Budget Review 2009-10 Index

Budget 2009–10: Public sector

Australian Public Service

Dr Nicholas Horne

Background

The efficiency dividend

Over the 2008–09 financial year the Government imposed a one-off 2 per cent efficiency dividend on the departmental funding of most agencies over and above the ongoing 1.25 per cent efficiency dividend.[1] The 2008–09 Budget estimated that the additional 2 per cent would yield approximately $1.8 billion in savings over five years;[2] elsewhere it was estimated that over 2008–09 the total 3.25 per cent dividend would yield savings of approximately $662 million.[3]

A number of agencies were exempted from the additional 2 per cent efficiency dividend or from both the additional 2 per cent and the ongoing 1.25 per cent efficiency dividend.[4] Some other agencies had a proportion of their funding subjected to, or exempted from, the efficiency dividend.[5]

In 2008 the Joint Committee of Public Accounts and Audit (JCPAA) conducted an inquiry into ‘the effects of the ongoing efficiency dividend on smaller public sector agencies’ (agencies with annual departmental funding of $150 million or less).[6] A number of agencies gave evidence to the JCPAA regarding the impact of the efficiency dividend on their operations.[7] In its December 2008 report the JCPAA concluded that:

… there is a definable group of agencies that are being placed in financial difficulty by the combined effect of the efficiency dividend, the indexation measures and the NPP [New Policy Proposal] process. This group is defined by their smaller size and their technical, well-defined roles.[8]

The JCPAA also observed more broadly in relation to the efficiency dividend that:

… it appears that current arrangements place the highest premium on ensuring that agencies do not build up fat and other risks are secondary … What the Committee would prefer to see is a greater balance achieved between efficiency and effectiveness in the Budget process.[9]

The JCPAA made a number of recommendations, including that the Government:

… either: exempt the first $50 million of all agencies’ appropriations from the efficiency dividend, excluding departments of state (the preferred option); or exempt the first $50 million of the appropriations of all agencies that have departmental expenses of less than $150 million, excluding departments of state.[10]

There has been no government response to the JCPAA report to date, although in April 2009 it was reported that Finance Minister Lindsay Tanner had stated that impacts of the efficiency dividend raised in the JCPAA report ‘would be dealt with case by case’, and that ‘there appears to be some case where there is a need for some remedial action’.[11] It was also reported that the Government was ‘in discussions’ with the Australian Bureau of Statistics regarding its budgetary situation.[12]

Australian Public Service staffing

The 2008–09 Budget estimated that the total average staffing level (ASL) for Australian Government general government sector agencies in 2008–09 would be 246 993 ASL after estimated staffing reductions of 1 224 ASL over 2008–09.[13] The 2009–10 Budget gives a revised 2008–09 ASL estimate for agencies of 250 566 ASL.[14]

In November 2008 the Government indicated that it would be continuing to seek efficiencies in government administration into the 2009–10 Budget period.[15] In April 2009 it was reported in the media that the Government had identified further savings but did not anticipate that the Budget would significantly affect Australian Public Service (APS) employment levels.[16]

In the lead-up to the 2009–10 Budget several agencies were the subject of media attention in relation to possible reductions in staffing levels:

• Prospective staffing reductions at the Australian Bureau of Statistics (ABS) (180 positions) and at Geoscience Australia (150 positions) were reported.[17] In addition, the conduct of the ABS in relation to its staffing reductions was the subject of legal action by the Community and Public Sector Union (CPSU) in the Australian Industrial Relations Commission (AIRC).[18] On 5 May 2009 the AIRC issued a number of orders to the ABS including that the ABS withdraw advice provided to staff concerning job suitability assessments, permit staff removed from normal duties to return, and not commence employment termination processes. The AIRC also ordered the ABS to consult with the CPSU over proposed staff reductions.[19]
• It was reported that internal Australian Taxation Office (ATO) documents concerning a potential restructure identified the possibility of outsourcing around 3 800 full-time positions. The ATO stated that there were no plans to reduce staffing levels and that the documents were for discussion and were not ATO policy.[20]
• There was media speculation that the Budget would result in the loss of around 700 positions from the Department of Immigration and Citizenship.[21]
• It was reported that some 200 positions would be lost at Land and Water Australia and the Rural Industries Research and Development Corporation.[22] It was reported that Land and Water Australia would in effect be abolished.[23]

