public-service,

Good public servants will refrain from saying so publicly, but many were pissed off when the Coalition won. Yes, there were policy differences between the Coalition and Labor (for me, the demonisation of batteries was bizarre; storing energy is obviously useful). But, beyond policy, there's a sense in Canberra that Liberal ministers distrust, even despise, the officials who work for them. This might not be true, but the belief was no doubt reinforced when, days before the election, Scott Morrison said he would extend the 2 per cent "efficiency dividend" (the annual cut to government agencies' operating budgets). The dividend will eventually drop to the "standard" 1 per cent in three years' time, by when the bureaucracy would have had an extra $1.5 billion shaved from its budgets; less money for staff, consultants, IT, other services and so on. It's worth noting the dividend was last at its "standard" rate 14 years ago; no government since - neither Coalition nor Labor - has resisted the temptation to jack it up. (Kevin Rudd pushed it up to 3.25 per cent; Julia Gillard to 4 per cent.) There's no reason to believe Morrison will reduce it in 2022-23, and plenty of history to suggest he'll change his mind and keep it at an inflated rate. The Community and Public Sector Union says the decision will force the bureaucracy to shed about 3000 staff. This rings true, though only if the government lacks flexibility (or doesn't care). I have some ideas about other ways to cut departmental expenses. But, first, I want to defend the idea that underpins the dividend. It may be hated in this city, and with some reason; many governments abuse it, particularly when they increase it without warning, denying agencies the ability to plan. However, an alternative that's often advocated - no dividend, as applies to the ABC and to some military and intelligence agencies - defies sense. Almost all industries increase their labour productivity over time (i.e. the value of stuff produced per hour worked). There are exceptions - e.g. barbers' work practices and tools remain essentially the same as they were 50 years ago. But most enterprises improve their productivity or perish. Technology is one means. In my industry, publishing and broadcasting, the efficiency gains of recent years have been extraordinary. The internet and software have shredded the costs of reproducing and distributing information. Sure, some recent job losses were the result of imbalanced markets (e.g. Google and Facebook's dominance in advertising), which aren't serving the community well. But many of the changes were inevitable, positive improvements. The public service has a problem here. The value of its output - advice and service delivery, among other things - generally can't be measured, even if the Public Service Commission pretends it can be. Hence the dividend. It simulates market competition where there is none, compelling public servants to improve how they work. Mathias Cormann might even argue the dividend is an expression of faith in public servants' productivity; a belief that they're more innovative than barbers. While it might not be measurable, the Australian Public Service's productivity has clearly improved under three decades of the dividend. Technology has played a part. The typists have gone. MyGov and automated information systems mean I rarely need to visit Centrelink, Medicare or the Tax Office - a win for everyone. Other improvements are less obvious. Digital archives allow advice to be researched, written, checked and sent faster. Gathering community feedback is simpler and cheaper (not that it's always done). I'm told that that once-familiar creature - the unsupervised EL1 beavering away for years on a "special project" - is pretty much extinct. Some of this would have happened without the dividend, but not all. Senior public servants grudgingly acknowledge that the dividend works. The Finance Department undertook a study of efficiency eight years ago, and canvassed the views of top officials. They had many criticisms but agreed, overall, that the dividend was a major incentive to innovate and improve. It's not that public servants don't change their ways; it's that they tend to use improved efficiency to do more work on their projects rather than to save money. And while that may sound worthwhile, it's not their decision to make. Nonetheless, the dividend's flaws are many. Here's a taster (some from the Finance Department study, some from me): Let's assume the dividend is here to stay. Putting aside its many flaws, a small dividend represents the accepted wisdom that the public service is not a static workplace; that, like almost all other industries, it's able to become more productive over time. Let's also assume the re-elected Morrison government is open to alternatives to its current policy of inflating the dividend. How else can the government reduce departmental expenses by a reasonable amount each year? Before it lost the election, the Labor opposition had a straightforward proposal: Labor had some success implementing similar cuts when it was last in office. However, it's unlikely it could scrape many further savings from travel. Procurement is already centralised and public servants can no longer accumulate personal frequent-flyer points for work trips. The government should enforce far more strictly its "lowest practical fare" policy, which public servants often ignore, but even that would yield limited savings. The big spender here is the Defence Department, which, for decades, has been beyond the control of