STATEMENT TO PARLIAMENT BY THE PRIME MINISTER
ON PUBLIC SERVICE REFORMS
SEPTEMBER 1986
Today I wish to announce a range of decisions taken by the
Government to give'effect to our commitment to improve the
efficiency of the public sector.
These decisions are an essential part of the restructuring
of the Australian economy which has been made necessary by
the decline of international commodity prices and their
consequent effects on our economic circumstances. That
restructuring must involve all sectors of the Australian
economy including the public sector.
No modern economy trading in world markets can survive
without a strong integrated Public Service, capable of
assisting and facilitating industries to achieve national
economic objectives. The Australian Public Service must be
able to take its place in the rebuilding of our
manufacturing and industrial sectors required by Australia's
present economic and social circumstances and our national
aspirations.
A vital ingredient of this process is that Public Service
management must also improve. I have spent a good deal of
time in recent months, not infrequently in blunt terms,
exhorting Australia's private sector managers to improve, to
do better. Government expects the same of its own managers..
The Public Service has, in many ways, reflected the easy
going ' she'll-be-right-mate', management and work style of
the lucky Australia of the 60s and 70s. we can afford this
no longer.
Through its 1984 reforms, the Government has provided
considerable flexibility, independence and professional
opportunities to its senior management. It now expects to
receive a return on that investment. It expects the powers
given to departmental Secretaries in respect of
non-performing staff to be used. It expects its most senior
management to take a tough, hard nosed look-at performance
at all levels of the Public Service. It looks to senior
management to take tough decisions about public servants who
are not performing.
Yesterday the Government started a process between employers
and unions in the private sector to examine management
practices and work practices which are constraining
Australia's competitiveness. That process, which is now
underway in the private sector, must be matched in the
public sectcr.
It is a simple fact that, in common with many other
industries, the Public Service has traditionally enjoyed
work practices that the country can no longer afford.
Whilst Government has taken some positive steps already,
much more is required to be done.
I would ash public servants particularly to understand this.
The Government is keenly aware of the cynicism which exists
within and without the Public Service about this sort of
exercise. The Public Service has been subjected,
particularly by our predecessors, to a series of exercises
aimed at cheap political advantage by maligning public
servants, which has generated a good deal of uncertainty and
hardship, and some animus, but which has achieved nothing.
I would ask that such cynicism be put aside. This is not a
Public Service bashing exercise. It is not a negative
exercise. It is about making a good Public Service even
better. And that is about building a better Australia.
Those who work for Government must in turn make Government
work as efficiently as possible for Australia.
many employment groups around the country are making choices
between traditional practices and future economic
prosperity. Neatly all are choosing the latter and those
who argue -or the former do so at great personal cost.
Those who work for Government now face the same choice; I
have faith they will have the wisdom to make the same
positive aecision.
Madam Speaker
The Government has decided:
First, to establish an efficiency scrutiny unit, to be
headed by a senior private sector representative to
underta~ ce an extensive program of scrutiny of public
sector operations.
Secon: S, departments and agencies will, in future be
required to cut their administrative expenses each year
for on-going activities and, Madam Speaker, they will be
required to declare the savings so that the Government
of the day can decide how they can best be utilised.
Third, there will be major changes in the arrangements
for the redeployment or retrenchment of inefficient and
surplus staff. Special protection will be retained
against political victimisation. But inefficient public
servants will be treated the same way as are inefficient
workers in the private sector. In short, public
servan~ s are no longer immune from dismissal.
Fourth, the Government will proceed within a few months
to simp~ lify and integrate the complex job classification
distinctions which currently exist in the Public Service
office structure. New technology has made these
distinctions obsolete. The review might well become the
largest single restructuring of occupations in the
Public Service ever undertaken.
Fifth, there will be a number of management changes
designed to make public service personnel management
more e~ ficient and effective.
Sixth, flextime will be reviewed, with the objective of
eliminating abuses but maintaining the advantages of the
system for both departments and employees.
These changes mean that Government will be making less
demand on the public purse, which in turn means that the
taxpayers will be saving more. At a time when the
Government is being called upon to perform greater services
for some sections of the community this means, simply, doing
more with less. it means that those working in Government
now face the same challenge as their colleagues in the
private sector : working harder, working smarter, and giving
greater value for money.
