Smaller and More Rational Government Ministerial Paper

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3 Smaller and More Rational Government Ministerial Paper Paper by Senator the Honourable Mathias Cormann Minister for Finance May 2014

4 Commonwealth of Australia 2014 ISBN This publication is available for your use under a Creative Commons Attribution 3.0 Australia licence, with the exception of the Commonwealth Coat of Arms. The full licence terms are available from Use of this Australian Government material under a Creative Commons Attribution 3.0 Australia licence requires you to attribute the work (but not in any way that suggests that the Australian Government endorses you or your use of the work). Australian Government material used 'as supplied' Provided you have not modified or transformed Australian Government material in any way including, for example, by changing the text; calculating percentage changes; graphing or charting data; or deriving new statistics from published Treasury statistics then the Australian Government prefers the following attribution: Source: The Australian Government Derivative material If you have modified or transformed Australian Government material, or derived new material from those of the Australian Government in any way, then the Australian Government prefers the following attribution: Based on The Australian Government material Use of the Coat of Arms The terms under which the Coat of Arms can be used are set out on the It s an Honour website (see Other Uses Inquiries regarding this licence and any other use of this document are welcome at: [email protected] Printed by CanPrint Communications Pty Ltd

5 MINISTER S FOREWORD One of the key commitments of the Abbott Government is to reduce the size of government and to ensure that government services are as efficient and well-targeted as possible. The Smaller Government initiatives announced in the Federal Budget are part of a methodical ongoing effort to reduce the total number of Australian Government bodies. These decisions build on steps taken shortly after the 2013 election to abolish unnecessary advisory bodies and boards, take steps towards our first major privatisation and abolish a number of agencies including statutory authorities. Commonwealth bodies play a vital role in advising the Government, delivering public services and enforcing the law. However across the Commonwealth we have too many inefficient and complex structures, which create costs that should be avoidable. In some areas we are investing in bodies that are adding marginal value or are duplicating each other or other levels of government. The National Commission of Audit was asked to consider opportunities to streamline government structures and identify improvements that would ensure greater value for taxpayers money. The recommendations and reform principles proposed by the Commission provided an important input into designing smaller government reforms. Many of these reforms will preserve delivery of the same range of services, but will ensure that overly-bureaucratic structures are simplified where possible. Where we have consolidated functions into government departments or merged smaller bodies into larger agencies, this will enhance lines of accountability. The reforms we have implemented following the election and those announced in the Budget will achieve ongoing savings and greatly simplify the structures of government in several areas. But it is important to acknowledge that the number of Australian Government bodies still remains high and more can be done to further rationalise bodies and find other efficiencies. A third phase of reductions and consolidations will take place ahead of the next Mid-Year Economic and Fiscal Outlook, following further due diligence on additional reform options. The Abbott Government is facing up to the structural challenges that have been ignored for too long. Mathias Cormann Minister for Finance iii

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7 CONTENTS MINISTER S FOREWORD...iii DELIVERING A SMALLER AND MORE RATIONAL GOVERNMENT FOOTPRINT... 1 DELIVERING A SMALLER AND MORE RATIONAL GOVERNMENT FOOTPRINT... 2 PHASING OF REFORM... 2 NEW INITIATIVES... 4 POLICY FRAMEWORK THE PROBLEMS WITH OVER-GROWN GOVERNMENT SUMMARY APPENDIX A APPENDIX B v

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9 DELIVERING A SMALLER AND MORE RATIONAL GOVERNMENT FOOTPRINT 1

10 DELIVERING A SMALLER AND MORE RATIONAL GOVERNMENT FOOTPRINT PHASING OF REFORM The Abbott Government is undertaking reforms to reduce the number of government bodies further and make the operations of remaining public sector organisations more efficient. We recognise that it is important to get the policy settings right for a leaner and more business-like administration. Reforms to remove or amalgamate government bodies will be implemented in a methodical and phased approach. The first phase of reform was implemented prior to the 2014 Budget, including Machinery of Government reforms in September 2013 and initiatives included in the December 2013 Mid-Year Economic and Fiscal Outlook. This included shifting the Australian Agency for International Development (AusAID) into the Department of Foreign Affairs and Trade (DFAT); combining the Department of Resources, Energy and Tourism into the Department of Industry and DFAT; merging the functions of the Department of Regional Australia, Local Government, Arts and Sport into other departments; abolishing 23 advisory bodies; and commencing the process to sell Medibank Private. The full list of phase one reforms is at Appendix A. Altogether decisions taken pre-budget have resulted in a reduction of 40 government bodies. In the Budget the Abbott Government announced the second phase of reform, that will result in abolition of another 36 government bodies. Details of these reforms are listed at Appendix B. These reductions will be achieved through closures, mergers and consolidations of functions into departments. The Government will also commission scoping studies to consider the future of five bodies, assessing new delivery options including privatisation. The third phase of consolidation of the number of government bodies will be announced as part of the Mid-Year Economic and Fiscal Outlook. To support better decision-making and limit the creation of new government bodies in the future, an Australian Government Governance Policy will be released in the second half of

11 Together phase one and two of the Smaller Government agenda will affect 88 government bodies plus three proposed bodies that the previous Government had provided funding for. These decisions will result in the abolition of 76 bodies. Some 16 of these reforms involve consolidation of functions from abolished bodies into government departments. Another 25 bodies are to be merged into other types of government bodies. One privatisation has been commenced and five scoping studies have been announced that may result in further privatisations. Acting early to deliver a smaller and more rational government footprint will contribute to fiscal repair and to the sustainability of government operations. Table 1: Initiatives to reform government bodies Principal Secondary Total Phase 1: Post-election (a) Cease (b) Transfer to Private Sector (c) Consolidate (d) Merge (e) Stop establishment of bodies Total decisions Abolition subtotal (a) to (d) Phase 2: Budget (a) Cease (b) Transfer to Private Sector (c) Consolidate (d) Merge (e) Stop establishment of bodies Total decisions Abolition subtotal (a) to (d) Total abolition of bodies less (e) Other reforms in the Budget Scoping studies Back-office mergers Total number of reform initiatives includes stopping the establishment of bodies (e) Source: Department of Finance and the Australian Government Notes: Assumes an existing body becomes the head structure for the merged merits review tribunal, and a similar approach for the merger of blood, organ and tissue responsibilities. Alternatively if entirely new legal structures are created in these areas, total abolitions will be greater. All six Health bodies proposed for merger are counted, pending final arrangements

