Federal budget 2014: the road to a lean, mean government

Successive governments of both sides have failed to answer the fundamental questions of what it is that government should actually do and how it should go about doing it. AAP/Lukas Coch

Treasurer Joe Hockey’s first federal budget set out a vision of a smaller, less intrusive role for government. The sentiment can hardly be a surprise; prime minister Tony Abbott has long championed the notion of small government. He said in 1994:

I stand for active government, not big government.

The sentiment was sprinkled through the Liberal Party’s Real Solutions for all Australians 2013 election manifesto: more infrastructure, budget control, reduced waste and red tape, putting communities in charge, co-operation with the states to build better health and education systems at the local level, lower debt and a more responsive, effective public service.

Australians are now in for three big phases of change to the role of government in this country. First is the smash and grab, followed by the slash and burn, and then the slow bleed.

This transformation will take several years. The result will be a smaller, much more contained public service and a bigger role for outside providers: all delivering on a leaner and meaner government agenda.

Smash and grab

In the Coalition’s quest for a smaller, more rational government, the smash and grab – or the Smaller Government Reform Agenda, as the government has named it – started months ago. The first part of this, which followed the election, was the swift abolition of a range of bodies and machinery-of-government changes.

Soon after taking office, the Coalition government merged AusAID with the Department of Foreign Affairs and Trade, abolished the Social Inclusion Board and the Prime Minister’s Council on Homelessness, and prepared for the sale of Medibank Private.

The next stage of this agenda, announced in the budget, puts a further 36 government bodies under the microscope. The COAG Reform Council and the National Water Commission will go, for example. The Australian Customs and the Border Protection Service will merge into the Department of Immigration and Border Protection, and a shared services model will be adopted for a range of back-office functions for those organisations in the cultural and archival business. Several existing bodies will merge to create the Health Productivity and Performance Commission.

Scoping studies will be undertaken to check the feasibility of privatising Defence Housing, the Royal Australian Mint, Australian Hearing and ASIC Registry functions. Partly this is a response to the messy model of governing that has developed in Australia. The Commission of Audit identified more than 900 bodies and gave the government the blueprint for winding this back.

The Commission of Audit had a much longer hit-list, from Snowy Hydro Limited to Australia Post to the Royal Australian Mint. The government may not have adopted all of its suggestions in its first budget, but this is not the end of privatisations, mergers and abolitions. While the government has estimated savings in this domain at A$500 million, these changes will not be cost-free in either the short or long term.

Slash and burn

The slash-and-burn phase will come soon enough. This will be needed to deliver on Hockey’s promise of a smaller and less interfering government.

The announcement that some 16,500 public servants would go by 2017 exceeded even the Commission of Audit’s estimates. However, the government is laying the sacrifice of 14,500 of these squarely at the feet of the former Labor government; the result of “secret, unfunded, across-the-board cuts which they initiated before the last election”.

The extra 2000 come from specific decisions made in the current budget, but this will not be the end of the slash and burn. There will be more to come as the consolidations, sales, mergers and abolitions kick in over the coming years and as the government adopts a new contestability regime.

While there was plenty of talk of co-operation with the states, pulling $80 billion from health and education funding might make this tougher. The scale might have been a shock, but the sentiment was not. The government made it clear that these areas were the responsibilities of the states and that the huge cadre of “unaccountable bureaucrats” in Canberra needed to get out of the way.

The Real Solutions manifesto repeatedly refers to the responsibilities of the states in these areas and how the government should “help” them to do this better, but not do it from Canberra. No-one should be surprised to see massive reductions over the medium term in the education and health areas.

The government also took the decision to turn up the dial on the efficiency dividend. Already slated to increase as a result of decisions by the previous government, the government slapped on an extra 0.25% for good measure, taking this up to 2.5%. This is a large part of the “secret” job loss projections.

Even the Commission of Audit report pointed to the bluntness of the efficiency dividend. It’s a lazy way of chipping away at government organisations, rather than making the much harder decisions about what you want to do and how to go about doing it. It not only takes resources away from low-priority areas, it attacks those that might already be operating efficiently and those that are high priority.

The announcement that some 16,500 public servants would go by 2017 exceeded even the Commission of Audit’s estimates. AAP/Lukas Coch

The slow(er) burn

There is plenty of attention on the 16,500 announcement, but more cuts will come as the government reconfigures and rebuilds the government machine – a slow bleed after the slash and burn, perhaps.

Finance minister Mathias Cormann announced yesterday that over the next three years:

Government functions will be systematically reviewed to determine if they are, in whole in part, appropriate for competition or whether they should continue to be performed exclusively by government.

The implementation of this new Contestability Framework might have been a sleeper on budget night. However, this framework, which will be used to determine whether the bureaucracy should be opened up to the winds of competition, will have a much bigger impact in the long run on both the scope and size of the public service as the outsourcing agenda is rolled out.

Does size matter?

The Commonwealth machine is a huge, complex and often unwieldy beast. But who should be blamed for this? Successive governments of both sides have failed to answer the fundamental questions of what it is that government should actually do and how it should go about doing it. This has led to complexity, overlap, duplication, the never-ending debate about a broken federation and a risk-averse, compliance-focused bureaucracy.

This government is clear that it wants a smaller, less intrusive public service. What the government actually wants it to do is still not clear. Yet that must surely be the most important question.

There is no doubt that the Australian Public Service is in for a major transformation. While the heat today is on smash and grab and cuts, over the medium and long term there will be plenty of pain to come, especially if the government’s ultimate aim is not so much about what it wants the public service to do, but rather that they just be leaner and meaner.

If that is the case, Australia has lost yet another opportunity to rethink the role of the public service.