Cut early, cut often: where the Commission of Audit wants the axe to fall on the APS

New Axe

It’s a big vision for big cuts that carries big risks.

That’s the wash-up from the mass of recommendations from the National Commission of Audit that the Abbott government, its Treasurer Joe Hockey and Finance Minister Mathias Cormann now have to wade through as they try to strike a delicate balance between their vision of budgetary tough love, electoral pragmatism and not hard pruning a bureaucracy

Ostensibly 15,000 APS jobs are now on the line, a figure that the Community and Public Sector Union says is actually more like 25,000. Whether those figures are on top of, or included in, the present tranche of cuts estimated to be between 14,500 and 26,500 is still unclear – but finally some of the detail has arrived.

In terms of big numbers the Department of Human Services (including Centrelink and Medicare) and Australia Post logically top the list, although careful attention has been paid not to call out specific numbers of potential retrenchments.

While Mr Hockey has tactically leaked the potential merger of retail services between Post and Human Services, the Commission of Audit has heavily backed the privatisation of Post as a way to get the imminent loss-maker off the books, arguing its services are contestable.

Under Post’s decidedly corporate branding, its easy to forget that those employed there actually work for the government, but the reality is that its more than 30,000 jobs could soon move from public to private hands.

“The Commission considers that Commonwealth bodies that operate in contestable markets should be privatised,” the Phase 1 section of the landmark report says  before recommending that “10 bodies be privatised over the short, medium and long term, in accordance with established practice.”

On The Block

In the short term the proposed bodycount for sell offs include:

Australian Hearing Services
Snowy Hydro Limited
Defence Housing Australia
ASC Pty Ltd (better known as the Australian Submarine Corporation).

Of those, Defence Housing is the obvious candidate to secure some easy liquidity given its decidedly real asset base. Snowy Hydro has previously proved difficult to jettison – so much so that the electoral consequences in the bellwether seat of Eden Monaro sufficiently spooked John Howard to back off. If Snowy Hydro is to be liquidated, former Australian Chamber of Commerce and Industry chief Peter Hendy will inherit the hot potato.

The Commission’s ambitions for sell-offs in the medium term – which in reality means after the next election   are far greater.

The list of liquidations there comprise of:
Australia Post
Moorebank Intermodal Company Limited
Australian Rail Track Corporation Limited
Royal Australian Mint

The listing of Post under the ‘medium term’ timeframe now raises significant questions as to what, in the event functions are merged with Human Services, could be sold into a private sector. Investors may be less keen on plumping for over the counter welfare functions as they are a parcel freight and logistics business.

Under the ‘long term’ category for a sell off is the National Broadband Network, a proposition that even Labor had contemplated in the event the build was completed.

Downsizing details

Although there is no specific plan outlining the whats, wheres and whens of the proposed multitude of mergers and consolidations, what is clear is that big headcounts equate to big targets and the Department of Defence is a prime target

The Commission want the Defence Materiel Organisation (DMO) ‘reintegrated’ into the Department of Defence “with the size of the Defence Materiel Organisation being significantly reduced and with a renewed focus on contract management as opposed to project management.”

There’s also a call to chop “the staffing size” of Defence headquarters in Canberra (read jobs) “including senior staff” back “to 1998 levels.”
On the local defence industry jobs front the Commission is urging for a “teeth to tail” assessment of the ratios and “additional cost of unique and Australian built procurement decisions.”

Public servants working at the Department of Education will also be likely feeling nervous, given that the Commission is barracking for “significantly reducing the size of the Commonwealth Department of Education” as part of its divestment of functions back to the states.

However over the Productivity Commission could, at least in theory, grow given the Phase 1 recommendation that the COAG Reform Council “be abolished with its reporting role and staff moved to the Productivity Commission.”

Cuts could come home and away

Also recommended for the chop is the Export Finance and Insurance Corporation.

The Commission has also recommended “ceasing funding for Export Market Development Grants, tourism industry grants and the Asian Business Engagement Plan.” It also wants halve funding for Tourism Australia “and significantly reducing the activities of the Australian Trade Commission (Austrade).”

That could entail “moving any residual functions of Tourism Australia and Austrade into a commercial arm of the Department of Foreign Affairs and Trade (DFAT), with the existing loan book of the Export Finance and Insurance Corporation also transferred to the Department of Foreign Affairs and Trade to investigate options to on-sell or wind up the loans.”

There are also suggested cuts for DFAT on the diplomacy front. The Commission wants to end “future involvement in international expositions” as well as a review of “overseas conditions and allowances” and the rationalisation of “Australia’s memberships of international organisations.”

In terms of direct potential job cuts, the Commission has recommended the consideration of “further outsourcing of passport production” as well as stripping money for soft diplomacy  by “ceasing funding for the Australia Network and scaling back the International Relations Grants Program.”