12 NEW INITIATIVES Reductions to the number of government bodies The Government is taking strong and early action to reduce the footprint of the public sector. The Budget contains a number of measures that reduce the number of Australian Government bodies and streamline the shape of government. These reforms are detailed at Appendix B. The Budget includes proposals affecting 48 government bodies plus two proposed bodies that the previous Government had committed to establishing. In summary: In this second phase of reform the Government will abolish 36 government bodies and stop the creation of a further two bodies. The reforms will merge back-office functions of another seven bodies. Scoping studies will be sought on a further five bodies. The abolition of 36 bodies in the Budget will be achieved through the following changes. Cessation of 10 bodies including: the Abalone Aquaculture Health Accreditation Workshop, the Albury-Wodonga Development Corporation, the Australian Renewable Energy Agency, the Australian River Co. Limited, the Corporations and Markets Advisory Committee and its legal committee, the National Water Commission, the COAG Reform Council, the Office of the Independent National Security Legislation Monitor and the Prime Minister s Indigenous Business Policy Advisory Group. Consolidating the functions of several bodies into Departments. - The most significant of these reforms will consolidate the Australian Customs and Border Protection Service into the Department of Immigration and Border Protection to form a single operational border agency. - The functions of Health Workforce Australia, General Practice Education and Training Limited and the Australian National Preventive Health Agency, will be consolidated into the Department of Health. - The functions of the Telecommunications Universal Service Management Agency will be consolidated into the Department of Communications. 4

13 - The roles of the Grape and Wine Research and Development Selection Committee and Wine Australia Corporation Selection Committee will be subsumed in the Department of Agriculture. A number of mergers will bring together the complementary expertise of related bodies that are working in related fields. - Comsuper will merge into the Commonwealth Superannuation Corporation. - Five civilian merit review tribunals will be amalgamated into a single organisation including: the Administrative Appeals Tribunal, the Classification Review Board, the Migration Review Tribunal and the Refugee Review Tribunal (which constitute one body), and the Social Security Appeals Tribunal. - The back-office functions of seven Canberra-based cultural collection institutions and archival institutions will be amalgamated to realise synergies. These seven organisations have a similar focus and are geographically sited in close proximity: the National Archives, the National Film and Sound Archive, the National Gallery, the National Library, the National Museum, the National Portrait Gallery and Old Parliament House. - Different functions of the Office of the Australian Information Commissioner will be merged into the Australian Human Rights Commission, the Administrative Appeals Tribunal, the Commonwealth Ombudsman and the Attorney-General s Department. - The Private Health Insurance Administration Council will have some functions merged into the Australian Competition and Consumer Commission and others into the Australian Prudential Regulation Authority, while the Private Health Insurance Industry Ombudsman merges into the Office of the Commonwealth Ombudsman. - The AQUAPLAN Working Group will be merged into the Aquaculture Committee. - Several bodies will be merged into the National Biosecurity Committee: the Australian Weeds Committee, Biosafety and Biosecurity Working Group and Established Pests and Diseases Working Group. - The National Competition Council Secretariat will merge into the Australian Competition and Consumer Commission. 5

14 - The National Blood Authority will merge with the Australian Organ and Tissue Donation and Transplantation Authority. In consultation with the State and Territories, the Government will also consider opportunities for more streamlined and efficient arrangements to drive much needed productivity and performance improvements in the health care sector. The National Commission of Audit has highlighted that there is scope to improve the way data is collected, analysed and disseminated by the multitude of Australian Government bodies currently working in this field. - Subject to consultation, a new health productivity and performance commission will be formed by merging the following existing bodies with related functions: the Australian Commission on Safety and Quality in Health Care, the Independent Hospitals Pricing Authority, the National Health Funding Body, the National Health Funding Pool Administrator, the National Health Performance Authority and the Australian Institute of Health and Welfare. - These bodies have related functions around improving the quality of health care and raising awareness of particular health matters. By operating as separate entities, opportunities are being lost for more coordinated administration and the combined overheads are wasteful. Preventing commencement of new agencies The Abbott Government announced in the Budget that it will not proceed with the establishment of two new bodies which the previous Government sought to establish and fund in The Government will not proceed with the plans of the previous Government to create a Student Identifiers Agency. Instead the Abbott Government will achieve savings by appointing a statutory officeholder within the Department of Industry to administer the same set of responsibilities. Likewise funding will be reclaimed by ceasing plans to establish a Brisbane Cross River Rail and Melbourne Metro Projects Advisory Board. This will help repair the Budget and fund policy priorities. Assessing future ownership options In the Budget, the Government has provided funding for scoping studies into future ownership options for Defence Housing Australia, Australian Hearing, the Royal Australian Mint and the registry function of the Australian Securities and Investments Commission. A scoping study will also consider more efficient options for the Defence Service Homes Insurance Scheme. 6

15 Divestment of assets will also occur within agencies. A number of properties which are surplus to the needs of agencies will be progressively sold over the next three years and savings will be redirected to repair the Budget. The Government will also achieve further efficiencies through implementing a Contestability Framework to assess whether particular government functions should be open to competition and how competition should occur. This will allow competing providers to come from both inside and outside government and help ensure that government functions are undertaken in the most efficient manner by the organisation most able to do so. Under this new framework, over the next three years, government functions will be systematically reviewed to determine if they are, in whole or in part, appropriate for competition. As a principle, government bodies should not be given preference as service delivery agents, where others are more capable of providing the same service. The world has changed greatly from the time when governments enjoyed an insurmountable advantage in running sophisticated public services, owing to their access to information, supporting capital and technology. Greater competition will result in better value for money in the efficient delivery of functions and will help provide more agile service delivery to the public. Implementation work on phase one reforms Several of the most significant initiatives announced in the first phase of agency rationalisation have been subsequently included as measures in the Budget. These budget measures will achieve: Savings from consolidating AusAID into DFAT, including from removing duplication in corporate functions, introducing more efficient models for administering Official Development Assistance and creating other efficiencies. Savings from consolidating the key parts of the Department of Regional Australia, Local Government, the Arts and Sport into the Department of Infrastructure and Regional Development. These savings will be achieved through the removal of duplication in corporate functions. Proceeds from the sale of Medibank Private. Timing for implementation of phase two initiatives Most of the phase two initiatives announced in the Budget are to take effect by 1 July Some reforms may take longer where there are existing Federal-State arrangements that require re-negotiation, or where more efficient replacement bodies need to be established in legislation. 7