finance ministers (or anyone else). Unless a government is willing to force Russell to adopt the same standards expected of the rest of the APS, there's little point pursuing travel reform. Most of Labor's savings were to come from cutting spending on consultants and contractors. (The Greens had similar ideas.) Labor did manage to cut consultancy spending each year when it was last in office, though this was when the APS workforce was growing. Since then, the bureaucracy has shed many thousands of staff, while simultaneously ratcheting up spending on a secondary workforce of contractors, consultants and labour-hire staff. The ongoing cap on APS staffing levels has fed this trend; agencies may well prefer to hire public servants but they can't. (There also remain unanswered questions about the legality, indeed constitutionality, of employing private-sector staff to do the work of public servants.) The Coalition argues this alternative workforce is more flexible and, in the long run, cheaper, because it only pays for the employees when it needs them. Yet there's no clear, public evidence of these savings. Today, after accounting for inflation, the government's operating costs per capita are pretty much the same as they were 18 years ago (though they are down dramatically from the Howard-era peak of 13 years ago). A government could reduce this secondary workforce's size, and perhaps save some money doing so. But it must first address what is likely a more expensive problem, and one of the reasons the APS keeps turning to the private sector: it doesn't believe in itself. Each year, the APS hires a workforce that other industries would envy: a cohort, many with postgraduate degrees and experience elsewhere, who shine among a competitive recruitment pool. And then, in many cases, it breaks them. The bureaucracy is full of people whose skills - whether economic modelling, scientific training, social research or data analysis - wither because they are rarely or never used. Over time, they lose confidence in their abilities. Inevitably, agencies end up buying these skills from the market instead. And yet APS leaders regularly lecture on the need for less risk-aversion; for public servants to be given the leeway to experiment and learn from mistakes. Here's a test many senior executives can apply to their own office. How many times have you allowed an APS or EL-level officer, if they're the one who knows the subject best, to brief the minister? How many times have they even attended such briefings? After all, EL staff are paid on par with mid-level academics. They are meant to be experts in their fields; you are meant to manage them. If the answer is pretty much never, you've probably failed in your job. You either micromanage, recruit poorly or fail to manage staff performance effectively. And if your excuse is that your staff are ill-suited to their work, who signed off on their probation or their last promotion? Did you chase that up? Have you helped the employee develop or find a more appropriate role? Why are they still there? I wrote a column years ago detailing how an informal post on a government blog was edited more than 80 times before it was published; SES and ELs intervening to correct, rewrite, undo corrections and rewrite again. I thought this was exceptional. Many readers told me it was closer to normal practice. There's your next productivity gain. For most of the dividend's existence, it didn't apply to the defence portfolio. Even now, many parts of the defence budget remain exempt. Governments often spare intelligence agencies, too, from finding more efficient ways to spend public money. We all know the political reasons for this. The national-security lobby is brutal; no minister wants to be portrayed as "soft" on defence (a label that has been applied in the past to anyone who didn't given Russell precisely what it wanted). But think about the message this sends. The cabinet ministers responsible for these exemptions have decided that Australia's spies and soldiers are inherently unproductive and lacking in innovation. And that lawyers, marketers and HR practitioners in defence are incapable of being as efficient as their counterparts in other agencies. Is the same also true of ABC journalists? Of course it isn't. As I've written previously, there's no sound rationale for sparing the national broadcaster from an efficiency dividend, which has applied to most of the rest of the federal public sector for three decades. After all, few industries have benefited as much over that period from productivity gains as has broadcasting. I've canvassed only a few options, and only in general terms. There are many others. Some are policy decisions that only ministers can make. Of those, an obvious one would be to ditch the goal of increasing defence spending to the arbitrary (and variable) target of 2 per cent of GDP. This is a policy of inexplicable idiocy that almost guarantees inefficiency. But the public service can make progress elsewhere without waiting for a decent minister to turn up. For example, it repeatedly allows large IT firms to lock themselves into ongoing service contracts, without effectively transferring control of the projects to government. It could learn much about policymaking from parliamentary committees, which have skeletal staffing but produce sound work by adopting public, open processes. Until the APS tackles some of these obvious reforms, I can't help but remain sceptical of claims that the budget knife really has cut to the bone.

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