Government ICT reform

APS resourcing will be affected by the Government’s reform of its use of information and communication technology (ICT), upon which the government spent around $5.3 billion in 2007–08.[24] In April 2008 the government announced a review of its use of ICT by a UK efficiency expert, Sir Peter Gershon.[25] Gershon completed his review in August 2008 and concluded that:

… the current model of very high levels of agency autonomy, including the ability to self-approve opt-ins to whole-of-government approaches in the ICT domain, leads to sub-optimal outcomes in the context of prevailing external trends, financial returns, and the aims and objectives of the current Government.[26]

Gershon recommended a significant programme of reform to improve the Government’s use and management of ICT together with an implementation plan.[27]

In November 2008 the Government announced that it would implement all of the Gershon review recommendations. It stated that it would reduce the number of ICT contractors by 50 per cent over 2009–11 and that it expected to eventually realise savings of some $400 million annually from agency ICT budget reductions, half of which would be reinvested.[28] The Government stated that ICT budget reductions ‘averaging 15 per cent for larger agencies and 7.5 per cent for mid-sized agencies are expected and achievable’.[29]

2009–10 Budget measures

Administrative efficiencies and Australian Public Service staffing

As the Government indicated in November 2008, it is pursuing further administrative efficiencies and savings in the 2009–10 Budget. The Government has stated that operational efficiency measures in the Budget will generate savings of $1.1 billion over four years, and that ‘This brings total savings from improving government efficiency under the Rudd Government to around $5 billion over five years.[30]

Although there is no mention of the efficiency dividend in the Budget papers, it appears that the additional 2 per cent efficiency dividend was indeed a one-off and will cease (the ongoing 1.25 per cent efficiency dividend, however, will presumably continue). Finance Minister Lindsay Tanner stated that:

In its first Budget, the Rudd Government delivered savings through the one-off 2 per cent increase in the efficiency dividend … The 2009–10 Budget builds on these reforms and demonstrates the Government’s ongoing commitment to improve its operations and deliver greater value to the taxpayer.[31]

The Government has confirmed that it ‘will cease funding for Land and Water Australia in 2009–10’ and that ‘Priority research activities currently being undertaken by Land and Water Australia will be transferred to other agencies’.[32]

Tanner has also stated that, as part of the Government’s ICT reform programme, ‘Over fifty of the largest Commonwealth agencies have identified annual savings totalling more than $100 million to reduce their business-as-usual Information and Communication (ICT) expenditure’.[33]

For 2009–10 the Budget estimates the total ASL for Australian Government general government sector agencies to be 253 318 ASL.[34] This represents an overall estimated increase for agencies of 2 752 ASL on 2008–09 levels (250 566 ASL). The Budget also estimates overall ASL reductions for agencies of 1 316 ASL in 2009–10.[35] Estimated ASL changes in 2009–10 for each portfolio and estimated ASL changes for selected agencies, including those referred to above, are set out in Table 1 below.

Senators’ and Members’ staff increase

The Budget provides $34.2 million over four years (2009–2013) for an additional 44 government and non-government staff employed under the Members of Parliament (Staff) Act 1984 (Cth).[36] The government has stated that:

The proposed increase in staffing is consistent with recommendations made by an independent review conducted by Mr Alan Henderson PSM and reflects the review’s assessment of the excessive demands on staff in the face of the challenges facing the Australian Government.[37]

It has been reported in the media that, of the 44 additional staff, 34 will be allocated to government ministers, seven to the Opposition, one to the Greens, one to Independent Senator Nick Xenophon, and one to Family First Senator Steve Fielding.[38]

The staff increase will constitute a partial reversal of the government’s 30 per cent reduction in ministerial staff numbers in 2008 (the reduction amounted to some 119 ministerial staff positions from October 2007 to February 2008).

