When ‘efficiency’ is code for ‘cuts’

Christopher Stone
Christopher Stone speaking at the NSWNMA 68th Annual Conference on Professional Day.

Our public sector suffers the plight of the anorexic. No matter how thin it gets there are voices saying it is too fat.

The word “efficiency” is often misused to mean “cuts” and some cuts can end up costing as much as they save, says Christopher Stone, research director at the Centre for Policy Development.

Now we have a Liberal government at the federal level as well as state in New South Wales, and both governments are strongly committed to reducing the size of the public service in the name of efficiency.

Efficiency is a buzzword that is often bandied about when it comes to restructuring and reforming the public service. Christopher Stone says every Australian needs to understand what politicians mean when they say “efficiency” so they can demand an efficient government.

“Unfortunately the word ‘efficiency’ is often misunderstood or misused, leading to decisions that cause waste. In public services the two most common kinds of false economies are inappropriate cuts or savings, and inappropriate privatisation or outsourcing,” he says.

“When it comes to privatisation or outsourcing, many politicians have tunnel vision. They only see the private sector as efficient and are blind when it fails. Yet markets regularly mess up.”

Inappropriate savings

Stone argues that false economies result from short-term, narrow-minded thinking on Australia’s public services. These false economies, he says come from “muddled thinking” – decisions made in the name of efficiency that end up costing more than they save.

“These are usually staff cuts such as promises to reduce the number of public servants by a certain amount or general budget cuts such as the so-called ‘efficiency dividend’ which requires most federal government departments to spend 1.25% less to meet the same responsibilities each year.

“Cutting spending on activities that deliver more benefits than they cost, or failing to invest in projects that should be undertaken, can make government less efficient not more.”

Stone says a lot of the debate around public sector efficiency is really rhetoric using phrases like “doing more with less” to advocate doing more work with fewer resources.

“There is often a misuse of the word efficiency because the proposed plans focus on the resources being used and don’t sufficiently consider the outputs being produced.

“The cuts are usually measured in detail and get strong media attention, but the services are not so well measured and so decreases in quality or accessibility of the services are not so noticeable.”

Howard cut then hired

Cuts to the public sector seem to be a central goal of the Liberal Party in government. Pre-election Joe Hockey mentioned figures of 12,000 and 20,000 jobs in the federal public service that could go. Barry O’Farrell has intimated that 5000 are to go in the New South Wales public service. 12,000 is the stated goal of Campbell Newman’s Queensland government.

The Howard Government also entered government with a similar zeal to wield the razor to public sector jobs. It cut the Australian public service by 32,000 in its first four years. It then found that it had insufficient capacity to deliver services and hired 42,000 extra public service servants in the next four years.

Christopher Stone says our public services do a lot for us and there needs to be a consideration of results as well as resources when considering privatisation or outsourcing.

“Our public services need to be efficient, effective and fair. But we won’t achieve that by endless cuts or blind faith in market solutions.”

What your money buys in public services

The average household pays about a quarter of its income in taxes. With this money governments:

  • Teach 65% of our children and substantially co-fund the other 35%.
  • Co-fund nearly all Australian university students.
  • Provide 67% of hospital beds – and co-fund the private beds.
  • Co-fund medical services and medications.
  • Provide and police the entire justice system.
  • Undertake all diplomatic and national security tasks.
  • Provide infrastructure such as the majority of roads.
  • Supply essential community services and provide help when bushfires, floods or other emergencies occur.
  • Give financial assistance to those in need e.g. aged pensions.
  • Run trusted information sources such as the ABC and the Bureau of Meteorology.

Strong views on the public service

People have strong opinions about the public service and those views are often insightful.

“I respect the professionalism of the public service. In the longer term, though, we have to rely less on bureaucrats and put more trust in the common sense of the Australian people. We need smaller, more efficient government.” — Tony Abbott

“It’s not ‘efficiency’ to default on your social obligations. It’s not ‘waste’ to treat your people with respect.” — Kim Carr, ALP

“The reality is that government employees around the world are known not to be as efficient as the private sector. What the public sector can learn from the private sector is the need for a constant focus on efficiency.” — Paul Fletcher, Liberal Party, member for Bradfield

“It was public servants that did so much to get us through the global financial crisis with a temporary, timely, targeted fiscal stimulus program that was recognised by international economic authorities, such as the IMF, as being a world-beating fiscal stimulus program because it was put into place quickly and efficiently.” — Andrew Leigh, ALP, member for Fraser.