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1. Introduction

This Second Phase Report of the National Commission of Audit examines government efficiency and effectiveness in detail. In accordance with its Terms of Reference it builds on the theme of responsible government and focuses on infrastructure and public sector performance, productivity and accountability.

The Phase Two Report addresses the question of what should be done to improve the structure and operation of the Australian Public Service and how to better evaluate the effectiveness of government programmes and agencies.

The Commission’s Phase One Report highlighted the legitimate role for government in Australia and also the challenges to create a sustainable budget.

To meet them, governments must reorganise and reprioritise what they do and how they do it. They must stop doing things that do not work or are less important.

Arrangements need to be simplified and the public service must remain accountable within a framework of ministerial responsibility.

This is consistent with the Principles of Good Government the Commission outlined in its First Phase Report. The Principles are repeated below.

Given the Commonwealth annually manages some $410 billion of expenditure, it is essential that there are sound processes and good information about what government plans to spend, what it actually spends and, critically, what it achieves from this spending.

Consistent with its Terms of Reference, the Commission has focussed on the spending side of the Budget and has not examined tax issues in detail. As outlined in the Phase One Report, the Government has committed to consult the community to produce a comprehensive Taxation White Paper with all aspects of the tax system ‘on the table’. This will provide an important opportunity to improve the tax system and examine existing tax concessions and ‘tax expenditures’.

Current Commonwealth arrangements have a strong focus on financial accountability but there is insufficient attention to whether programme objectives are being achieved.

The Commission’s Terms of Reference ask it to identify options for continuous assessment of programmes and agencies as well as better performance metrics and improved financial performance targets.

The public service plays a major role in this. Where the government’s priorities are clear, departments and agencies are better placed to design and implement programmes and policies that deliver its agenda efficiently and effectively.

The arrangements that support the public service – including the Australian Public Service Commission, the Public Service Act and relevant legislative and governance requirements – should support a culture that delivers high performance and results.

Likewise, the Australian National Audit Office can accomplish more.

The Commission’s Terms of Reference also ask it to examine the extent, condition and adequacy of Commonwealth infrastructure, identify factors that may have contributed to the current situation and report on possible remedies.

The discussion of this issue, outlined below, has significant overlap with many aspects of the Commission’s Phase One Report particularly in relation to the Commonwealth balance sheet and the operation of the Federation.

A number of other issues initially raised there are further developed below including an assessment of grant programmes, rationalisation of Commonwealth agencies, boards and committees and options to reform and rationalise other spending programmes.

Principles of Good Government re-stated

  1. Live within your means. All government spending should be assessed on the basis of its long-term cost and effectiveness and the sustainability of the nation’s long-term finances.
  2. Harness the benefits of the Federation but demand a responsible Federation. The Commonwealth’s activities should be guided by the Constitution. The States and Territories should be free to compete amongst themselves, respecting the regional differences of a big continent. However, there will be occasions where the national interest calls for a cooperative and national approach.
  3. Protect the truly disadvantaged. Government should protect the truly disadvantaged and target public assistance to those most in need.
  4. Respect personal responsibility and choice. Government should not and cannot eliminate or insure every risk to the community. Personal responsibility and choice are fundamental to our democratic system.
  5. Assure value for taxpayers’ money and ministerial responsibility. Governments spend taxpayers’ money not the government’s money. They must assure value across all expenditure and constantly strive to improve productivity and eliminate waste. All programmes should be regularly assessed for effectiveness against their stated goals and outcomes. Ministerial responsibility is imperative and departments should be the primary source of policy advice.
  6. Be transparent and honest. Transparency and honesty are fundamental to accountability. Government policy goals and programme outcomes must be transparent. Transparency in government will better illuminate the choices we face and the decisions needed for the overall good of the nation. Spending on lower priorities, however popular at the time, needs to be resisted.
  7. Reduce complexity. Government should reduce complexity which impacts on its own operations, the operations of the States and Territories and the activities of the community and business. Reporting requirements should be kept to a minimum.
  8. Avoid regulation as a first response to a problem. Adding new regulations to deal with problems should be the last resort and introduced only when existing laws prove inadequate and the risks of no regulation outweigh the costs to the community.
  9. Act in the public interest and recognise the benefits of markets. In competitive markets, customers, not producers, take precedence. Competition and contestability drive lower costs, improve quality and give people what they want. Government should act in the public interest and only intervene in markets where market solutions fail to produce the best outcome for the nation as a whole.
  10. Do not deliver services if others are better placed to do it. The delivery of public services should, wherever practicable, be handed to those organisations and levels of government closest to those receiving the service and should not be duplicated.