Reaction to the 2009–10 Budget

There has been some media comment on prospective funding and staffing reductions across the APS over the forward four-year period.[39] In its Updated Economic and Fiscal Outlook of February 2009 the Government stated that, as the Australian economy returns to growth, the Government will ‘review spending programs to reduce the levels of real growth in government spending to 2 per cent per annum’ and will also ‘continue its efforts to deliver greater efficiencies across the public sector’.[40]

Opposition Senator Gary Humphries was reported in the media as being gratified that the APS will not to be subject to wholesale staffing reductions, but also concerned at the estimated ASL reductions.[41] Family First Senator Steve Fielding labelled estimated funding and ASL increases for the Department of the Prime Minister and Cabinet as ‘obscene’ in the context of the economic downturn.[42]

The CPSU endorsed the cessation of the additional 2 per cent efficiency dividend and resourcing increases for particular agencies, but criticised the Government regarding the estimated ASL reductions.[43] The CPSU noted that, excluding forecast ASL increases for the Australian Broadcasting Corporation, the Special Broadcasting Service, and Defence military and reserves, the APS would increase by around 1 400 ASL.[44]

The reduction in funding for natural resource management research and the cessation of funding for Land and Water Australia has reportedly drawn widespread criticism from the National Farmers Federation and farm groups, scientists, academics, Indigenous leaders, the Coalition and the Australian Greens.[45]

Table 1: estimated portfolio and agency ASL changes 2009–10

The following table, extracted from Budget Strategy and Outlook: Budget Paper No. 1 2009–10, sets out the estimated ASL changes (reductions or gains) in 2009–10 for each portfolio along with estimated ASL changes for selected agencies. As the table indicates, ASL reductions and gains vary considerably among agencies and both within and across portfolios.

While the estimated ASL changes in the Budget papers draw on figures provided by agencies, it should be noted that they are estimates only and that agencies determine their own staffing levels subject to requirements.

Source: Australian Government, Budget strategy and outlook: budget paper no. 1 2009–10, Commonwealth of Australia, Canberra, 2009, pp. 6–66—6–70.

[1].       Australian Government, Budget measures: budget paper no. 2 2008–09, Commonwealth of Australia, Canberra, 2008, pp. 321, 348, viewed 18 May 2009, http://www.budget.gov.au/2008-09/content/bp2/download/bp2.pdf; see also L Tanner, Labor delivers on savings, media release, 22 November 2007, viewed 18 May 2009, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2FDM0P6%22

[2].       Australian Government, Budget measures: budget paper no. 2 2008–09, pp. 321, 348.

[3].       Joint Committee of Public Accounts and Audit (JCPAA), Report 413: The efficiency dividend and small agencies: size does matter, JCPAA, Canberra, December 2008, p. 2, viewed 18 May 2009, http://www.aph.gov.au/house/committee/jpaa/efficdiv/report/fullreport.pdf

[4].       JCPAA, Report 413, pp. 2–3; Department of Finance and Deregulation (DoFD), Finance submission to the Joint Committee of Public Accounts and Audit inquiry into the effects of the ongoing efficiency dividend on smaller public sector agencies, JCPAA, Canberra, 2008, pp. 3–4, viewed 18 May 2009, http://www.aph.gov.au/house/committee/jpaa/efficdiv/subs/sub25.pdf

[5].       JCPAA, Report 413, p. 3; DoFD, Finance submission, pp. 3–4. For example, approximately 11.2 per cent of the ‘civilian and non-operational’ departmental funding of the Department of Defence was subject to the efficiency dividend over 2008–09: DoFD, Finance submission, p. 4.

[6].       JCPAA, Report 413, pp. xi–xii.

[7].       For example National Gallery of Australia, Submission by the National Gallery of Australia, JCPAA, Canberra, 2008, viewed 18 May 2009, http://www.aph.gov.au/house/committee/jpaa/efficdiv/subs/sub6.pdf; Australian War Memorial, Australian War Memorial Submission—Inquiry into the effect of the efficiency dividend on small agencies, JCPAA, Canberra, 2008, viewed 18 May 2009, http://www.aph.gov.au/house/committee/jpaa/efficdiv/subs/sub26.pdf; National Library of Australia Council, Submission by the National Library of Australia, JCPAA, Canberra, 2008, viewed 18 May 2009, http://www.aph.gov.au/house/committee/jpaa/efficdiv/subs/sub41.pdf

[8].       JCPAA, Report 413, pp. 102–3.

