Address by The Hon Lindsay Tanner MP
Minister for Finance and Deregulation
26 September 2008
We are here today to discuss more effective ways for governments to interact with business and the community to help improve government regulation. I want to spend my time talking about how a method of consultation termed “Second Track” might and might not contribute to that process.
In working this through, I want to raise four main issues for your consideration.
First, what do I think are “Second Track” processes, and how do they work?
Second, why would this interest the Commonwealth Government’s Department of Finance and Deregulation?
Third, can “Second Track” processes really improve regulation?
And, fourth, what rules of engagement are worth considering for “Second Track” initiatives? When might “Second Track” initiatives work, and when are they unlikely to work?
I take Peter Fritz’s invitation to speak on a “Second Track” to policy development and regulation as a chance to step aside from the normal track – pun not intended – that we take in Government, so that we can look for other and, presumably, more effective ways, for Government to help improve regulation through consultation.
“First” or “main” track processes involves governments’ existing, very familiar and often near universal processes for consultation and interaction with business, academia and the community generally. These include everything from the highly structured and formal Green and White Paper process – the peak of the consultative ladder which, incidentally, has found renewed favour under the new Government – through to less formal – but still very familiar – methods of broad stakeholder consultation.
“Second Track” processes may not be harder to define, but they are less familiar. The idea is that interaction should occur between government, business and the community that complements but does not risk the formal machinery of government. An intriguing idea, and a very broad ranging one.
To my mind, that suggests that “Second Track” implies:
These thoughts do not really define what a second track process is, but they do set some loose boundaries around it. The boundaries are, if nothing else, a bit more satisfying than saying that “Second Track” is what normal track is not.
And they allow me to tell a favourite story about the secret of successful consultation on regulatory issues. It comes from a UK Government regulation reformer who explained that nothing the regulatory body had tried in relation to consultation on a particular regulatory issue had worked until, in almost despair, they turned the normal approach on its head and got not “all the right people” but “all the wrong people” in a room together. That, apparently, got to the bottom of the problem and helped produce a workable solution. It sounds like a form of “Second Track” to me.
We all know that little in the government or bureaucratic worlds are completely new, and Second Track is not either. Let me offer some relatively recent examples of this process, although I suspect that any reasonable historian could find a lot more.
Firstly, and appropriately from the diplomatic sphere, since the mid 1990s, ASEAN has interacted with a non-government organisation called the Council for Security Cooperation (CSCAP) [pronounced see-scap]. This organisation is recognised “as one of the leading “Track 2” institutions in the Asia-Pacific region” according to a 2006 paper from the ANU’s Strategic and Defence Studies Centre. Its key contribution is to provide a forum for formal but “unofficial” dialogue between government and non-government representatives, and do it without undermining official diplomatic channels. It is but one of many examples of “Track 2” processes that we might find are used in the global diplomatic community.
Secondly, on the domestic front, I believe that CSIRO’s Sustainable Communities Initiative (SCI), which has been under way since 2006, uses Second Track process to foster collaboration. This initiative has brought together stakeholders from federal, state and territory governments, local government, private enterprise and NGOs to help communities address problems relating to local sustainability challenges. Its success reflects Second Track characteristics – engaging stakeholder organisations, early in the process, in a facilitated discussion that probes the facts surrounding the issue being addressed, as well as ways forward. I believe we have with us Sean Rooney, Director of the SCI with us today. I’m sure he will enlighten us, during the discussions, more than I am able to in this brief description, about CSIRO’s use of Second Track.
Thirdly, let me give you an example of Second Track process at the grass roots of democracy from overseas. In June 2008, the Australian Public Service Commission hosted a seminar looking at Canada’s approach to creating better communities through extensively involving the public in policy development. Lessons learned from ongoing community consultation in New Brunswick province suggested that the government must learn to be “convenor, facilitator, enabler and partner”. As a convener, government must bring stakeholders, citizens and communities to the table. As a facilitator, it must help them recognize, articulate and accept their role in making change happen. As an enabler, it must use its authority in new and innovative ways to encourage collaboration. In all of the foregoing roles, the government is a partner with its citizens. Certainly, this sounds like more than the normal track consultation process.
Fourthly, and closer to home, the Minister for Finance and Deregulation, Lindsay Tanner, is continuing to look for new and novel ways to consult with industry and the community in developing, implementing and reducing regulation. In his speech to the Sydney Institute on 26 February this year, the Minister mentioned that he was developing a forum where he could meet informally with business leaders. To this end, the Minister has since met with an informal advisory board of business leaders on two occasions. The informal nature of these meetings, without papers, notes or minutes, and the open dialogue does help the government to identify opportunities for further regulation change and reform, and assign priorities to them. I doubt that more formal processes in this area – of which there have long been more than enough – have the ability to deliver initial insights in regulatory priorities for government as informal ones.
I want now to turn to the interest that my Department has in Second Track processes. One reason is that we are a “quintessential second track organisation”. Let me explain.
Some of those familiar with the Australian Government may know that from 1901 to 1976 budgetary and economic advice was formulated within the then Department of the Treasury. However, in late 1976, the then Prime Minister, Malcolm Fraser, decided that there would be benefit in Cabinet receiving what could be described historically as an informal “Second Track” of economic, budgetary and financial advice. Accordingly, he split the then Treasury, leaving a much reduced Treasury retaining responsibility for the macroeconomic, international, revenue and broader economic issues, while the new Department of Finance provided an expenditure and financial perspective. Each function had a Cabinet level Minister – although, initially, they were in the form of one person. Malcolm Fraser set economic and financial advice on “two tracks” which continue today – they usually run in parallel, but occasionally they cross with potentially interesting results.