16 The forecast savings The reforms in the Budget will deliver total savings of $530 million through to These ongoing savings are necessary so that the Government can repair the Budget and strengthen Australia s future. In some cases where a service delivered by a government body has been funded via a levy and that body is abolished or streamlined, savings from the more efficient new arrangements will ultimately be enjoyed by those who pay the levy. Some reforms will have transitional costs associated with IT system changes, staff redundancies, or costs for winding up legacy contracts. However as reforms are implemented, there will be substantial long-term benefits to taxpayers from permanent structural reductions to government overheads. Table 2: Smaller Government Savings in the Budget Smaller Government measures Year Total Source: Budget Paper No. 2. A minus sign before an estimate indicates a reduction in expenditure; no sign before an estimate indicates increased expenditure. Notes: These figures exclude savings such as those from reduced grant, loan and other programme expenses which are not directly related to operational overheads and therefore are not directly attributable to more efficient government structures. The figures in this table therefore exclude the savings that will be achieved from: 1. Abolishing grants administered by the Australian Renewable Energy Agency which total approximately $357.0 million in funding. 2. Savings for the Infrastructure Investment Programme administered by the Department of Infrastructure and Regional Development of $113.5 million from onwards. The savings included for the measure Strengthen and enhance Australia's border protection services reflect the net impact on the Australian Customs and Border Protection Service. The breakdown of these Budget savings into individual budget measures is shown at Table 3 on the following page. Further information on which government bodies are connected to particular policy measures is set out in Appendices A and B. 8

17 9 Table 3: Smaller Government Measures in the Budget Measure title (page reference for Budget Paper 2 in brackets) Portfolio Year Total Collection agencies - consolidation of back office functions (p.63) Attorney-General's Privacy and Freedom of Information functions - new arrangement (p.64) Attorney-General's Telecommunications Universal Service Management Agency - abolition and Communications transfer to the Department of Communications (p.68) Additional reductions in the number of Australian Government bodies (p.70-71) Cross-portfolio National Water Commission cessation (p.109) Environment Contestability Framework (p.116) Finance Medibank Private Limited sale (p.117) Finance Scoping studies for four operations of government (p.117) Finance Surplus Commonwealth Properties divestment (p.233) Finance Department of Foreign Affairs and Trade - realising efficiencies (p.122) Foreign Affairs and Trade Australian National Preventive Health Agency abolish (p.145) Health More Efficient Health Workforce Development (p.146) Health Strengthen and enhance Australia's border protection services (p.157) Immigration and Border Protection Australian Renewable Energy Agency cessation (p.163) Industry Unique Student Identifier - revised industry government arrangement (p.171) Industry Department of Infrastructure and Regional Development - savings (p.181) Infrastructure and Regional Development Council of Australian Governments Reform Council cessation (p.187) Prime Minister and Cabinet National Security Legislation Monitor cessation (p.187) Prime Minister and Cabinet National Competition Council Secretariat transfer (p.217) Treasury Defence Service Homes Insurance Scheme - independent scoping study (p.220) Veterans' Affairs Source: Budget Paper No. 2. Notes: Where relevant, figures include offsetting reductions in revenue. The note for table 2 marked with an asterisk () is applicable to the three measures with that same annotation above. Table 3 consists mainly of phase two initiatives but also includes some reforms that were announced as part of phase one, with their fiscal impacts recognised in the Budget.

18 While savings from rationalising some government bodies can be limited or difficult to quantify because of mergers or consolidations, the savings were never the primary reason for any of these reforms. Of equal importance the Smaller Government initiatives create more coherent and effective government structures. The importance of ongoing reform The National Commission of Audit has recommended that a large number of public bodies be subject to closer examination, with a view to making further reforms. The Abbott Government will make decisions on further reforms by the end of 2014, to ensure a thorough and wide-ranging approach to finding further opportunities to rationalise bureaucratic structures. The Smaller Government reform agenda is based upon methodical re-thinking of the Commonwealth s responsibilities from first principles. In some cases this re-assessment points to a shedding of functions (winding up some bodies, transferring functions to non-government or commercial providers, or return of responsibilities to the states and territories) and in other cases requires more efficient structures (through streamlining functions, consolidating bodies into departments, or merging bodies). Rationalising the number of Australian Government bodies will bring a number of benefits including: Reducing the number of points of entry to government, so that it is easier for the public to interact with government. Improving the effectiveness of government administration by simplifying the coordination required for cross-agency work. Achieving savings through the reduction of overheads associated with separate governance arrangements and the oversight costs of responsible departments, central agencies and integrity agencies. Reducing the number of stand-alone bodies with narrow responsibilities by merging bodies together or consolidating their roles into departments this gives government more capacity and flexibility to refocus resources on emerging pressures and priorities. Increasing career options within the public sector and reducing the costs associated with inter-agency transfers. 10

