Ken Henry’s appearance at the Press Club yesterday was a thing of wonder.
Not so much for the anecdotes about hairy-nosed wombats and Jim the grazier, whose folksy take on business tax arrangements re-invigorated Henry’s lifelong passion for tax reform. Nor, certainly, for his dead-batting of the many questions that invited an unbureaucratic candour.
No. The wonder came from finally having a powerful, disinterested advocate for tax reform speaking his mind in public. It’s unprecedented.
There’s a debate, not exactly a raging one but at times very heated, occurring at the moment about politicisation of the Treasury.
When it comes to politicisation of the bureaucracy, neither side of politics traditionally has clean hands. The Hawke Government ended permanent tenure for department heads. Keating boasted of his influence over the Reserve Bank. The Coalition came to power in 1996 with a visceral loathing of the bureaucracy, and took deep pleasure in inflicting cuts and sacking six secretaries, including one because they confused him with someone else. The Howard years witnessed a steady politicisation of the Australian Public Service, under the mantra of “responsiveness”.
I tried to draw Henry on that sort of long-term perspective yesterday, hoping that he might be more forthcoming in taking a long view than he would with more politically-charged commentary on recent events. He didn’t bite — ever the professional.
The Rudd Government has, so far, been wholly different except in one key aspect. To the chagrin of his backbench — and, almost certainly, of 99% of public servants in Canberra — he dismissed no secretaries, not even those who morally bankrupted themselves by happily participating in the worst excesses of the Howard years. And Rudd, while happy to work bureaucrats to death, has also publicly demanded higher-quality and more independent advice.
Putting aside what increasingly looks like a concerted Coalition attack on Henry, there is an emerging strand of criticism that Rudd and his Treasurer have been hiding behind the bureaucrats, using them as props in their attempts to portray the Government as “decisive” and “ahead of the curve”. The Prime Minister and Treasurer’s reliance on Henry for these purposes, in particular, has drawn criticism from Peter Costello. The point is a fair one, but that’s not the whole story.
Rudd and Swan litter their discussion of their response to financial crisis with references to how they have followed the advice of the regulators. That, of course, defeats the purpose of having a democracy. We didn’t elect Ken Henry and Glenn Stevens, however competent they and their staff may be. And using bureaucrats as shields won’t help the Government anyway. Voters take out their resentment on politicians, regardless of how much they followed advice.
But it’s not the whole story because the Coalition hid behind bureaucrats and staff every bit as much when it was convenient. The children overboard and AWB affairs gave the game away (politicians ready to blame underlings, whether in their own offices or in the Public Service) for allegedly failing to tell them inconvenient facts. The Coalition backbenchers who call out “stop using Henry as a shield” at Rudd in Question Time might reflect on the shameful performance of Alexander Downer, Mark Vaile, Peter Reith and John Howard in office.
And the Rudd Government is different in another very important way. It has launched a full-scale tax review (OK, nearly full-scale, the GST rate is omitted) without, apparently, the faintest idea what it wants. And Henry’s address yesterday was less as Treasury Secretary than as head of that review, in which he raised fundamental changes — improvements — to the business taxation system and the interaction of the tax and transfer systems.
That’s why it was a thing of wonder. As George Megalogenis correctly noted this morning, the notion of an unguided tax review is rare in Australia. Previous tax reviews have been run by strong Treasurers (or their Prime Ministers) with a very clear idea of what they wanted. This review is a genuine attempt to identify significant reforms.
Not merely does it breach the old rule about not having an inquiry unless you know the result beforehand, but it also breaks the plausible deniability rule. The Government can’t dismiss this review if it doesn’t like the results. It can’t, as it did with Garnaut’s climate change work, reduce it to just one “input”. This is a review done by the Government itself, and by its best and brightest, including two senior secretaries.
It turns out there’s an upside to having a Treasurer who lacks the aggression and self-confidence of Costello and Keating.
So now we have a genuinely independent review, one not driven by either political or commercial imperatives, one focussed on hunting down inefficiencies and distortions, one not beholden to the interests of the Government, or pushing the barrow of private interests.
It may only be a one-off. The Government may find the review outcomes so distasteful that it will never fall into the trap of holding such an inquiry again. But even if it is, it is a major change from the way previous Governments have done business, and Rudd and Swan are to be applauded for it. They may be using Henry as a shield, but on taxation they’re going to have to follow him if they want to stay in his shadow — not the other way around.