[9].       JCPAA, Report 413, pp. 105–6.

[10].     JCPAA, Report 413, p. xvii.

[11].     M Ruffles, ‘PS chiefs too eager on job cuts: feds’, Canberra times, 4 April 2009.

[12].     M Ruffles, ‘PS chiefs too eager on job cuts: feds’.

[13].     Australian Government, Budget strategy and outlook: budget paper no. 1 2008–09, Commonwealth of Australia, Canberra, 2008, p. 6–64, viewed 18 May 2009, http://www.budget.gov.au/2008%2D09/content/bp1/downloads/bp1.pdf

[14].     Australian Government, Budget strategy and outlook: budget paper no. 1 2009–10, Commonwealth of Australia, Canberra, 2009, p. 6–70, viewed 18 May 2009, http://www.budget.gov.au/2009-10/content/bp1/downloads/bp_1.pdf. The Budget notes that ‘ASL figures reflect the average number of employees receiving salary or wages over the financial year, with adjustments for casual and part-time staff, to show the full-time equivalent. This also includes non-uniformed staff and overseas personnel’: Australian Government, Budget strategy and outlook: budget paper no. 1 2009–10, p. 6–70.

[15].     L Tanner (Minister for Finance and Deregulation), Government to implement Gershon ICT review recommendations in full, media release, 24 November 2008, viewed 18 May 2009, http://www.financeminister.gov.au/media/2008/mr_372008.html. For media comment see T Skotnicki, ‘Fears jobs at risk in second round of public service cuts’, Canberra times, 4 August 2008; L Dodson and D Crowe, ‘Tanner calls savings quest’, Australian financial review, 14 November 2008; M Franklin, ‘Razor gang to fund rescue’, The Australian, 22 December 2008; D Alexander, ‘Tanner’s razor gang accused of confusion’, Canberra times, 23 December 2008.

[16].     AAP, ‘Public service jobs safe’, Australian financial review, 4 April 2009; V Burgess, ‘Tanner’s point on efficiency dividend disappoints unions’, Australian financial review, 9 April 2009; M Franklin, ‘Razor gang hits savings of $4bn’, The Australian, 15 April 2009.

[17].     For example M Mannheim, ‘Geology agency to slash 150 jobs’, Canberra times, 20 March 2009, ‘Executive stress as 180 ABS jobs to go’, Canberra times, 21 March 2009; L Andrews, ‘ABS blames pay rise for axing 31 staff, more jobs to go’, Canberra times, 18 April 2009.

[18].     M Mannheim, ‘ABS in court for ‘illegal’ sackings’, Canberra times, 23 April 2009.

[19].     CPSU, the Community and Public Sector Union–PSU Group v Australian Bureau of Statistics, Australian Industrial Relations Commission, Sydney, 5 May 2009, C2009/2429, viewed 18 May 2009, http://www.airc.gov.au/awardsandorders/html/PR986874.htm. See also M Mannheim, ‘Statistics jobs saved by tribunal’s ruling’, Canberra times, 6 May 2009.

[20].     M Mannheim, ‘Tax office staff rally against cuts’, Canberra times, 8 May 2009.

[21].     J Topsfield, ‘700 jobs to go as Rudd’s axe falls’, The Age, 1 May 2009.

[22].     R Beeby, ‘200 jobs to go at research agencies’, Canberra times, 7 May 2009.

[23].     R Beeby, ‘200 jobs to go at research agencies’, ‘Short-sighted axing a $13m false economy’, Canberra times, 7 May 2009; D Smith, ‘Farmers furious as scythe swings through research’, Sydney morning herald, 8 May 2009.