19 Implications for a smaller and more efficient Public Service The number of government bodies tells only a part of the story of the cost and growth of the public sector. Total public sector staff numbers also illustrate the growth of the Australian Government. The number of employees in the General Government Sector increased significantly over the past decade from around 217,000 in to around 257,000 in The Smaller Government reforms are the Abbott Government s solution for reducing public sector staffing levels on a basis of deliberate decisions about functions, priorities and the proper scope of Government. It is anticipated that over the four years to , the Australian Public Service will reduce by 16,500 positions. Some 14,500 of these reductions are the result of the previous Government s decisions in the Budget, in the 2013 Economic Statement and as a result of preceding decisions and policy settings. Around 2,000 are the result of decisions taken in the Budget. The Budget forecasts for the year will see total staffing in the General Government Sector return to a level around that last recorded in Excluding military personnel and reservists, staffing levels will return to a more efficient and sustainable level around that last recorded in The Abbott Government has adopted measures to better manage the 14,500 reduction in staffing levels as a result of decisions taken by the previous Government in Specifically, controls have been put in place to ensure any recruitment is well justified and funding was provided to those agencies that are facing financial strain to cover required redundancy payments and ensure that the day-to-day operations of those agencies is not compromised. Interim recruitment arrangements that the Government announced on 31 October 2013 are still continuing as a way of achieving the forecast reductions and ensuring that the size of the public service is managed based on deliberate whole-of-government choices about priorities. As part of the Smaller Government agenda, the Government will continue to identify additional areas where appropriate reductions can be achieved in the number of government bodies and related staffing levels. 11

20 POLICY FRAMEWORK Getting the policy settings right for the long term In response to recommendations of the National Commission of Audit, the Abbott Government will continue to implement reforms that transition the public sector towards leaner business-like ways of operating. To support better decision-making in future about the shape and size of government, I will release an Australian Government Governance Policy later in In developing this, the Abbott Government will consider introducing a requirement for some form of cost-benefit analysis for future proposals to create new government bodies. This will help guard against a future loss of discipline over decisions on the size and shape of government. The policy will ensure fundamental efficiency and effectiveness considerations are given proper attention. A number of policy principles recommended by the National Commission of Audit will be considered for inclusion in the policy. Some of the most significant principles that could be applied to both existing government bodies and proposals to establish new bodies include: Whether a current or proposed body performs a public function properly belonging to the Commonwealth; Whether a government body is necessary to provide the function; Whether functions can be grouped more efficiently into a small number of government bodies; Whether government bodies have the appropriate type of legal structure to achieve their purpose in the most efficient and effective manner. Too often government bodies are established on a permanent basis, when the policy problems they seek to address can be solved or moderated over the short to medium term. In such cases, creation of a public body should be a policy choice of second recourse, after consideration has been given to project-based solutions (like temporary taskforces). Where public bodies are established in such circumstances, sunsetting rules can be attached, to provide end dates or milestones for winding-up. Better policy clarity in this area will prevent the proliferation of wasteful structures, including by ensuring efficient alternatives are considered up front. 12

21 Better information on the shape and size of government Demonstrating our commitment to open and accountable administration, the Abbott Government will also put in place a publicly-searchable directory of government bodies. This will for the first time put an official number on the total of Australian Government bodies, support better management of government bodies, and will provide the community more clarity on how to find the most appropriate part of government to deal with. As well as providing greater transparency, such a list will capture information that will strengthen the future ability to continually and systemically review the nature and scope of all public bodies. 13

22 THE PROBLEMS WITH OVER-GROWN GOVERNMENT Losing count of government offshoots Information on the organisation of government is not found in any one place. Relevant sources include annual reports, the State of the Service Report; the Government Online Directory, body-specific websites and the AusGovBoards website. There are now so many different Commonwealth bodies that there is no authoritative and definitive figure. Public service heads have, in recent years, not had a current and reliable count of the number of government bodies. The last attempt to catalogue a comprehensive list of all Australian Government agencies was in Known as the List of Australian Bodies and Governance Relationships, it took an entire year to research and catalogue every Australian Government body. This last full list identified 932 bodies and governance relationships as at 1 October This included 292 departmental bodies, 47 Ministerial Councils, 54 joint Commonwealth-State bodies, 136 advisory bodies, and 118 statutory authorities and statutory committees, to name just a few of the categories of entities. The usefulness of the list was constrained by its manual collation, limited data on the responsibilities of bodies and the static nature of the data produced. No routine or automated process has since been put in place to provide updates. Beginning in late 2013, the National Commission of Audit surveyed all Commonwealth department heads, who reported over 800 bodies within their portfolios. Further research by the Commission identified a further 100 bodies beyond those that department heads were able to identify. Further research by the Department of Finance in preparation for the Budget found that at the time of the 2013 election, there were closer to 1,000 different government bodies. Chart 1 on the following page shows the breakdown of the number of bodies by policy portfolio, based upon the research of the National Commission of Audit. This analysis finds that the portfolios with the greatest number of bodies are Agriculture, Infrastructure and Regional Development, Attorney-General, Health, Industry and the Environment. 14

23 Chart 1: Estimated number of bodies following the 2013 election 120 Number of bodies Principal bodies Secondary bodies Source: Appendix to the Report of the National Commission of Audit Vol. 3, pages 129 to 175. Notes: Principal bodies are bodies connected, to varying degrees, with government policies, purposes or services which are prescribed under the Financial Management and Accountability Act 1997 or subject to the Commonwealth Authorities and Companies Act Secondary bodies are committees, councils, boards, statutory office holders, consultative bodies and working groups linked to the Australian Government. The inefficiency of small agencies The growth in the number of bureaucracies has been most noticeable among small agencies, which by their nature tend to have inefficient overheads. In the last decade, the number of Government bodies with less than 300 staff has increased by 36 per cent (from 84 to 114). Small agencies face the same governance and compliance arrangements as the larger agencies. The fixed costs and reporting obligations, when added up across the number of small agencies in the Commonwealth, represent a material overhead for government operations. A Chief Executive Officer, a Chief Financial Officer and associated support staff can easily cost half a million dollars per year, before adding scalable costs like separate IT systems, human resource costs and public relations. 15