In the 32 years since it was created, the Department of Finance and Deregulation has expanded well beyond its initial focus to fulfil much more of the broader “Second Track” of economic advice. Fascinating! It is now involved in two areas where “Second Track” has real promise.
First, my Department is responsible for the Australian Government Information Management Office (AGIMO), which is working on ways to increase Government’s engagement with the community. AGIMO has found that attempting a broader dialogue alone may prove to be difficult in unexpected ways. AGIMO’s report, “Consulting with Government – online” (June 2008), included focus group feedback that many participants wanted to put their own point of view alone, without much “willingness to engage in a debate with others who have different views.” That view suggests “second track” and in an online environment.
Second, my department is now responsible for deregulation, an area where second track should be very useful.
More recently, the Minister for Finance and Deregulation has himself been participating in Second Track style processes. I have already mentioned the informal advisory board. Further, in a September 2 blog, on The Age web site, he indicated that he is in the early stages of organising a trial government blog. The purpose of the experiment will be to explore the possibilities for Government participation in blogging and to obtain the thoughts of other bloggers on this idea. This is a particular recognition of the need for alternative mechanisms for consultation in the Second Track sense.
I turn now to how Second Track processes might help improve regulation generally.
First, let’s reflect briefly on the nature of “regulation”.
It is sometimes said that one person’s necessary and desirable regulation is another’s “red tape”. Some see regulation as a threat that reduces profitability, discourages investment and damages competitiveness. Others see it as essential for a just and fair society. This means that regulatory processes can and often do become adversarial processes and public adversarial processes at that – a non‑adversarial process that can help cut through the “sound and the fury” of public positions on regulation is therefore particularly valuable in this area.
The issue is to regulate the right things, at the right time and in the right way. Or, to use the Macquarie Dictionary definition of “regulate”, as being “to put in good order”, the trick is generating active “good order”.
Knowing the context for regulation is vital, and understanding its value and its impact cannot occur just by taking account of formal public positions, of only one perspective, by consulting only traditional stakeholders, or taking superficial perspectives (especially on complex issues).
A key strength behind the “Second Track” approach, as I see it, is its ability to help go beyond traditional stakeholders and traditional understandings to help ensure better (and perhaps fewer) regulations.
If we accept that Second Track process will – as seems likely – be used more frequently in future, it is worth exploring some threshold issues around their use. When is a Second Track process appropriate and when is it not appropriate?
The use of Second Track processes should be governed by a test of “fitness for purpose”. There are some issues before Government where consultation is not possible. In other cases, consultation will be beneficial but its form will be an issue. I expect that part of the challenge for all governments is how to keep the balance of the ledger more towards the consultative end by finding the best way to consult.
A related issue is the extent to which there has been a history of consultation in the relevant area, and the level of knowledge that those outside government can be expected to have. Incidentally, “lots of knowledge” can be a good or a bad thing!
First, let me deal with occasions where the use of Second Track process would seem not to be appropriate, or at least the use of what I have determined to be Second Track.
Perhaps the most apparent is where disclosure of information through consultation could unfairly advantage a particular recipient, in which case the inclusion or exclusion of someone from consultations could be problematic. Other times are where the changes proposed are subject to the deliberation of government and are highly confidential, as in the announcement of a tax measure in the Budget.
Indeed, the inherent danger in Second Track process that is selective – and I think second track is often selective – is that in choosing the “right” people to consult with, an uneven playing field may be created.
Another overriding, but not necessarily inhibiting, factor is that, despite the inherent confidentiality aspects of a Second Track process, government officials are always subject to Ministerial and Parliamentary oversight and scrutiny through accountability mechanisms that make it difficult and not always appropriate to maintain the necessary confidentiality.
To turn to more positive factors in the application of Second Track process, it clearly offers the opportunity to address issues early and extensively. Facilitated dialogue between the “right” parties at the “right time” can be useful in uncovering knowledge that, in its absence, would adversely affect the policy outcome. It is the “to and fro” of conversation that uncovers the range and, sometimes, unexpected factors that need to be considered. In the main track setting, these can be missed or, at least, poorly understood by the more formal modes of inquiry.
Another key consideration in the use of Second Track process is that Commonwealth officials must be mindful of ensuring that their processes are efficient, effective and ethical, as set out under section 44 of the Financial Management and Accountability Act 1997. This means that consultation must occur in a way that takes account of the cost of the consultation as against the expected benefits. This may work in favour of Second Track facilitated discussions where the commitment of individuals to progress an issue may mean a speedier resolution.
This brings me to comment on the format of Second Track process.
Where interaction is appropriate, there is value in setting out the rules of any engagement with clarity and in plain English. This will be a given for many stakeholders, but is always worthwhile considering, given the propensity of those in government to make liberal use of technical terms and obscure acronyms. It is also important in setting the expectations of participants in what is probably a new form of engagement for many of them.
Consultation is not necessarily easy. However, designing and implementing regulatory or other policy will be even harder if done without good consultation. And, I would suggest, the less consultation the greater the scope for mistakes and poor policy design.
Before closing my remarks, I want to note that the current government is keenly interested in seeking new ways to improve the discourse and interaction between the Australian Government, other levels of government, business and the community more broadly. We have seen innovations such as the 2020 summit and the Community cabinets, both of which have elements of Second Track processes. My own department continues to explore better consultation methods through the activities of AGIMO in the online environment, and in relation to deregulation that I referred to earlier.
“Second Track” processes, such as I have discussed today, are continuing to evolve.
I am confident that “Second Track” processes will be an important part of our future. I have offered some considerations on applicability, however, in an effort to frame a positive environment to help Second Track processes flourish. They are not set in concrete and – in the spirit of Second Track engagements – I welcome any questions and discussion.
Thank you
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