I now turn to explain the changes in detail.
EFFICIENCY SCRUTINY UNIT
The Department of' Finance and the Public Service Board
already administer a number of programs designed to bring
about improvements in the management of all Departments and
agencies. But the Gcv~ rnment sees value in a further initiative to
encourage improvements in the management and administrative
procedures in much of the public sector. It will do this by
establishing an Efficiency Scrutiny Unit, similar to that
which has eXisted in the United Kingdom since 1979 initially
headed by Sir Derek Rayner. The key elements of its
operations will be as follows:
A small unit of up to seven people will be established
under a senior private sector representative to oversee
an extensive program to scrutinise selected areas of
public sector administration. There may be additional
private sector members of the Unit, and the remainder
will be drawn from within existing Public Service
resources. The Unit will operate for a finite period of
three y'ears;
The Head of the unit will report directly to me and,.
through Lie, to the Expenditure Review Committee of
Cabinet, The Unit will have responsibility, in
consultation with the relevant Departments and agencies,
for advising us on the terms of reference and
methodolcgy for the scrutinies, for monitoring their
conduct, and for advising on subsequent recommendations
and their implementation;
The scrutinies will be carried out by staff of the
relevant Departments and agencies, and their ministers
will be involved at all stages of the process. The
scrutinies will be co-operative ventures. The detailed
procedures, and an initial program, will be settled in
consultations between Ministers, senior* Department
officials and the Unit. I expect the Unit to be fully
operational by early 1987;
Each scrutiny will take place over a maximum of around
three months and action to implement their findings will
be expected to be completed within 12 months or in many
cases less;
In order to provide an incentive for Departments and
agencies to co-operate fully in the scrutinies, they
will he entitled to retain 25 per cent of the savings
achieved for staff development, acquisition of improved
technology and other means of further enhancing
efficiency and improving productivity.
I am pleased to announce that the Efficiency Scrutiny Unit
will be hoaded by Mr David Block, A. O. who has had a wealth
of experience in the financial sector. Mr Block is
currently a strategic adviser to Coopers and Lybrand, is a
member of the Board of CSR and Chairman or Director of a
number of other public companies. He is the Chairman of the
Sydney Opera House Trust and a fellow of the University of
Sydney, and was formerly a member of the Mathews Committee
of Inquiry into Inflation and Taxation.
we would expect the greater efficiency achieved by this
innovation t1o be reflected in savings to the taxpayer.
Indeed in the case of the United Kingdom Scrutiny Program,
it is now estimated that over a seven year period aggregate
savings of approximately 900 million pounds have been
achieved, with annual running costs in the civil service now
some 300 nillion pounds ( or 2.3 per. cent) less than they
otherwise would have been.
Above all, the decision to establish the Efficiency Scrutiny
Unit is a recognition that the present economic climate
requires the public sector to review systematically and in a
quite func~ aLental way, its management and administrative
procedures, having regard to best private sector practice.
OTHER MEASURES TO ENHANCE FINANCIAL EFFICIENCY
In addition to the establishment of the Efficiency Scrutiny
Unit, the Gcvernment is also to adopt a range of other
measures to enhance efficiency, building upon previous
initiatives in the Financial Management Improvement Program,
Program Budcgeting and the Performance Management Review
Programs. First; to encourage more economical and efficient use ' of
funds provided to them, Departments and agencies will be
permitted, in effect, to carry over unused administrative
funds from one year to the next, subject to a limit on the
amount of carryover. This will remove the incentive to try
to spend all remaining funds at the end of each financial
year, and should result in a more rational and efficient
allocation of resources. Departments and agencies also will
be given greater freedom to move funds between their
Salaries and Administrative Expenses votes, where this would
lead to greater efficiency.
Second, a series of studies is underway to determine the
scope for extending user-charging between Departments, as an
incentive to greater economy in the use Of goods and
services.