[24].     P Gershon, Review of the Australian Government’s use of information and communication technology, Commonwealth of Australia, Canberra, August 2008, p. 46, viewed 18 May 2009, http://www.finance.gov.au/publications/ICT-Review/docs/Review-of-the-Australian-Governments-Use-of-Information-and-Communication-Technology.pdf

[25].     L Tanner (Minister for Finance and Deregulation), UK efficiency expert to lead review of Australian Government’s use of information and communication technology, media release, 11 April 2008, viewed 18 May 2009,         http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2FCM5Q6%22

[26].     P Gershon, Review of the Australian Government’s use of information and communication technology, p. 2.

[27].     See P Gershon, Review of the Australian Government’s use of information and communication technology, pp. 3–5 for key recommendations and the proposed implementation plan.

[28].     L Tanner (Minister for Finance and Deregulation), Government to implement Gershon ICT review recommendations in full.

[29].     L Tanner (Minister for Finance and Deregulation), Government to implement Gershon ICT review recommendations in full.

[30].     L Tanner (Minister for Finance and Deregulation), Budget delivers over $1 billion in efficiencies from government operations, media release, 12 May 2009, viewed 18 May 2009, http://www.financeminister.gov.au/media/2009/mr_282009.html

[31].     L Tanner (Minister for Finance and Deregulation), Budget delivers over $1 billion in efficiencies from government operations. See also M Mannheim, ‘Union boss no cheerleader for government’, Canberra times, 13 May 2009; Community and Public Sector Union (CPSU), Budget 09 is a mixed bag for the APS, CPSU, 13 May 2009, viewed 18 May 2009, http://www.cpsu.org.au/campaigns/news/13207.html

[32].     Australian Government, Budget measures: budget paper no. 2 2009–10, Commonwealth of Australia, Canberra, 2009, p. 85, viewed 18 May 2009, http://www.budget.gov.au/2009-10/content/bp2/download/bp_2.pdf

[33].     L Tanner (Minister for Finance and Deregulation), Budget delivers over $1 billion in efficiencies from government operations.

[34].     Australian Government, Budget strategy and outlook: budget paper no. 1 2009–10, p. 6–70. General government sector agencies are those which ‘provide non-market public services and are funded mainly through taxes’: Australian Government, Budget strategy and outlook: budget paper no. 1 2009–10, p. 9–35.

[35].     Australian Government, Budget strategy and outlook: budget paper no. 1 2009–10, pp. 6–66—6–70.

[36].     Australian Government, Budget measures: budget paper no. 2 2009–10, p. 250.

[37].     Australian Government, Budget measures: budget paper no. 2 2009–10, p. 250. Alan Henderson was engaged to conduct the review by the Department of the Prime Minister and Cabinet in December 2008.

[38].     N Berkovic, ‘Staff numbers up despite promise of axe’, The Australian, 14 May 2009.

[39].     D Uren, ‘Years of tighter spending lie ahead’, The Australian, 13 May 2009, ‘Departments to cut spending, later’, The Australian, 15 May 2009; P Maley, ‘Job cuts only way to make savings’, Weekend australian, 16 May 2009.

[40].     Australian Government, Updated economic and fiscal outlook, Commonwealth of Australia, Canberra, February 2009, pp. 38–39, viewed 18 May 2009, http://www.budget.gov.au/2008%2D09/content/uefo/download/Combined_UEFO.pdf

[41].     M Mannheim, ‘Union boss no cheerleader for government’.

[42].     S Fielding, Budget of broken dreams, media release, 12 May 2009, viewed 18 May 2009, http://www.stevefielding.com.au/images/press_room/SF471_051209.pdf. See also B Nicholson and B Doherty, ‘PM’s office to get 65 more staff’, The Age, 14 May 2009. 

[43].     ABC News Online, ‘Union gives Budget bare pass mark’, ABC Online, 13 May 2009, viewed 18 May 2009, http://www.abc.net.au/news/stories/2009/05/13/2568745.htm; CPSU, Budget 09 is a mixed bag for the APS; M Mannheim, ‘Union boss no cheerleader for government’.

[44].     CPSU, Budget 09 is a mixed bag for the APS.

[45].     R Beeby, ‘200 jobs to go at research agencies’, ‘Short-sighted axing a $13m false economy’; D Smith, ‘Farmers furious as scythe swings through research’; ‘Farmers to fight cuts’ (n.a.), Daily telegraph, 14 May 2009.

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