SENATOR THE HON KATY GALLAGHER
Minister for Finance
Minister for the Public Service
Minister for Women
Date: Monday, 17 July 2023
ADAM SHIRLEY, HOST: Federal Minister for the Public Service and Minister of Finance, Katy Gallagher, a very good morning to you.
SENATOR THE HON KATY GALLAGHER: Good morning, Adam.
SHIRLEY: Reflect on that text and the public sentiment, it would seem, on the Big Four, the money they get paid by government to do their work?
GALLAGHER: Well, Adam, I've been saying for some time for years, in fact, that I think it's out of balance across the APS about our reliance on consultants and external workers for doing the work that the public service should be doing. That's why we went to the election with a policy around reducing the reliance on consultants because I thought it was out of balance. I have to say, after the first 12 months in government, I think it's worse than I had thought in opposition in terms of our reliance on them and how embedded they are across the APS. But I don't think that's a surprise, because, you know, the previous government had a policy around staffing caps which didn't allow the employment of public servants to do work. And in order to deal with that, the public service responded by buying in help when they needed it. And that's what's created this out of balance situation that we're trying to rectify now.
SHIRLEY: Given what we know already about PwC, the consequences that have unfolded in that massive organisation, what we might hear from Deloitte Australia today, is there a credible place for big consultants in government?
GALLAGHER: Well, I definitely think there should be a role for external consultants, but it should be for a specific work, where you lack those skills within the department, where it's technical advice. Obviously, there's an auditing function that some of these consultancies provide, which I think will remain needed by the APS. But in terms of the way it operates now, I think, definitely, we need to wind it back. We've obviously made some changes to the procurement rules and some advice to departments around, you know, how they engage and assurances they seek from consultants. And I think there are issues it seems around conflict of interest, which I'm sure the Senate committee will have a look at. So I think there's more to learn, I have certainly learned a lot in the last 12 months and I am determined, you know, more determined, perhaps, than ever to try and make sure or to make sure we rebalance the public service so that where you do use these firms, you are using them for specific terms, for specific pieces of work, for specific pieces of expertise, not just as a way to do the work that the public service should do.
SHIRLEY: So knowing that you've probably got a number of consultants who work for these firms listening as well as a lot of public servants listening too, what particularly do you want to cut back on, scale back on, when it comes to the private consultancies and the way they are currently embedded in the machine of government?
GALLAGHER: Well, I think it goes to the point I just said before, where it's core public service work, i.e. developing policies, advice to government, you know, filling positions. I mean, we've had a huge change in the way of the use of external labour to fill, you know, what would traditionally have been seen as public service roles. Where that is in place, I want to see that change and rebalance. And look, you can't do this overnight, because of the way it's happened over a number of years. It's not just a matter of saying we don't use them anymore because in some areas the use of external labour has, you know, is in place, and so we have to wind it back. And we've been doing that. In the last Budget, we converted about 3,300 external labour arrangements into permanent public service jobs, and it saved across the Budget papers, I think it was about over $800 million. So it's not just, you know, rebalancing. It's actually being able to use taxpayers money more efficiently as well.
SHIRLEY: You mentioned the public service cap previously as maybe a why, but I guess a lot of other listeners will be wondering why, why has it come to this mutualism? This, I guess, symbiotic relationship to use a biological term, where it seems many departments cannot work and exist without private corporations and consultants now?
GALLAGHER: Well, I mean, I do think it's part of how the former government saw the role of the public service they —
SHIRLEY: So do you think it's been ideological for some years?
GALLAGHER: I think that's a large part of what we've seen happen over the last decade is there was a view from government that, "we wanted the work done, we didn't really care how it was done, we wanted to champion this small government approach, you know, we're not employing public servants in Canberra to do this work," that kind of narrative that I don't think the former government shies away from.
SHIRLEY: What about the Rudd Government era razor gangs, the increased so-called efficiency dividends and the pressure they put on the public service, which then meant consultants had to be brought in?
GALLAGHER: Well, there's no doubt that governments have to run the public service efficiently. And I've been on the record as saying I do believe there's a role for an efficiency dividend, there is an efficiency dividend in place now that keeps driving that, but at the same time, we're making investments into the public service as well. But I see that as a good way of ensuring department heads are looking at how they allocate resources and where. The big change with the staffing cap came when it was a directive from government that said you cannot employ public servants to do the work that we are asking you to do unless you get an exemption from the Finance Minister. Now, that created a significant change in the way the public service operated because they needed to do the work. They weren't assured of getting an exemption. In fact, you know, they probably wouldn't get one, in which case they relied on consultants to come in and do the work. But it wasn't to just do, perhaps a piece of work, like a review or provide advice to a department on a particular matter. It was to actually to do the work of a public servant. And that is what we have to change.
SHIRLEY: A few of you who are consultants, and public servants are sending in texts and experiences, I appreciate these. From Rowan "morning, when I was an EL2 I was paid at $88 per hour, then took a package and sold my skills back at $550 per hour. So I only needed to work 10 hours a week." Honest of you to tell us this Rowan. Katy Gallagher, Rowan's experience and what he did, is that part of what the government needs to address that far greater cost of public servants, but seemingly Rowan was welcomed for his skills and experience, even though he was certainly skilled back at a far higher, rate?
