We need a stronger public service - but consultants have their place

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This was published 1 year ago

Opinion

We need a stronger public service - but consultants have their place

Shadow Treasurer Jim Chalmers received applause on the ABC’s Q&A on Thursday when he promised a Labor government would cut back on the use of consultants and rebuild the hollowed-out public service. That is, of course, what you would expect from a Canberra auditorium filled with public servants.

Chalmers is not wrong on the headline numbers. The Coalition has taken an axe to the public service. During the last Labor government, there were about 7.4 federal public servants for every 1,000 Australians. Today, that figure is less than six. Had the Coalition maintained those higher staffing levels, we’d have an additional 37,000 federal public servants.

Shadow Treasurer Jim Chalmers says Labor will cut back on consultants.

Shadow Treasurer Jim Chalmers says Labor will cut back on consultants.Credit: Alex Ellinghausen

Meanwhile, spending on consultants and contractors has exploded. While the public service has shrunk by 20 per cent under the Coalition, spending on consultants has tripled to nearly $1.2 billion a year. On the face of it, it seems like a sleight of hand to shrink the size of government while expanding the size of government-serving consultancies. The trouble is, despite what has emerged as a popular consensus against consultants among the chattering classes, it’s not at all clear this is an unwelcome development.

If Chalmers wants a better understanding of the value consultants bring, relative to in-house expertise, he need only ask his new colleague, Labor’s candidate for Parramatta and current Accenture managing director, Andrew Charlton (or he could ask Boston Consulting Group partner Ben Keneally, the husband of Labor’s candidate for Fowler, Kristina Keneally).

There’s been some controversy about Charlton’s $16 million house in Bellevue Hill. But that house was bought with the proceeds of the consulting company that Charlton built from the ground up to offer services to the public and private sectors. That company, AlphaBeta, was successful in part because it offered better value to government: better trained people using better data to provide better advice, for less money than its competitors.

If Chalmers were to ask Charlton whether the model he developed at AlphaBeta would work for the public service, I’m confident his answer would be “no”. Consultants are a soft target but governments, like private companies, use them for various reasons, some of which are virtuous, others less so.

Anthony Albanese with new Parramatta candidate Andrew Charlton on Friday.

Anthony Albanese with new Parramatta candidate Andrew Charlton on Friday. Credit: Louie Douvis

Sometimes, unfortunately, consultants are used to game the system. Government departments often have more flexibility with their financial budgets than with their staffing levels. If you have the same budget but a lower staffing level, then consultants are your only avenue to get the job done. That’s silly and should end.

More pernicious but harder to solve is the motive of arse-covering –a key reason why the private sector uses consultants too. If I want to justify a course of action I’ve already chosen to take, or I want to be able to blame someone else if it fails, consultants are willing and eager whipping boys. So long as that motive exists, so too will consultants.

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But a more fundamental reason to hire a consultant is a desire for better work. Some of my most brilliant friends are consultants. At the high end, the public service can’t compete in even graduate salaries, paying literally half. And the rigid employment conditions in the Australian Public Service, which make it near-impossible to fire people and which rule out performance pay, make it more difficult to recruit high performers, to get the most out of them, and to keep them.

There are many great public servants. I joined Treasury straight out of uni with a first-class honours degree in economics and didn’t apply anywhere else. Many public servants are driven by duty; by a desire to do some good for the country. They’ll put up with a lot. But with a stifling culture, a slow rate of career progression, no freedom to make public comments, deteriorating relative pay and often mundane work, quality has to suffer at the margin.

Josh Frydenberg and Treasury secretary Steven Kennedy at the Treasury offices in Canberra last month.

Josh Frydenberg and Treasury secretary Steven Kennedy at the Treasury offices in Canberra last month.Credit: Alex Ellinghausen

By being formally outside the public service, consulting firms help solve this problem. Better recruitment, higher pay that’s geared to performance, more flexibility, more variety of work, and fewer unpleasant rigidities – all while working on rewarding policy analysis ... that’s a very good thing for ensuring better policy.

Can the Australian Public Service replicate that? I’m sceptical. If Labor wins the next election, they should do everything they can to build a stronger and better public service. Morrison’s reframing of the public service as a passive deliverer of government edicts was a big mistake, as was gutting it. But the use of consultants in many cases can and should continue within the public service – and even grow if what we ultimately care about is better policy.

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Steven Hamilton is assistant professor of economics at George Washington University and a former Treasury official.

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