be edified simultaneously. Here are a handful of randomly selected gems that should have you itching for more:

Gripping stuff and the only remaining gift in the stocking for this year; no small consolation though. Let's add a dozen copies.

For next year, the steps needed to get replacements for labour hire and the Treasury back into the stocking are obvious enough, and it's to be hoped Pezzullo will still be around. Fixing the abject failure of public service remuneration policy is not difficult, although the method may be worth spelling out.

When, in his fabulous travelogue, Jonathan Swift gets Lemuel Gulliver to Laputa, our hero is permitted to visit the Grand Academy of Lagado. Here, he finds "the most ancient student of the academy" engaged in "an operation to reduce human excrement to its original food, by separating the several parts, removing the tincture which it receives from the gall, making the odour exhale, and scumming off the saliva".

That's exactly what must be done with public service remuneration policy; the end result being a centralised system of remuneration determination whereby rates are set by occupational categories (clerks, engineers, scientists, medical officers, tradesmen, etc) on the basis of what is needed to put them in a reasonably competitive position in the labour market over time. Anything less would be an insult to managers and staff, a continuing nasty burden for agency heads and a pathetic refusal to learn from the ills and grievances of failure.

Things will improve in the New Year. Believe me.

Paddy Gourley is a former senior public servant. pdg@home.netspeed.com.au