GALLAGHER: Yes, well we've heard stories like that, I've certainly heard stories like that. And because the work actually needs to continue to be done, if you don't have a person in place, you know, departments will have to buy in that expertise. And obviously, that comes with a premium on top of that. If you're buying in that work from a company, because they don't do this because they're a benevolent organisation, they are private companies operating for profit. And that's the point I was making earlier, where we've converted positions into public servants with the conditions they get, we are saving $800 million, just from those 3,000 positions. So you can see the link here. We know that for example, bringing in labour hire and other companies adds the premium on top of what would normally cost for a public servant. And so it suits some public servants as well, you know, to leave and to work under other arrangements. And I'm not saying you have to chuck everything out. But I want to make sure that we are building the public service with the capability it needs to do its job and serve the Australian people, not outsource that to a private company that is established and arranged to drive profit. That is, you know, I see the public service as an institution fundamental to our democracy. And it needs to be resourced and capable to do the job that the Australian people need it to do.
SHIRLEY: The key question I guess is how far will you go? Because a lot of ministers on either side of major politics, I'll say, who have been responsible for the public service have echoed the thoughts you just had this morning. So my question is, how far will you go to push the balance towards the public servants versus the consultants?
GALLAGHER: Well, we've already taken a saving on this area and across government of $3 billion across the forward estimates. So that sends a pretty significant signal from government that we are wanting to see departments reduce their expenditure on consultants and contractors. We've invested in additional public service positions in recognition of that so that we have bodies in place doing the policy work that we need them to do. And we have a public service reform office, which is developing policies like the in-house consultancy model to make sure that we are driving that change plus all the other work we're doing in public service reform. We've been very clear, the Prime Minister has been very clear that he wants a capable, independent, fearless public service. And that is what my job is to deliver.
SHIRLEY: We haven't mentioned much in detail the review – the Australian Public Service Commission review into its capability recently released. I mean, in terms of getting more in-house knowledge and expertise, in terms of, I guess, better administering programmes, how important is that review in what you're talking about, in developing a stronger and I suppose, more centralised public service?
GALLAGHER: Well, these capability reviews are part of that reform work. You know, they used to exist, they've dropped off, we're bringing them back. They're not, you know, used to drive any sort of Budget decisions or anything like that, they are a capability review. So, you know, how are you going, what are you doing, they're forward looking. And it was important that the Public Service Commission be the first cab off the rank, in a sense, because they're going to be central to driving these capability reviews across the public service. So they needed to show that they were up for having one done on them, first up, which they've done. And that, you know, has a range of areas where we need to see improvements. And an improved role for the APSC, which is what I want to see, I want to see how it used to be where the Public Service Commission was an institution where its advice was sought, it was highly respected, it drove a lot of the sort of people change across the APS. That's been eroded over time. And I want to see that brought back. And part of that is this capability review.
SHIRLEY: Part of that capability internally too, and we get this from listeners whenever we raise these sorts of issues. One listener asks, "what about IT – can the Public Service offer competitive salaries given private pay a fortune?" Minister?
GALLAGHER: Well, I mean, this again, workforce is a key part of the public service reform. And again, part of the work that the Commission needs to do is how we ensure that we're training and retaining the workforce we need for the future. Obviously, a lot of the jobs growth in the APS in the future is going to be around data and digital. And we need to be putting in place programmes now to make sure we are competitive, that we are a model employer, this goes to some of the issues we're having around bargaining at the moment to make sure that we are genuinely bargaining with our public service, and that we are an exemplar around wages and conditions.
SHIRLEY: So do you need to pay more for IT experts in the public service?
GALLAGHER: Well, I mean, there's classification structures in place now. We need to do some work around professions, which is, you know, the development of these, I guess, the workers of the future and how we support them throughout the APS. And it is changing. Our workplace is no different to every other workplace that is undergoing incredible change and reform at the moment. So we need to look at how we are competitive, but people work for the public service not just for salaries. They work, because they believe in the work we do. And so the other side of that, not only is being a model employer, it's actually developing the APS so that it can do its work, which I think it has struggled under over the past decade.
SHIRLEY: Last question for now, just with a nod to what we might hear in the Senate hearings today from Deloitte. History would tell us virtually none of these people who seem to have shared confidential information, the breaches that PwC we've noticed, history would tell us they don't see jail time. Depending on what is revealed, Minister, should there be some criminal charges at least considered for what went on?
GALLAGHER: Well, I don't think that's a matter for me, that's a matter for the relevant law enforcement agencies. I mean, obviously, there has been a referral to the AFP around the Tax Practitioners Board breach, and that needs to undergo its own processes. But I think, you know, in terms of the work that I'm in charge of, around the procurement rules, around how we manage guidance to departments, and also how we, where there is a problem, how we deal with that, including cancellation of contracts – that's the area that I'm focused on. And I think for these companies, you know, reputational risk, loss of work, all of those things matter incredibly. And so, you know, we'll see what happens in the Senate inquiry. I think the Senate is doing the job it needs to do. And we'll do the work that we need to do across the APS to make sure we're rebalancing the situation as we've inherited it, and it's going to take a little bit of time, but it's underway.
SHIRLEY: We do appreciate your time today, Minister. Thank you for it.
GALLAGHER: Thanks so much, Adam.
Lisa Glenday 0403 931 209 | Gallagher.Media@finance.gov.au