24 These are avoidable costs for a Government that understands the need for using scarce taxpayer dollars responsibly. It can be counter-productive for small agencies to absorb the costs of a complete suite of corporate overheads and infrastructure, even if their role might otherwise justify a degree of independence. As the National Commission of Audit has noted, the need for independent decision making does not alone justify the establishment of a stand-alone operational body. It is possible for some executive officeholders to have distinctive branding and quarantined powers, but to be supported within a department or parent agency. Where a separately branded body or officeholder is hosted in a government department, this will allow them to focus more on their core business and will reduce distractions arising from generic administrative responsibilities. Accountability problems It is difficult for Ministers or parliament to have oversight of, let alone give strategic direction to, a very large number of bodies. Some bodies have been established with well-defined roles, then broadened their activities over time through regulatory creep. Others branch into new areas of focus as a result of the ambitions of their internal leadership. However well-intentioned or worthwhile, not all scope creep by government bodies is consistent with the changing policy priorities of the Australian Government, or are affordable alongside other pressures on the public purse. It is a concern to the Government that, in the current difficult fiscal environment, some bodies have escaped adequate scrutiny because of their relative obscurity within the wider scheme of government. Consolidation of bodies in areas of similar activity can enhance proper systems of oversight and lines of accountability. Boards and committees Many advisory committees have been created to address a particular policy area or issue. These committees are easy to establish but once in existence are rarely abolished and their overall benefit is rarely reviewed or assessed. They tend to remain because they foster close support from their own constituencies and have low visibility among the broader public. Every time a new board or committee is created, it brings costs to the taxpayer. The overheads include not only internal governance costs but also oversight costs for responsible departments, central agencies and integrity or oversight agencies. Parent departments often need dedicated resources just to manage the Government s relationship with boards and committees, including checking compliance with government policies and coordination of cross-agency work. 16

25 The Howard Government sought to introduce a clean framework to guard against inconsistent or poor practices in designing the governance arrangements for statutory authorities and office holders. The policy principles it adopted were based on the recommendations of the Review of Corporate Governance of Statutory Authorities and Officeholders, known after its author as the Uhrig Review. Amongst other things, the Uhrig Review principles put clarity around the circumstances where it was appropriate to establish separate statutory authorities or boards. In 2005 the Secretary of the Department of Finance issued a guidance document called Governance Arrangements for Australian Government Bodies, drawing upon the thinking of the Uhrig review. However this has lacked government policy authority, and has not been enforceable. Although the Uhrig recommendations were almost all formally agreed by the Howard Government, in practice they have not been consistently used to shape the structure of public bodies, particularly under the subsequent Government. The lack of policy clarity and rigour around the establishment of new government bodies has allowed new structures to proliferate, without regard to efficient alternatives. The Abbott Government will clarify, formalise and strengthen the policy framework. Strong disciplines will be set in place to rebalance the size and shape of government. Misuse of separate bodies for public relations purposes The previous Government lacked a clear direction about when a self-contained, separate agency is appropriate and on the most efficient way to structure the operations of government bodies. Short-term political factors have been behind some decisions to create separate entities to give visibility to key issues or public demands, even when more bureaucracy was not the most efficient way to achieve the desired policy goal. Several bodies created by the former government were intended to maintain a profile in the news media and perform a public reassurance role, but lacked meaningful powers fit for their purported purpose. Examples of this window dressing approach include the following. In 2013 the previous Government created the Asbestos Safety and Eradication Agency, consisting of fewer than 20 people. This function was already being carried out as a separately-branded office within the then Department of Education, Employment and Workplace Relations. However, the Minister responsible wanted to raise the profile of government activities in this area, so the decision was taken to create an entirely new, self-contained agency with all the extra resource and administrative costs, previously paid by the 17

26 department. There was no change in the scope of the particular activity of government, other than the addition of these overhead costs. The Australian National Preventive Health Agency was a new bureaucracy, populated with positions that already existed in the Health Department. The agency came under particular criticism for undertaking a costly study of a possible fat tax, even though there was no support for such a policy from either side of politics. Labor also created a $330,000 a year position of Petrol Commissioner. After establishing the role in 2008, the Government then abandoned the failed FuelWatch policy that was linked to the position. In July 2013 when the then Commissioner announced he would not seek reappointment, the Government scrapped the dedicated post, assigning responsibility to the ACCC Chairman. Chairman Rod Sims was scathing of the decision to fund a special petrol pricing commissioner, saying: I believe it was an unsuccessful policy. [...] We had no extra powers; we just had somebody playing an extra monitoring role, really. It, I think, gave the public a wrong understanding about the ACCC's role and what we could do. [ ] My concern was: having a Petrol Commissioner elevated expectations of what the ACCC could and could not do beyond what was possible. 1 Other case studies of over-complex government structures Appointment committees are an example of over-engineered and wasteful types of government structures, that were identified as a concern by the National Commission of Audit. For example there is a seven person Grape and Wine Research and Development Corporation Selection Committee, that was tasked with advising the Minister on appointments to the Grape and Wine Research and Development Corporation. There is also a separate Wine Australia Corporation Selection Committee for the Wine Australian Corporation, which selects candidates from the same industry. Both committees will be abolished by the Abbott Government, while the parent bodies will be merged. Advice on appointments will be sourced in future from the department, consulting within industry as appropriate. Some government bodies are grouped into overly complex arrangements that include sub-committees, working groups and other governance bodies reporting to each other. 1 Hansard, Senate Economics Committee, 20 November 2013, p

27 For example in the field of biosecurity, there is an Emergency Preparedness Working Group that reports through an Emergency Preparedness and Response Working Group, which in turn reports to a National Biosecurity Committee. In addition there is a Biosafety and Biosecurity Working Group (responsible for setting standards for laboratories, additional to other Commonwealth laboratory regulators) and an Established Pests Working Group. On top of all this, there is an Incident Communication Network, and a Biosecurity Stakeholder Consultative Group, plus a Biosecurity Information Governance Group. However worthy the functions of these various inter-connected bodies, these structures are hardly streamlined and efficient. Sometimes wasteful structures are put in place to give a tailored solution to a particular industry, even though there may be another Australian Government body well suited to the same role on an industry-neutral basis. For instance the Private Health Insurance Administration Council undertakes monitoring of competition and prudential regulation, which are roles performed by the Australian Competition and Consumer Commission and the Australian Prudential Regulation Authority respectively. Some government bodies share different responsibilities in regulating a single business process. Others have a single client relationship with another government body (for instance ComSuper and the Commonwealth Superannuation Corporation have closely intertwined operations). Such arrangements could be greatly simplified by bringing these connected organisations under a single structure, to cut the overheads imposed on taxpayers. 19

