The Daily Telegraph
24 September 2012

By Tony Shepherd
President, Business Council of Australia

In the past two weeks we’ve seen some very tough decisions made by state governments in an effort to rein in spending and control the size of the public service.

It’s easy to portray these decisions as attacks on public servants themselves or on services that we rely on most heavily, like health and education. It’s easy to use them for political purposes to generate fear and mistrust.

But if we are to avoid these kinds of tough corrections on public spending from happening every few years it’s important to understand how and why we’ve come to this point, and to plan on how to deal with it.

To put it plainly, we’ve not had the checks and balances to ensure the public sector doesn’t grow beyond our capacity to afford it.

Using public sector staffing figures from the federal budget, between 2001–02 and 2010–11 the total number of government employees increased by 23 per cent or at an average growth rate of 2.3 per cent each year. This is faster than the average 1.4 per cent growth in the population.

Official figures suggest the total number of state public sector employees increased by almost 30 per cent over the same period.

Given the failure to measure outputs, it is impossible to judge whether the quality and scope of public services has increased commensurately.

To ensure we can afford quality services into the future, we must subject our public sector and spending to constant, incremental reform. The only way to forestall the need for painful corrections is for governments to ensure their systems are sustainable over time, based on comprehensive audits in all jurisdictions of the scope and size of government.

This is the basis on which the NSW and Queensland governments made their public spending decisions, as did the government of South Australia two years ago. Whichever political party is in power, the approach must be the same.

We can’t quarantine health and education from this kind of ongoing scrutiny. Together, these two spending areas consume 45 per cent of state government outlays and they are growing.

We have to constantly challenge the assumption that we are getting value for money out of the huge amounts going into these systems because big dollars are often used to paper over systemic problems that need to be fixed. We need to measure the effectiveness of public expenditure by looking at not only inputs (e.g. wages, salaries and capital) but also outputs (e.g. health and educational outcomes).

Business Council of Australia Chief Executive Jennifer Westacott, once a senior bureaucrat in both the NSW and Victorian governments, told an audience of public servants that we are at a crossroads when it comes to the future of the public service.

Her premise is that the authority and legitimacy of the service is being undermined, in part because politicians have lost sight of its fundamental role in formulating a long-term policy agenda for the nation.

Central to our recommendations for restoring the status of a high-performing public service is a renewed commitment to standards in public policy making, decision-making and the setting of rules and regulations.

We have to ensure that government spending is subject to a rethink of how public policy is made, with greater focus on what works and what doesn’t, and what’s really meaningful.

It’s what businesses have to do all the time and it’s what governments need to do more of.

Daily, we are watching companies restructure as we come out of the boom and return to a more normal environment – no one makes these decisions lightly. There are painful decisions both sectors need to make.

Pretending to the taxpayer that the imperative isn’t there is both disingenuous and irresponsible. People aren’t fools -- they know that revenues are falling and they know that public services and the way they’re delivered need to be improved.

Making sure taxpayers are getting value for money is no longer a choice. Because if we don’t, the corrections we are seeing in NSW and Queensland are nothing compared to what we will be facing in future.