Third, the Government will in future require efficiency
improvements to be reflected substantially in reduced
demands on taxpayers' resources. In the past, resources
freed by improvements in efficiency have usually been
retained by Departments and agencies to improve the quality
of services, to provide new services, or to improve working
conditions. The Government of the day has not always been
in a position to consider the most appropriate use of the
funds. In future the Government will specify how these
freed resources are to be used.
As part of this process, Departments and agencies will be
required to achieve real reductions in the running costs of
on-going activities something like the payment of an
efficiency dividend of which the Australian taxpayer will be
the ultimate recipient. They will be required to reduce the
real level of resources directed to administer existing
activities by an average 1 per cent each year over the next
three years, starting in 1987-88.
The Governmeont expects the scrutiny process will be a
considerablo aid to departmental managers in achieving the
dividend required, and in identifying opportunities for
greater efficiency in terms of their own priorities.
The " effici-ency dividend" requirement reflects the
Government's view that the benefits of previous measures to
improve efficiency and productivity can and should lead to
lower costs.
Particularly in the improved managerial environment being
developed, all government agencies should be able to make
continuing efficiency gains by improving their
administrative procedures, making better use of improvements
in technoloC~ y and in the use of human resources.
Account wfll. continue to be taken of changing resource
requirements resulting from changed workloads and functions.
As well, n~ ajor investments in new technology will be
required to achieve improvements in efficiency over and
above the " efficiency dividend".
THE SIZE 0? THE PUBLIC SERVICE
As an initial step in reaping the benefits of past
efficiency improvements, the Government has also acted in
this year's Budget. to realise a general saving of 0.5 per
cent in average staffing levels of departments and agencies.
As already announced in the Budget, as a result of these
processes and some specific staffing decisions, average
staffing levels for 1986-87 will rise by only 0.3 per cent
above the average level for 1985-86, excluding the effects
of the Census and the additional component for youth
trainees. This outcome will continue the moderation of the
growth in staff numbers which has already been reduced
steadily from about 4.5 per cent in 1983-84 to 1.2 per cent
in 1985-86. During the course of 1986-87 there will be a
resultant decline of some 2,000 in the number of public
servants. As Departments and agencies submit staffing plans which
indicate how this reduction is to be achieved, the staffing
freeze announced on 30 June is being progressively lifted.
Agencies, other than those few approved for growth, have
been informed that their plans should generally assume a
further one per cent reduction in staffing in 1987-88.
It is not correct, as some critics have suggested, that
Australia has a special problem in relation to the numbers
of its public servants. The latest ABS statistics indicate
that employment in general government activities as a
proportion of total employment in Australia is about the
OECD average. The Australian Public Service constitutes
only about 15 per cent of general Commonwealth, State and
Local Govornment employment. Nevertheless, it is essential
that its numbers be held to the minimum required to carry
out Government programs efficiently and equitably.
The measurces which I have outlined represent a series of
initiatives for on-going improvements in efficiency. They
are intended to slow down and then reverse the previously
inexorable growth in the resources used in public
administration. CHANGES IN DEALING WITH INEFFICIENT AND SURPLUS STAFF
The Government has decided to make important changes to
personnel aianagement practices to ensure that public sector
managers are not unnecessarily constrained, while ensuring
proper protection for staff against unfair treatment.
Public servants have the right to be protected against
arbitrary or unfair dismissal. But they do not have the
right to continued employment where there is no real wor~ k
for them to do, or where they are not performing
satisfactorily. The exist,' ng arrangements for redeploying and retiring staff
for whom there is insufficient work, or who are working well
below standard, are complex, slow and ineffective.
This state of affairs is unacceptable to the Government.
The measures being announced today will rationalise
significantly these arrangements.
Legislative Changes
The CE( RR) Act has not provided a satisfactory basis for
the redeployment and retirement of staff. It is
unnecessarily complex; it does not provide for
voluntary retrenchment; it provides too many stages of
appeal; its potential for providing a Commonwealth
employment wide redeployment system has not been
realised; it requires redeployment to be considered in
cases where this is manifestly inappropriate, as in some
inefficiency cases.
