On Monday in Business Spectator Robert Gottliebsen had a crack at Treasury Secretary Martin Parkinson over productivity, suggesting public servants themselves had the power to significantly improve national productivity if they so desired. There was a tone of “productivity advocate, heal thyself” to Gottliebsen’s criticism, in which he demanded that Parkinson put in place “tough productivity measures for government employees and contractors and second to tie public service promotion and the allocation of money to improving productivity.”

Parkinson, of course, isn’t in a position to do either, given he’s head of Treasury. PM&C head Terry Moran, and Public Service Commissioner Steve Sedgwick, have oversight of the functioning of the public service. I wondered if that meant Gottliebsen wasn’t fully across how the Public Service operates, so I thought I’d put together a couple of points if he wants to take his crusade for public sector productivity improvement further.

First of all, Gottliebsen’s right about the potential benefits of improving public sector productivity. Our biggest, and one of our fastest growing, employer is mostly state-owned: the health sector. There are huge benefits to be gained from getting the health sector operating more efficiently. Of course, that’s what the government’s been trying to achieve through its health reforms, particularly the shift to activity-based funding and greater performance reporting. The government has also been trying to introduce performance payments and better performance reporting for another significant state-controlled sector, education.

But Bob presumably means the core of the public service itself, the bureaucrats, pencil-pushers and shiny-arses administering rather than drawing blood or teaching.

The greatest factor in public sector productivity is, unfortunately, outside the control of the bureaucrats: politicians. It was the Howard government’s fiscal diarrhoea that saw a massive rise in the number of public servants from 2001 onwards, as that government spent more and more money on handouts to bribe voters, half-baked environment programs to cover its embarrassment about climate change, and pork barrelling, mainly to sate the hunger of Nationals MPs for boondoggles in their electorates. The Howard government quickly undid all the work of retrenching 30,000 public servants between 1996 and 1999 — all voluntarily, all costing tens of thousands of dollars each  in redundancy payouts — and expanded the Public Service to its highest ever levels.

This is something bear in mind when listening to Joe Hockey promise that the Coalition will slash public service numbers by 20,000 over two years. Hockey’s promising about two-thirds of what the Coalition did when first in government, over a shorter time period. And it will chiefly benefit Canberra’s restaurants — they had a boom in 1996 from all the farewells public servants attended — and its building industry, as retrenched public servants use their payouts to renovate their houses, before returning to the Public Service 12 months later and resuming their careers.

The only difference this time around will be that more bureaucrats have worked out what a great scam being retrenched is and will be sticking their hands up for redundancies.

The problem with the rapid expansion in Public Service numbers under Howard was that it was simultaneously a booming employment market out in the real world. The Public Service therefore had to compete with the private sector for skilled workers. Unlike the private sector, the Public Service is notionally limited in its capacity to compete on remuneration — Public Service pay rises have for a long time been linked to productivity increases. But departments found ways around that, quietly offering sign-on bonuses and guaranteed performance bonuses to lure quality staff to fill the ever-growing demand from politicians for people to spend money.

Recruitment, though, is exactly an area where there are huge productivity gains to be made, because many departments go out of their way to make recruitment a Kafkaesque ordeal unsatisfactory to those recruiting, those being recruited, and senior managers who lose staff to the process for days on end. One of the features of Terry Moran’s reform blueprint (yes Bob, people have been thinking about Public Service productivity before this point) is an overhaul of recruitment — indeed, his review made the point of identifying some of the myths about recruitment rules that public servants labour under. On that subject, it was interesting to note that yesterday’s review of the foreign aid program specifically identified slow recruitment processes as a significant impediment to AusAID’s management of the program.

Moran’s reforms also include streamlining the manifold employment conditions public servants now face between agencies, improving the performance management framework under which bureaucrats are rewarded or managed according to their level of performance, and “decluttering” the Public Service of red tape, much of which has been driven by central agencies anxious to protect their political masters by keeping a close eye and micro-managerial hand on line agencies. It also suggested trying to outsource corporate functions from smaller agencies to parent departments to take advantage of economies of scale in areas such as HR and payroll. All good stuff from a productivity point of view.

Then again, there’s a slight problem with the Moran reforms — the politicians removed the funding for them in the lead-up to the election campaign.

So the lesson for Gottliebsen and others who want to see a more productive Public Service is — find better politicians first.

Peter Fray

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