28 SUMMARY Changing the way the Australian Government does business Today taxpayers are saddled with the costs of a large number of government departments, agencies, committees, boards and other bodies. Some have overlapping responsibilities, which can result in blurred accountability and uncoordinated action. This can be confusing and costly for the community. People and businesses sometimes struggle to identify which agencies to engage with and there can be a poor customer experience when government disperses related issues across institutional boundaries leaving people to navigate between the cracks. Consolidation of bodies has occurred in a number of other sectors of the economy over past decades including among institutions such as superannuation funds, trade unions and life insurers. Although different Australian Governments have sometimes shown the mettle to undertake major policy reforms to the design of legislation or of government services, none has made major inroads into reducing the number of government bodies. The National Commission of Audit starkly illustrated the expansion in the complexity of the Australian Government by showing the growth in the Administrative Arrangements Order at different points in time over the decades. The complexity of government has become worse over time as new functions have been added. As the Australian Government now faces an outlook of fiscal deficits and constraints stretching over the coming decade, more discipline is needed on several fronts. Our structures of government are well overdue for reform and a clean up will contribute to both fiscal repair and a better focus on the delivery of outcomes. The Abbott Government will continue to pursue opportunities for a smaller and more rational government footprint because: What we do we should do well and with a clear public purpose; A lack of discipline on the shape and size of Australian Government is no longer sustainable; and Australians deserve a government that serves its interests by living within its means and taking the hard decisions to repair the budget bottom line. The Smaller Government reforms made today will strengthen Australia and prepare our country for the long term challenges before us. 20

29 APPENDIX A Abbott Government reforms announced following the election Portfolio Body Type of Body# Agriculture Agriculture Agriculture Attorney-General Attorney-General Attorney-General Attorney-General Attorney-General Attorney-General Employment Australian Animal Welfare Advisory Committee Grape and Wine Research and Development Corporation Wine Australia Corporation Independent Inspector General of Animal Welfare and Live Animal Exports Commonwealth Firearms Advisory Council International Legal Services Advisory Council International Pro Bono Advisory Group National Alternative Dispute Resolution Advisory Council National Intercountry Adoption Advisory Group National Steering Committee on Corporate Wrongdoing Centre for Workplace Leadership Advisory Group Action Taken Measure Title/Announcement Five-Year Total Secondary Cessation of the body. Prime Minister's press release of Principal Secondary Merger of the Grape and Wine Research and Development Corporation and Wine Australia Corporation to create the Australian Grape and Wine Authority. Not proceeding with the creation of the body announced by the previous Government. Minister for Agriculture's press release of 14 November Legislation passed on 13 December 2013: Grape and Wine Legislation Amendment (Australian Grape and Wine Authority) Act Mid-Year Economic and Fiscal Outlook: Independent Inspector General of Animal Welfare and Live Animal Exports - cessation. Secondary Cessation of the body. Prime Minister's press release of Secondary Cessation of the body. Prime Minister's press release of Secondary Secondary Consolidation of the body within the Attorney-General's Department. Consolidation of the body within the Attorney-General's Department. Prime Minister's press release of Prime Minister's press release of Secondary Cessation of the body. Prime Minister's press release of Secondary Cessation of the body. Prime Minister's press release of Secondary Consolidation of the body within the Department of Education. Prime Minister's press release of -4.0

30 22 Portfolio Body Type of Body# Employment Environment Office of the Fair Work Building Industry Inspectorate Antarctic Animal Ethic Committee Principal Action Taken Measure Title/Announcement Five-Year Total Cessation of the body and replacement of the body with the Australian Building and Construction Commission. Legislation introduced into Parliament on 14 November 2013: Building and Construction Industry (Improving Productivity) Bill Mid-Year Economic and Fiscal Outlook: Australian Building and Construction Commission - re-establishment. Secondary Cessation of the body. Prime Minister's press release of Environment Climate Change Authority Principal Cessation of the body and consolidation of some functions to be undertaken by the Department of Environment Mid-Year Economic and Fiscal Outlook: Repeal of the Carbon Tax - abolishing land initiatives and unnecessary bureaucracies. Environment Climate Commission Secondary Cessation of the body Mid-Year Economic and Fiscal Outlook: Repeal of the Carbon Tax - abolishing other measures. Environment National Council for Education for Sustainability Secondary Consolidation of the body within the Department of Environment. Environment National Sustainability Council Secondary Consolidation of the body within the Department of Environment. Finance Medibank Private Ltd Principal Transfer of body to the private sector. Proceeds will be reinvested in productive economic infrastructure. Finance Foreign Affairs and Trade Procurement Consultative Committee Australian Agency for International Development (AusAID) Prime Minister's press release of Prime Minister's press release of Government - Medibank Private Limited - sale. Secondary Cessation of the body. Ministerial decision communicated to stakeholders on 3 February Principal Consolidation of the body within the Department of Foreign Affairs and Trade. Administrative Arrangement Orders of 18 September Government - Department of sale costs. Proceeds not for publication

31 Health Health Industry Portfolio Body Type of Body# Advisory Panel on the Marketing in Australia of Infant Formula Pharmaceutical Benefits Pricing Authority Department of Resources, Energy and Tourism Action Taken Measure Title/Announcement Five-Year Total Foreign Affairs and Trade - realising efficiencies. Secondary Cessation of the body. Prime Minister's press release of Secondary Cessation of the body. Pharmaceutical Benefits Scheme online news statement of March Principal Consolidation of the functions of the body into the Department of Industry. Industry Pulp and Paper Advisory Group Secondary Merger of the body into the Manufacturing Leaders Group. Infrastructure and Regional Development Infrastructure and Regional Development Infrastructure and Regional Development Prime Minister and Cabinet Prime Minister and Cabinet Prime Minister and Cabinet Department of Regional Australia, Local Government, Arts and Sport (DRALGAS) High Speed Rail Advisory Group Maritime Workforce Development Forum Coordinator General for Remote Indigenous Services National Policy Commission on Indigenous Housing Principal Consolidation of the functions of the Department of Regional Australia, Local Government, Arts and Sport into other Portfolio Departments. Administrative Arrangement Orders of 18 September Prime Minister's press release of Administrative Arrangement Orders of 18 September Government - Department of Infrastructure and Regional Development Savings. Secondary Cessation of the body. Prime Minister's press release of Secondary Cessation of the body. Prime Minister's press release of Secondary Cessation of the body Mid-Year Economic and Fiscal Outlook: Coordinator-General for Remote Indigenous Services cessation Secondary Merger of the body into the Prime Minister's Indigenous Advisory Council. Prime Minister's press release of Social Inclusion Board Secondary Cessation of the body. Prime Minister's press release of 23 September (^) -7.1