There is no good reason for matters of redundancy,
ineffliciency and invalidity to be dealt with in
legislation separate from that covering other aspects of
personnel management. we will, therefore, repeal the
CE( RR) Act. Streamlined provisions for redeployment and
retirement will be included in the Public Service Act,
and we will pursue discussions with the public service
union~ s on complementary changes in industrial awards.
The Public Service Act will be amended to give the
Public Service Board a general power to transfer staff
withih the Public Service in the interests of the
efficient management of the Service. The Board will
also have power to transfer staff automatically to
another Commonwealth body where there is an agreed
transfer of functions from the Public Service to that
body.
( ii) Inefficient Staff
The present processes for dealing with inefficient staff
are cum,-bersome and lengthy, and they discourage Public
Service managers from acting other than in the most
blatant cases. These processes are to be revised so
that, viiile the employee is protected both from
arbitrary and politically-motivated dismissal, it will
be possible for management to move quickly to remove an
inefficient employee.
The Secretary of a Department will be able to retire
staff from the Service when, after they have been warned
and given an opportunity to improve their performance,
the Secretary is satisfied that they have remained
ineff-' ient. This will be done after the possibilities
o~ f tronsfer to another job, or of reduction in status,
have been considered. The various appeal processes that
are now available have been consolidated into a single
appeal right, which will protect staff against
victimisation. It is essential in the public sector to protect staff
against loss of jobs on political grounds if a
non-partisan Public Service is to be maintained, and
thus it is essential to maintain a formal appeal
mechanism. Apart from this, processes to deal with
inefficiency will be comparable to the normal personnel
practices pursued by better-managed large employers in
the private sector.
managers will also have greater powers to defer the
payments of annual increments to staff not performing
satisfactorily, and discipline practices will also be
streamlined. Details will be provided when the
legislation is introduced.
( iii) Surplus Staff
When Public Service units or functions are abolished or
reduced in size, this may result in a situation where
there are surplus staff for whom no new placements are
readily available. The present arrangements for
redeploying or retiring such staff are extremely
lengthy. They contain a number of appeal points, and
they may result in long periods when staff are
underemployed. Existing awards provide for a union veto
on " fast track" voluntary retirements.
while many * of these arrangements were introduced to
protect staff from arbitrary dismissal, the Government
believes that adequate protection can still be provided,
while greatly streamlining and simplifying these
procpsses, and reducing the cost to the taxpayer.
where a staff surplus is likely to arise, discussions
will be held between the relevant Department Secretary
and union representatives. After considering possible
redeployment to other positions at the same level, staff
with poor redeployment prospec * ts will be offered, with
Public Service Board approval, a lump sum termination
benefit ( similar to that recently paid to Department of
Defence personnel in defence factories) if they agree to
voluntary retrenchment. Thus it is expected that
redundancy situations can be resolved within about two
months, as compared with a year or more under the
present procedures.
Effor-ts will continue to be made to place any surplus
staff who do not opt for voluntary retrenchment, but
their period of entitlement to income maintenance
( either six or twelve months) will begin from the date
of the voluntary offer. Staff leaving the Public
Service during this period will no longer be entitled,
as at present, to such income maintenance. Where
efforts to redeploy surplus staff at the same level are
unsuccessful, they will be redeployed to a lower level
or retrenched. Unlike the present system of multiple
appeals, this will be the only point at which ani appeal
can be lodged on the grounds that the decision was
unreasonable.
( iv) Invalidity
The Government is concerned about the incidence of
invalidity retirement under the Commonwealth
Superannuation Scheme. The processes applying to
invalidity retirement need to ensure that hardships are
not created for incapacitated staff, who have urgent
need for income support. But they should at the same
time encourage the development of good occupational
health practices, which could avert some of the
invalidity retirements that now occur, and discourage
both management and staff from accepting too readily an
invalidity retirement rather than continued employment.
on 17 April this year the Minister for Finance
foreshadowed the adoption of a number of measures
desi gned to contain the rate of invalidity retirements
and related costs to the Commonwealth. The Government
has decided to introduce a number of these measures.
