05/11/2009 - 00:00

Economic audit needs to deliver

05/11/2009 - 00:00


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A year after an ambitious public sector review process was established, the time for the state government to deliver results is approaching.

THE Chamber of Commerce and Industry WA launched a pre-emptive strike last week to keep the state government on its toes over public sector reform.

The CCI issued a statement foreshadowing the completion of the Economic Audit Committee’s final report, which was to be completed in October.

Chief economist John Nicolaou rightly described the report as a historic opportunity to make meaningful changes to how government is run, and valuable taxpayer dollars spent.

Treasurer Troy Buswell made similar comments 12 months ago when he convened the inaugural meeting of the committee, whose high-calibre members include former Canberra mandarin Peter Shergold, Premier and Cabinet chief Peter Conran, Under Treasurer Tim Marney, and his predecessor and current Australian Capital Equity executive, John Langoulaut.

Mr Buswell said no state department or agency would escape the microscope in the course of the committee’s review.

“Government in this state has been gathering moss for a good decade and the time has come for a long hard look at just where it is doing its job and delivering value to taxpayers and where it is not,” he said at the outset.

Having raised expectations, the community will be looking for impressive results.

Mr Nicolaou said the focus must be on removing duplication, eliminating inefficiencies, and focusing on core service delivery.

Specifically, he called for an overhaul of the Public Sector Management Act and a reduction in the number of agencies and departments.

The need for change was highlighted last Friday when Mr Buswell released the latest data on state finances, for the months of July and August.

It showed a general government sector operating deficit of $687 million, down from a $73 million surplus in the same period last year.

The most worrying aspect was the rapid lift in government spending, which the Barnett government has struggled to contain.

It has sought 3 per cent spending cuts across all agencies, and discovered this is a politically painful way to achieve modest savings.

It is also seeking to cap growth in wages – but only after giving in to the teachers union’s wage demands last year – and in public servant numbers.

The really big and sustainable savings come when ministers decide to change policy or when the government sector is fundamentally restructured.

Labor tried the latter and its experience provides salutary lessons.

It had success with one initiative – centralising all procurement in the Treasury department.

But it had a disaster with a second initiative – the creation of a handful of shared services units to handle back-office functions for all agencies.

This ambitious project had backing from respected private sector consulting and IT groups but has ended up costing money rather than saving any.

The Economic Audit Committee’s discussion paper has hinted at some of the changes it is likely to recommend.

The private sector is likely to have a bigger role in service provision.

It referred to Acacia Prison and Joondalup Health Campus as “two successful examples where alternative financing and management arrangements have delivered value for money”.

There is widespread expectation in the business sector that the government will opt for ‘public private partnerships’ for some of its big capital works projects, including hospitals, schools and water infrastructure.

Labor governments in most other states have successfully implemented multiple PPPs. The occasional PPP project has failed to deliver, and has attracted adverse headlines, but there have been many quiet success stories.

It’s also expected that the not-for-profit sector will be given a bigger role in service delivery, but this will only be effective if the government follows through on Premier Colin Barnett’s stated support for cutting the administrative and red tape burden.

The number of government agencies will come under the spotlight, after the discussion paper said WA’s public sector remains highly fragmented, with more than 160 public sector bodies in addition to a large number of boards and committees.

However there is a much bigger, underlying issue. Do government agencies have appropriate leadership and culture, are their goals clearly defined and are they empowered to act in the most efficient manner?

For most government agencies the answer would be no.

That is the really big challenge for the state government.



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