32 Portfolio Body Type of Body# Social Services Social Services Aged Care Standards and Accreditation Agency Ltd National Children and Family Roundtable Principal Secondary Action Taken Measure Title/Announcement Five-Year Total Cessation of the body and replacement of the body with the Australian Aged Care Quality Agency. Merger of the body into the Social Services Ministerial Advisory Council. Department of Health's online news statement of 24 December Prime Minister's press release of Social Services National Gambling Regulator Secondary Cessation of the body Mid-Year Economic and Fiscal Outlook: National Gambling Regulator - cessation. Social Services Treasury Treasury Prime Minister's Council on Homelessness Advisory Panel on Positive Ageing Australian Charities and Notfor-profits Commission Secondary Merger of the body into the Social Services Ministerial Advisory Council. Prime Minister's press release of Secondary Cessation of the body. Prime Minister's press release of Principal Cessation of the body, with some functions to be continued by other regulatory bodies. Minister for Social Services' press release of 19 March Legislation is currently in Parliament - Australian Charities and Not-for-profits Commission (Repeal) (No. 1) Bill Treasury Australian Valuation Office Secondary Cessation of the body Parliamentary Secretary to the Treasurer s media release of 24 January Treasury Clean Energy Finance Principal Cessation of the body Mid-Year Economic and Corporation Fiscal Outlook: Repeal of the Carbon Tax abolishing other measures. Treasury Energy Security Council Secondary Cessation of the body Mid-Year Economic and Fiscal Outlook: Repeal of the Carbon Tax - abolishing land initiatives and unnecessary bureaucracies. Treasury Insurance Reform Advisory Group Secondary Cessation of the body. Prime Minister's press release of

33 Portfolio Body Type of Body# Treasury National Housing Supply Council Action Taken Measure Title/Announcement Five-Year Total Secondary Cessation of the body. Prime Minister's press release of Source: Figures for Mid-Year Economic and Fiscal Outlook measures as published in the Mid-Year Economic and Fiscal Outlook. A minus sign before an estimate indicates a reduction in expenditure, no sign before an estimate indicates increased expenditure. Notes: # Principal bodies are bodies connected, to varying degrees, with government policies, purposes or services which are prescribed under the Financial Management and Accountability Act 1997 or subject to the Commonwealth Authorities and Companies Act Secondary bodies are committees, councils, boards, statutory office holders, consultative bodies and working groups linked to the Australian Government. Cessations shown here do not include the former Department of Education, Employment and Workplace Relations, which was replaced in September 2013 Machinery of Government changes. This is because this super department was split into two new departments. ^ These figures exclude savings such as those from reduced grant, loan and other programme expenses which are not directly related to operational overheads and therefore are not directly attributable to more efficient government structures. The figures in tables 2 and 3 therefore exclude the savings for the Infrastructure Investment Programme administered by the Department of Infrastructure and Regional Development of $113.5 million from onwards. + Forecast losses for the Australian Valuation Office (AVO) in prior to the decision on abolition were approximately $4 million. If it continued operations, forecast losses would worsen as AVO revenue declines sharply due to technological changes and decreased demand for the AVO s services. Not quantified. Nil.

34 APPENDIX B Smaller government and related budget measures announced in the Budget Agriculture Action Taken Measure Title/ Announcement Five-Year Portfolio Body Type of Body # Total Abalone Aquaculture Health Accreditation Workshop Agriculture AQUAPLAN Working Group Secondary Merger of the body with the Aquaculture Committee. Agriculture Agriculture Agriculture Australian Weeds Committee Biosafety and Biosecurity Working Group Established Pests and Diseases Working Group Grape and Wine Research and Development Selection Committee Wine Australia Corporation Selection Committee Secondary Cessation of the body. Government - additional reductions in the number of Australian Government bodies. Secondary Secondary Secondary Merger of the body with the National Biosecurity Committee. Consolidate the functions within the Department of Agriculture. Consolidate the functions within the Department of Agriculture. Government - additional reductions in the number of Australian Government bodies. Government - additional reductions in the number of Australian Government bodies.. Government - additional reductions in the number of Australian Government bodies. Government - additional reductions in the number of Australian Government bodies. ~ ~ ~ ~ ~ 26

35 Action Taken Measure Title/ Announcement Five-Year Portfolio Body Type of Body # Total Attorney-General s Attorney-General s Communications Cross-Portfolio Cross-Portfolio National Archives of Australia National Film and Sound Archive National Gallery of Australia National Library of Australia National Museum of Australia National Portrait Gallery of Australia Old Parliament House Office of the Australian Information Commissioner Telecommunications Universal Service Management Agency Administrative Appeals Tribunal Social Security Appeals Tribunal Classification Review Board Migration Review Tribunal and Refugee Review Tribunal Council of Australian Governments (COAG) Reform Council Principal Principal Principal Principal and Secondary Secondary Consolidation of corporate backoffice functions of seven Canberrabased arts and archive agencies. Merger of the body with the Australian Human Rights Commission, Administrative Appeals Tribunal, Commonwealth Ombudsman and the Attorney- General's Department. Consolidation of the functions of the body within the Department of Communications. Any savings will be reflected in levies payable by the telecommunications industry. Merger of five tribunals (four bodies) to create a single merit review tribunal. Cessation of the body, with some functions to be undertaken by the Productivity Commission and the Department of the Prime Minister and Cabinet. Government - collection agencies - consolidation of back office functions. Government - Privacy and Freedom of Information functions - new arrangements. Government - Telecommunications Universal Service Management Agency - abolition and transfer to the Department of Communications. Government - additional reductions in the number of Australian Government bodies. Government - Council of Australian Governments Reform Council - cessation ~ -8.3