Secretaries of Departments, with the Public Service
Board, will retain powers to retire staff on invalidity
grounds and Secretaries will also have the power to
transfer them to other duties, including at a lower
classification. The Board may also use its powers to
transfer such staff to another Department. Furthermore,
in future, invalidity pensioners under the Commonwealth
Superannuation Scheme are to be required to report any
employment, and pensions will be adjusted where annual
earnings exceed limits to be prescribed. The extensive
procoesses related to invalidity retirement will also be
simplified.
Provisions for invalidity retirement for Statutory
Authorities will be considered for amendment to make
them consistent with Public Service Act provisions. In
the rtian time, Ministers will require authorities within
their oortfolio responsibilitibs to take rigorous steps
to contain invalidity retirements.
OTHER CEHAWGES IN PERSONNEL MANAGEMENT
Promo -ions
Promotions in the Public Service are based on merit, and
there is no longer any reference to seniority in the
Public Service Act. The promotions system is designed
to select the best person for a vacancy, and to ensure
that decisions made are patently fair.
It is important that merit and fairness remain paramount
consicicrations but, within these parameters, the
Governent has decided that the promotion and associated
appea. systems are unnecessarily lengthy, costly and
rest:. Ictive.
The Government has decided that measures must be taken
to reduce the costs and time involved in awarding
promotions. In the 1984 reforms selection criteria were
altered, and promotion appeals were abolished for the
Senior Executive Service on the grounds that these were
managerial positions where a right of appeal was
consfidered inappropriate. Appeals will now be abolished
against promotions to positions above
Cler4 ' cal/ Administrative Class 8 ( and equivalent grades
in other occupations). The Government considers that
these positions are also largely managerial and thus
appeal rights are also inappropriate. This fits in with
current practices such as the overtime barrier which
distinguish these positions from lower level positions.
Instead there will be access to a grievance review under
the Merit Protection and Review Agency, which will have
the powier to recommend the annulment of the promotion by
the Secretary if it finds that proper procedures have
not been followed, or the decision has been
discriminatory or one of patronage. The relevant
provisions defining these circumstances will be
strengthened. For grades below this level appeals processes will be
significantly streamlined. Promotion Appeal Committees
will be able to disregard frivolous or vexatious
appeals, to undertake a level of enquiry appropriate to
each case and to require parties to submit documentation
by a specifipd time. The appeal period will be reduced,
and the right of appeal will be limited to those who had
originally applied for the job. Currently the appeal
system acts more as a dual selection system with appeals
availsible to all lower ranked officers whether or not
they applied for the position involved.
Greater use, at first for a trial period of twelve
months, will be made of Joint Selection Committees
chaired by nominees of the Merit Protection and Review
Agency for bulk promotions. Th ' ere will be no appeals
against promotions where decisions are unanimous and
where the Secretary accepts the advice of these
committees. The definition of efficiency in the Public Service Act
will be broadened to allow managers to take into account
the potential of staff for future development, and their
capability to perform a variety of jobs at the same
level when deciding on promotions. This will enable
more realistic promotion decisions, and greater
management flexibility in the deployment of staff.
Other elements of the selection process will also be
streamlined, and selection decisions will be excluded
from the requirement to formally state reasons under
section 1.3 of the Administrative Decisions ( judicial
Review) Act.
At the request of the Government, the Chairman of the
Public Service Board has written to all Secretaries of
Departments and Heads of Statutory Authorities
indicating the Government's grave concern at the
inefficiencies resulting from delays currently occurring
in the appointment process, and that Departments and
agencies are expected to improve significantly their
performance in this area, to reduce within six months
the average time for appointments by half.
( ii) Higher Duties
The Government recognises that Departments and agencies
need to fill positions on a temporary basis. But it
believes that many of the current provisions for
selecting and paying staff to perform higher duties are
unwarranted, unnecessarily complex, and costly.
Selection procedures for temporary higher duties will be
simplified by allowing Departments to select the most
suitable officer available, having regard to operational
requirements. Appeals against such selections will be
abolished, unless the period of acting extends beyond
three months. Departments and agencies will be required
to keep long-term acting arrangements to a minimum, and
this will be closely monitored.
