Pearls and Irritations

The relationship between politics and administration has been likened to the Chinese Yin and Yang: a dichotomy of almost opposites but simultaneously a complementary partnership in which neither can survive without the other. That is the challenge the new Morrison Government needs to understand as it sets out what it expects from the Australian Public Service.

The PM told departmental secretaries that he deeply respects the work of the public service ‘in delivering on the agenda of a government’:

‘In every portfolio that I have worked in … that is always the relationship that I’ve had – to set out clearly where we are going and to have the strong expectation that would be delivered, and that has been my experience.’

While acknowledging that ‘of course the public service gives us frank and fearless advice’, he made it very clear that:

 ‘the thing we depend on and that you’re professionally responsible for is the delivery of … services’;

‘There will be very clear targets about performance levels that we’ll expect from the delivery of the public service …’

There is nothing untoward about this because the public service in our democracy owes loyalty to the elected government and must follow its lawful directions. But there is more to the relationship than the PM here suggests as the public service is an institution in its own right and is expected to be ‘efficient and effective in serving the Government, the Parliament and the Australian people’ (PS Act Part 1 s3(a)).

Policy advising and service delivery are both important

Service delivery must always be a priority, but policy advising is no less important. Indeed, it will be critical for meeting the other two priorities the PM identified at the meeting with secretaries: the economy (and budget and financial management) and global uncertainties (both economic and strategic). Particularly as the Government pursues substantial tax cuts over the medium and longer term, it will need to address the expenditure side of the budget with great discipline. This includes not only the areas the PM mentioned which are growing and/or facing increasing community expectations, such as health and disability services, but other areas where more discipline is needed to ensure value for money, such as defence, security and infrastructure.

A good start has been made with the announced review of retirement incomes policy. Hopefully, this will not waste effort as Labor has foolishly done by revisiting tax arrangements which, after the Turnbull reforms, are basically about right. Much more important issues include: how to ensure people approaching retirement can plan their savings with confidence, knowing how much if any age pension they might receive and how much they should be putting into superannuation or paying off the mortgage; making it much easier to translate accumulated savings into adequate and secure retirement incomes for life; and addressing the poor performance and high costs of many superannuation funds as revealed by the Productivity Commission. The Government will need to revisit Morrison’s own changes to the assets test that undermined sensible planning for retirement, and look for other ways to contain costs such as increasing the preservation age and including high levels of housing assets in the means test.

In health, the policy agenda should include further action to improve primary healthcare and take pressure off hospitals, ensuring better value for money from private health insurance and the government subsidies the industry receives, addressing out-of-pocket expenses so that those who can afford to contribute do so but with some explicit cap while those who cannot reasonably do so are properly protected. No doubt, an agenda will also emerge for aged care from the Royal Commission.

In the February issue of PSI in an article encouraging a more deliberative approach to policy development to enhance public trust, I also mentioned other policy areas such as tax policy and climate change where, whichever party won government, more careful review and analysis was needed drawing less on immediate political advantage and more on expertise, views across the Parliament and the perspectives of those directly involved. The Government may rightly turn to external sources for some expert advice, but the APS has deep expertise and practical experience that needs to be brought into the process.

Performance targets

The PM’s reference to clear performance targets for service delivery should also be subject to careful scrutiny. Performance expectations must be commensurate with the resources available. In the last week of the campaign, the Government announced further cuts to public service resources, increasing the ‘efficiency dividend’ over the next three years. These reductions clearly exceed the level of further productivity improvement that can reasonably be expected, so some re-prioritisation of service outputs and quality will inevitably be involved. The Government has every right to require such re-prioritisation, but equally must take full responsibility. Secretaries will need to be careful that, in their eagerness to please ministers, they do not hide the consequences of the resource reductions they face or take responsibility for them by accepting unreasonable performance targets.

New structures

An interesting aspect of how the Second Morrison Government is to work with the public service concerns the new service delivery arrangements the PM mentioned when announcing the ministry last week. The new Administrative Arrangements Order issued on Wednesday clarified that the new arrangements do not involve as radical a restructuring as the initial announcement suggested. Services Australia will not be a new agency but essentially the former Department of Human Services with a new name. But the new National Indigenous Australians Agency seems likely to be an executive agency under the Public Service Act operating within the PM&C portfolio.

There are potential advantages in having service delivery agencies separate from policy departments. This can allow them to focus on their clients, looking mostly ‘downwards and outwards’, while meeting performance targets agreed with portfolio departments and their ministers; those departments would then have primary responsibility for ‘looking upwards’ to serve ministers. Such agencies must work in partnership with the policy departments and be directly accountable to ministers but their main energies can be devoted to the task of efficient and effective service delivery, exercising the authority devolved to them. Properly managed, this can lead to efficiencies,  higher quality services and greater responsiveness to clients.

That was the argument Margaret Thatcher used when pressing her ‘New Steps’ reforms thirty years ago; ‘agencification’ has subsequently been pursued by a number of other countries such as the Netherlands as part of the New Public Management agenda. Australia has long used statutory authorities to manage administrative functions like tax and customs, but has been ambivalent about more systematically pursuing agencification. We did establish Centrelink in the late 1990s in what was regarded internationally as a particularly successful initiative combining the advantages of separating service delivery from policy with the benefits of more integrated service delivery, but Centrelink (and Medicare Australia) has since been absorbed back into a department with no evidence of improved service. On the other hand, we have also established the NDIA, ensured public hospitals have their own boards and established independent Primary Healthcare Networks.

I am disappointed that the ‘establishment’ of Services Australia does not involve such a move (I would have preferred going further to re-establish Centrelink and Medicare Australia as authorities in their respective portfolios). But there could nonetheless be benefits if the minister does not focus on control but on helping the department get the resources it needs and helping it to improve its relations with clients, NGOs and communities.

I am pleased, however, about the new National Indigenous Australians Agency though there is as yet no clarity about its governance or its relationship with PM&C. Will its minister (Ken Wyatt who is in Cabinet) be advised by the agency or PM&C or both? If, in practice, the agency is the primary adviser of the minister, the advantages of a degree of independence to focus on service delivery may be diluted. Again, this might be avoided if the minister focuses primarily on helping the agency get the resources it needs, helping it foster close relationships with Indigenous communities and giving it real influence over the other arms of government delivering services to Indigenous Australians.

APS Review

Finally, the return of the Morrison Government will no doubt have implications for the APS Review and its impact on the APS. I have chosen to present my views on APS reform directly to the Review rather than in the PSI (my submissions are publicly accessible via the Review’s website), but I suspect the Morrison Government will be less keen on the governance reform directions the Review outlined in its Interim Report (and which I pressed them to take further) than on measures to change the operating model to take more advantage of new technology etc. The likelihood of significant changes to industrial relations and resourcing also seems slim. I hope the Review nonetheless takes its ‘independence’ seriously and makes recommendations based on its own analysis and the expert advice it has received, including on governance matters, demonstrating the ‘frank and fearless’ advising it and the PM have espoused for the APS.

Andrew Podger: Honorary Professor of Public Policy, ANU

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