Barbara Pocock (SA, Australian Greens) Share this | Hansard source

BARBARA POCOCK () (): I take note of committee report No. 12 of the Parliamentary Joint Committee on Corporations and Financial Services inquiry into ethics and professional accountability: structural challenges in the audit, assurance and consultancy industry. This is an important report that responds to a public scandal in PwC and the consulting industry more broadly, including all of the big four—PwC, KPMG, EY and Deloitte. I thank our chair, Senator Deborah O'Neill, and my parliamentary colleagues for their cross-party collaboration. And I thank the committee secretariat and my own staff for their very hard work.

This scandal has shocked Australians and many beyond our shores. For far too long, reprehensible behaviour has thrived in gaps in our regulatory framework. This evidence is of international significance. It reveals global challenges that beset effective governance behaviour and structures in some of the world's largest entities, which too often put their own interests before those of the public. Meaningful reform cannot wait. The evidence is in.

The PwC tax scandal first came to light in January last year, when the Financial Review posted its bombshell report into Peter-John Collins and his use of confidential government information. While PwC was advising the Australian government on new tax laws for multinationals, some of its senior partners were using the intel to court clients seeking to sidestep those same laws.

PwC initially tried to shrug off the story as an isolated incident affecting only a few bad apples. It's far from that. Eighteen months and two parliamentary inquiries later, this parliament has uncovered rot after rot within PwC.

PwC are yet to engage with this parliament in a truly transparent, open and honest way. They have yet to provide this parliament with the Linklaters report. We still don't have the full story on the extent to which international partners were involved. Just the other week, the Australian Federal Police raided PwC's Sydney headquarters for a week. Some of the former partners at the centre of this misuse of confidential government information could face up to 10 years in jail for breaches of sections 70 and 90 of the Crimes Act, if they were convicted. This whole scandal is outrageous, and it is far from over.

However, this is about far more than just PwC's misdemeanours, as concerning as they are. While these inquiries may have started with PwC, they have uncovered mountains of evidence demonstrating an unethical, shadow, privatised public service with no accountability. The extraordinary expansion of consultants into our public sector over recent years has had dire consequences. It has gifted billions to the big four while cannibalising funding for essential public services. It has given too much power to small numbers of influential people who have deliberately farmed a tight network of close relationships for personal benefit, across the big end of town and into government and regulatory bodies.

Like many Australians, the Australian Greens have long been aware of the ethical failures, unchecked conflicts of interest and lack of regulation in the consulting and audit sectors. The scandals in these sectors are frequent. They're global in nature. And many never see the light of day. However, this parliament has seen enough to know that serious change is needed. These inquiries exposed numerous conflicts of interest, poor governance, ethical failures, state capture and regulatory weaknesses across the larger consulting sector and parts of the public institutions that deal with it. We now undeniably have the evidence base we need to enact vital structural reform.

That brings us now to this report and its 40 recommendations. There was unanimous agreement for many important recommendations in this report, and that should give momentum to their realisation and enactment. It's not often in this chamber that you have Labor, the coalition and the Greens united on a vital issue, but we have all witnessed the big four's repeated resistance to the accountability and transparency that parliamentary inquiries bring, and we have shared the outrage. The committee unanimously recommended that the Australian government not permit PwC or any of its related entities from tendering for government work until the completion of all ongoing investigations and their recommendations.

The Greens also achieved some important wins in this committee work, as we have pushed for certain outcomes. We have pushed for recommendations that any government regulatory bodies or related standards boards are independent, including by ensuring that the bodies do not include individuals with a current financial interest in entities under the direct governance of the body. This mirrors our change to the Tax Practitioners Board which made sure that the foxes were kicked out of the henhouse and fixed the loophole that allowed big consultants to regulate themselves. We pushed to recommend a review into improving the ATO's tax settlement procedures, with a view to making their details more transparent. We pushed to recommend a whistleblower protection authority, covering both the public and private sectors, to provide practical support for our whistleblowers, without whom a great deal of the information in this report and through our inquiries would never have come to light. We thank them most sincerely. The 40 recommendations of this inquiry are a vital step towards change, and they deserve strong support.

The Australian Greens would have liked a number of areas in the report to have gone further. Our additional comments make five supplementary recommendations that also deserve attention. First is the issue of partnership reform. While the committee's recommendations to cap partnership size at 400, a very good starting point, there's considerable evidence in favour of it being lower. I, alongside others who gave evidence to the inquiry, think it should be around 100. Even Adam Powick, the CEO of Deloitte, told our inquiry that, once you get over 100 partners, it becomes impossible to effectively manage the partnership.

Second, we think separation between audit and non-audit functions should be clear and structural. We need to eliminate that built-in conflict of interest. We'd also like to enforce that structural separation so that audit divisions of consulting firms are forced to incorporate as a separate entity, eliminating, as former ACCC chair Allan Fels put it, 'that built-in conflict'.

Third, we'd also really strongly recommend the need for an independent regulator for the consulting industry. The report calls for a code of conduct for consultants and a register, but we really need an enforcement mechanism for that code and for national standards.

Fourth is the issue of political donations. Over the past decade the big four have donated over $6 million to the ALP and coalition and received a staggering $8.5 billion in contracts. There's widespread support for banning these donations—except within the major political parties—and that includes amongst 80 per cent of coalition voters and 70 per cent of Labor voters.

Lastly, the inquiry found considerable evidence within the big four of poor organisational cultures. We really need to take action to support the wellbeing, physical and mental, of staff within these big companies. We need devices like non-disclosure agreements to not be used to disguise poor behaviour. In this light we recommend a review of those non-disclosure agreements and the ways in which they're used in these firms to conceal or hide repetitive patterns of poor behaviour.

So we need systemic change to ensure that the PwC tax leak scandal can never happen again. This report, as well as the Senate Finance and Public Administration References Committee report into consulting services, provides the government with a very clear roadmap for reform. If the Albanese government adopts the 40 recommendations of this report, which were made without dissent, it will lead to a comprehensive overhaul of the regulatory framework that defines how auditing and consulting firms are allowed to operate. We need comprehensive legislative, cultural and structural change to fix these organisational failures. Let's honour the evidence that has been put before us and convinced us all of the need for strong change now. There is a very powerful case for change. Shared outrage is not enough. The time for action is now, and we must take it.