However the Commission has tread far more carefully when it comes Australia’s less than stellar history of delivering positive change through the myriad of initiatives around Indigenous and Aboriginal affairs.

The Commission has recommended in the relatively short timeframe of “the next two to three years” (read immediate forward estimates) “a new, separate agency for Indigenous Affairs reporting to the Prime Minister, with responsibility for Commonwealth Indigenous specific programme delivery, development of a robust evaluation strategy and coordination with mainstream and specific providers at the Commonwealth and State levels.”

Perhaps unsurprisingly, that recommendation falls squarely in line with the shift of Indigenous Affairs into the PM&C portfolio and strongly hints at what may come in the May Budget.

Keeping an eye on who gets into Australia could also be sent to private industry   even if the price of contracting out offshore accommodation activities for clients of the Department of Immigration has a tendency to be expensive in terms of both financial and political capital.

The Commission says that given the Department of Immigration and Border Protection grants around 4.7 million visas every year “many visa processing tasks are high volume and low complexity and would be well suited to outsourcing.”

It wants “a business case and scoping study for outsourcing …visa processing functions be prepared” – something national security agencies could have some pertinent views on.

There is also a push for fewer letterheads on the frontline of border protection and national security.

The Commission has recommended that “a single, integrated border agency, to be known as Border Control Australia, be established through the merger of the border control functions of the Department of Immigration and Border Protection and the Australian Customs and Border Protection Service.”

Those fighting organised criminals could soon also be better organised. Citing the increasing dependency on “strong intelligence collection and analysis” the Commission is pushing for intelligence database manager CrimTrac “be merged with the Australian Crime Commission to better harness their collective resources.”

Groundhog day for the Uhrig report?

By the time you get to recommendation 50 of a report the size of the National Commission of Audit’s, short and simple statements can be a blessing – even if they betray some sentiment of fatigue.

“There are too many government bodies.” the Commission’s report says, before noting the common malaise of “duplication, unnecessary complexity and a lack of accountability.”

To fix the spread, the Commission advocates a “significant rationalisation be undertaken of 99 Commonwealth bodies operating under the Financial Management and Accountability Act 1997 and the Commonwealth Authorities and Companies Act 1997.”

Specifically, it wants to cut “the number of existing bodies by 73” by abolishing 7 bodies; merging 35 bodies; and consolidating 22 bodies into departments and agencies; and potentially privatising nine bodies.”

At the same time it recommends “reassessing the operations and continuing need for 26 other bodies.”

Just keeping tabs on what bodies exist in government is recommended for an overhaul.

The Commission notes that “there is currently no central register of Commonwealth bodies” and recommends that “given the significant operating and governance costs of new bodies” … “a central register of Commonwealth Government bodies be established and maintained by the Department of Finance.”

And in a subtle hat tip to the 2004 Uhrig document, the 2014 Commission of Audit recommends that “new guidelines be established on the creation of new bodies recognising the primacy of ministerial responsibility and the role of departments, including requiring Cabinet agreement.”

Also recommended for review are the “194 principal bodies” and “around 700 other bodies including boards, committees and councils that the Commonwealth supports.”

The Commission says that each department should “reassess all bodies within its portfolio with a view to reducing their number and associated overheads and that “all bodies, including boards, committees and councils be included on the central register of Commonwealth bodies.”

Health bodies told to lose weight

Few portfolios have the complexity and diversity of the federal Department of Health, however the Commission has taken aim at the “22 bodies and agencies within the Health Portfolio, along with numerous associated boards, councils and committees.”

Recommending another “significant consolidation” of bodies be undertaken, the Commission has recommended that Health forms “a National Health and Medical Research Institute” so that “health and medical research” is a core part of the health system.

The Commission also wants to set up a “Health Productivity and Performance Commission” by consolidating 7 “existing bodies to better coordinate, report and drive performance across Australia’s health care system with a focus on measurable outcomes”.

At the same time it has advocated “consolidating five other agencies into the Department of Health.”

Tribune of Tribunals

Anyone that has ever had a complaint about government, or the complexity of it, could soon have a one-stop-shop.

The Commission has recommended that the Social Security Appeals Tribunal, the Migration Review Tribunal and the Refugee Review Tribunal, Classification Review Board all be amalgamated with the Administrative Appeals Tribunal.

Real estate returns to focus

Individual departments and agencies might know exactly what real estate they have on their books, but it appears the Commission or worse still the Commission of Audit and the Department of Finance may not.

The Commission wants “the management of the Commonwealth’s property portfolio be strengthened” by building “a central register of Commonwealth Estate properties within the Department of Finance” and bringing in “private sector experience in property management.”

A sell-off is also recommended through a “further divestment process to be overseen by an independent property expert [and] continuing to use commercially available office and other accommodation as far as possible, ensuring there is competitive tension and value for money.”

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