David Feeney (Victoria, Australian Labor Party) Share this | Hansard source

It is my pleasure this morning, on behalf of the Joint Committee of Public Accounts and Audit, to present report  No. 413, creatively entitled The efficiency dividend and small agencies: size does matter. I move:

That the Senate take note of the report.

The efficiency dividend was introduced in 1987-88 and designed to encourage productivity improvements in the public sector. Each year since, the public funding component of agencies’ budgets has usually been trimmed by 1.25 per cent. For the 2008-09 year only, the efficiency dividend was increased by an additional two per cent.

In June, the committee initiated an inquiry into the effects of the efficiency dividend on small agencies. We were concerned that, after 20 years, the dividend may be leading to reductions in service rather than genuine efficiencies, particularly in the case of many smaller agencies. The evidence provided to us proved that these concerns were indeed well founded. It is clear that the smaller agencies have difficulty, relative to large agencies, in attracting funding for new policy proposals. We also heard repeated instances of small agencies being forced to reduce services or delay initiatives as a result of the dividend. Reducing functions in regional areas and a diminished capacity for innovation are two particular consequences of squeezing more and more out of agencies that are already suffering.

While we accept that some sort of efficiency incentive is warranted, we are concerned about the unintended consequences for smaller agencies that have come about as a result of the ongoing efficiency dividend. To address these concerns we have made several recommendations. First of all, we recommend additional safeguards in the budget process to reinforce the independence from the executive of the Auditor-General, the courts and the parliamentary departments.

In the case of the Auditor-General, the committee has repeatedly expressed the view that the modest budget of the Audit Office is a cost-effective mechanism for identifying areas for better administration on behalf of this parliament and the Australian people. The Audit Office is at the front line in ensuring government accountability and integrity, and the parliament is not only well served by it but also not well served by a reduction in its work program.

The committee therefore recommends that, in addition to being adequately funded for other assurance activities, the Audit Office be funded to conduct the number of performance audits that is determined by the Auditor-General and endorsed by the committee. The actual number would be determined by the Auditor-General, but the committee notes that 50 performance audits per annum has always been considered appropriate in recent years.

In relation to the parliamentary departments, we recommend that a parliamentary commission co-chaired by the President and the Speaker and comprising elected representatives be established to recommend funding levels for the parliamentary departments in each annual budget. We note that this is consistent with custom and practice in other jurisdictions, including in Canada, the United Kingdom and New Zealand.

In relation to the courts, we propose that the Attorney-General establish an independent body to recommend funding levels for the Commonwealth courts. The courts should be treated as a separate portfolio under the Attorney-General in the budget process and in the budget papers.

We found that many of Australia’s major cultural institutions, including the Australian War Memorial, the National Gallery and the National Library are being compromised in their capacity to grow their collections and to maximise public access to those collections, including through touring exhibitions and initiatives such as digitisation.

There are a number of features that distinguish cultural agencies from other agencies. These cultural agencies often hold a large number of valuable assets and have a high proportion of relatively fixed costs related to maintaining those collections and the buildings in which they are housed. Many of the cultural agencies’ discretionary functions, such as travelling exhibitions, serve to benefit large numbers of regional and rural communities, as well as the broader Australian public. Importantly, collecting institutions are also often subject to a mandate to grow their collections. We recommend that a new funding model be developed for cultural agencies. This model should recognise the importance of funding the mandate for growth and development of collections and the high proportion of their expenses apportioned to depreciation.

Finally, we recommend that the first $50 million of all agencies’ appropriations, excluding departments of state, should be exempt from the efficiency dividend and that this amount should be indexed. This would obviously provide proportionately higher relief for smaller agencies. For the sake of administrative simplicity, it was the committee’s preference that there not be a threshold in terms of an agency’s budget to access this partial exemption from efficiency dividends. However, if the government does wish to impose a threshold, we have suggested that departmental expenses of $150 million or less would be an appropriate figure. Again, this amount should be indexed. We believe these recommendations, if adopted, will provide some important relief for small agencies at a very modest additional cost to the budget.

This was the very first occasion I had as a new senator in this place to participate in a committee inquiry, and I would like to particularly thank my colleagues on the committee for their diligence during the inquiry and, indeed, for my baptism of fire in understanding the exciting work that committees undertake. I would also thank very much those organisations and individuals who gave valuable evidence. I commend the report to the Senate.

Question agreed to.