36 Defence Action Taken Measure Title/ Announcement Five-Year Portfolio Body Type of Body # Total Defence Service Homes Insurance Scheme Secondary Scoping study to review the business operations and financial performance of the Defence Service Homes Insurance Scheme, and recommend options for the future management and ownership of the Scheme. Environment National Water Commission Principal Cessation of the body, with some functions to be undertaken the Department of Environment and other government bodies. Finance Finance Albury-Wodonga Development Corporation Australian Hearing Services (trading as Australian Hearing) Royal Australian Mint Defence Housing Australia Registry functions of Australian Securities and Investments Commission (ASIC) Government - Defence Service Homes Insurance Scheme - independent scoping study. Government - National Water Commission - cessation. Principal Cessation of the body. Government - additional reductions in the number of Australian Government bodies. Principal Scoping study to determine readiness for transfer to the private sector. Scoping study to determine future of ASIC's registry functions. Government - scoping studies for four operations of government ~ 11.7 Finance Australian River Company Ltd Principal Cessation of the body. Government - additional reductions in the number of Australian Government bodies. Finance ComSuper Principal Merger of ComSuper into the Commonwealth Superannuation Corporation. Health Australian National Preventive Health Agency Principal Consolidation of the functions of the body into the Department of Health. Government - additional reductions in the number of Australian Government bodies. Government - Australian National Preventive Health Agency - abolish. ~ ~

37 Health Action Taken Measure Title/ Announcement Five-Year Portfolio Body Type of Body # Total Australian Organ and Tissue Donation and Transplantation Authority National Blood Authority Principal Merge the National Blood Authority with the Australian Organ and Tissue Donation and Transplantation Authority. Health Australian Sports Commission Principal Consolidation of the corporate, business support and grant management functions within the Department of Health. Health Health Australian Commission on Safety and Quality in Health Care Australian Institute of Health and Welfare Independent Hospitals Pricing Authority National Health Funding Body National Health Funding Pool Administrator National Health Performance Authority General Practice Education and Training Ltd Principal and Secondary Principal Consultation with the states and territories on the merger of six Health bodies to create a single Health Productivity and Performance Commission. Consolidation of the functions of the body into the Department of Health. Health Health Workforce Australia Principal Consolidation of the functions of the body into the Department of Health. Health Private Health Insurance Administration Council Principal Merger of price monitoring functions into the Australian Competition and Consumer Commission, and health fund prudential regulation functions to the Australian Prudential Regulation Authority. Government - additional reductions in the number of Australian Government bodies Budget: Australian Sports Commission - redirection. Government - additional reductions in the number of Australian Government bodies Budget: Rebuilding general practice education and training to deliver more GPs. Government - More Efficient Health Workforce Development. Government - additional reductions in the number of Australian Government bodies. ~ ~ ~

38 Health Action Taken Measure Title/ Announcement Five-Year Portfolio Body Type of Body # Total Immigration and Border Protection Industry Industry Prime Minister and Cabinet Prime Minister and Cabinet Treasury Treasury Private Health Insurance Ombudsman Australian Customs and Border Protection Service Australian Renewable Energy Agency Unique Student Identifier Authority Office of the Independent National Security Legislation Monitor Prime Minister's Indigenous Business Policy Advisory Group Brisbane Cross River Rail and Melbourne Metro Projects Advisory Board Corporations and Markets Advisory Committee (CAMAC) Principal Principal Principal Secondary Merge the Private Health Insurance Ombudsman into the Office of the Commonwealth Ombudsman. Any savings will be reflected in levies payable by the insurance industry Consolidate the functions of the Australian Customs and Border Protection Service within the Department of Immigration and Border Protection. Cessation of the body, with some functions undertaken by the Department of Industry. Not proceeding with the creation of the body announced by the previous Government. Savings returned to a related program. Government - additional reductions in the number of Australian Government bodies. Government - strengthen and enhance Australia's border protection services. Government - Australian Renewable Energy Agency - cessation. Government - Unique Student Identifier - revised governance arrangement Secondary Cessation of the body. Government - National Security Legislation Monitor - cessation. Secondary Cessation of the body. Government - additional reductions in the number of Australian Government bodies. Secondary Not proceeding with the creation of the body announced by the previous Government Budget: Brisbane Cross River Rail and Melbourne Metro Projects Advisory Board - cessation Principal Cessation of the body. Government - additional reductions in the number of Australian Government bodies. ~ (^) ~ -1.6 ~ 30

39 Action Taken Measure Title/ Announcement Five-Year Portfolio Body Type of Body # Total Treasury CAMAC Legal Committee Secondary Cessation of the body. Government - additional reductions in the number of Australian Government bodies. Treasury National Competition Council Secretariat Secondary Merger of the Secretariat into the Australian Competition and Consumer Commission. The National Competition Council will continue as a separate body. Government - National Competition Council Secretariat - transfer. Source: Budget Paper No. 2. A minus sign before an estimate indicates a reduction in expenditure, no sign before an estimate indicates increased expenditure. ~ -3.6 # Principal bodies are bodies connected, to varying degrees, with government policies, purposes or services which are prescribed under the Financial Management and Accountability Act 1997 or subject to the Commonwealth Authorities and Companies Act Secondary bodies are committees, councils, boards, statutory office holders, consultative bodies and working groups linked to the Australian Government. Notes: ^ These figures exclude savings such as those from reduced grant, loan and other programme expenses which are not directly related to operational overheads and therefore are not directly attributable to more efficient government structures. The figures in Tables 2 and 3 therefore exclude the savings that will be achieved from Abolishing grants administered by the Australian Renewable Energy Agency which total approximately $357.0 million in funding. ~ These bodies are part of the measure Smaller Government additional reductions in the number of Australian Government bodies, which provides savings of $19.4 million over five years. Nil.