Existing remuneration provisions for temporary
performance have encouraged staff to expect additional
paymeont fore performance of any higher functions beyond
their normal duties. Higher duties allowance is too
often paid automatically where the payment is not
justified. The Government will, therefore, examine
opti"' Ons for limiting the incidence and extent of payment
of higher duties allowance, including possible financial
disciplines which would encourage departments to limit
the extent of payments of higher duties allowances.
( iii) Delegation of Central Personnel Functions
The Public Service Board has delegated progressively
many of its powers and functions to Departments.
However, in response to the Government's commitment to
achieve a more streamlined Public Service, the Board
will now initiate further delegation of its activities,
particularly in areas of personnel management and
employment conditions. Clear guidance will be given to
Departments and agencies to encourage efficiency and
desirable personnel and management practices.
The Government believes it should continue to set
examples in areas of equality of opportunity in
employment and participation in decision-making
pract4 ' ces. Experience shows that effective equal
employment opportunity legislation, particularly at an
early stage, needs effective monitoring, but this can be
, done without generating excessive paperwork. Changes
will be made to reporting requirements for both
industrial democracy and equal employment opportunity
proqrvms. The obligations on those Departments
performing well are reduced, while monitoring will
concentrate on Departments which are not adequately
fulfilling their statutory obligations. The Board will
retain responsibility for ensuring that all Departments
fulfil these obligations.
( iv) Jurisdiction of the Conciliation and Arbitration
Commi ss ion
The Government does not propose to limit the
jurisdiction of the Conciliation and Arbitration
commission in relation to public sector employees. It
believes, however, that areas of personnel management
decision making which are already governed by a code of
personnel practice legislated by Parliament, and overall
resource allocation for Government employment subject to
Budget decisions, should not be the subject of detailed
consideration in awards of the Commission. It will,
should the need arise, argue this view vigorously before
the Commission.
Flextime
The Public Service Board will conduct a review of
flextime. The review, which the Government hopes to
conduct with the full participation of the ACTU, will be
charged with eliminating abuses, while maintaining as
far as possible the advantages of the system to both
Departments' and staff.
IMPLEMENTATION
Many of the measures I have referred to will require
legislation, and others will require detailed guidelines and
procedures. In those cases requiring only administrative
action, I have asked the Public Service Board to proceed as
a matter of urgency.
APPLICATION TO STATUTORY BODIES
These changes to staffing processes apply only to staff
employed under the Public Service Act. Those statutory
bodies not staffed under the Public Service Act will be
given separate consideration, reflecting the diverse
circumstances in which they operate.
I have now written to all Ministers asking them to undertake
consultations with relevant Statutory Authorities. We will
be looking to making early progress towards achieving
reforms to staffing processes similar to those covered in
this statement. These reviews will also encompass work
practices wihich stand in the way of greater efficiency.
REVIEW OF CHANGES
The Government will review the various changes within
personnel management practices in twelve months, and make
any further adjustments that are necessary in the light of
experience with the new provisions.
The Government has consulted as fully as possible with the
public sector unions in the development of the initiatives
announced today, and will continue to do so in the
implementation phase, on the basis that the participation of
the unions continues to be constructive. The Government is
aware that not all of what it has decided has met with union
agreement or consent. It expects the unions and their
members to join with the Government in its determination to
make the reforms effective and enduring in their impact, for
the greater good of this country.
CONCLUSION The changes that I have announced today will lead to a
leaner, more efficient public sector. The changes in the
administration of the tenure provisions, and other changes
in personnel practices, constitute a major and radical
overhaul of the personnel management system of the Public
Service of the sort that previous Governments have not been
prepared to undertake. Some of the benefits to the taxpayer
will be immediate, in terms of the reduction in the size of
the Public Service and savings in administrative costs.
Others will be achieved in the medium-term, as the
" efficiency dividend" requirement and the work of the
Efficiency Scrutiny Unit take effect, as well as the
service-wide reforms to which I have just referred.
I am confident that public sector employees will accept
that, at a time when all sections of the Australian
community are being asked to make adjustments to a harsher
economi. c environment, the way in which they function should
have maximum regard for efficiency and cost-effectiveness.
For its part, the Government is firmly committed to such an
outcome. Printed by C. J. Ttiomrs-.. % Co-mmonwealth Government Printer. Ca nberra