What did 15,000 public servants ever do for us?

by James Whelan

June 14, 2012 The NSW Treasurer, Mike Baird, declared ”we stand for smaller government” this week, with a budget that will see 15,000 public servants retrenched. The cap on the public sector wages bill is a blunt instrument that will constrain the NSW public service.

Rather than citing evidence of excess capacity, the O’Farrell government justifies public sector cuts by arguing that the public sector is too big, costs too much, and that this slows the economy. These arguments lack evidence and are unlikely to convince the electorate.

The NSW public service has not even kept pace with population growth. Between 1995 and 2011, the state’s population grew 19 per cent and the public service grew 15 per cent. We underinvest in the public sector as a nation. Australia commits about 35 per cent of its gross domestic product to public sector spending, compared with an OECD average of 47 per cent. We are also an undertaxed nation, paying lower levels of both individual and corporate tax than most developed nations.

As for the myth that public sector spending slows the economy, the Herald’s economics editor, Ross Gittins, has said there is ”no correlation between the size of government and rate of economic growth” and noted that ”everyone who works is productive and everyone who earns and spends income pays taxes, regardless of their sector”.

Nonetheless, ”returning to surplus” has become the one-line rationale for reducing the budgets and staff of the agencies and departments of the Australian Public Service. In this week’s budget, it emerged as the main justification for state cuts. The 10,000 jobs cut, combined with a previously announced 5000, are part of a $2 billion savings plan. Attitudinal surveys demonstrate that few Australians support what the former Reserve Bank governor Bernie Fraser describes as a ”surplus fetish”. Instead, most people prefer delaying a surplus budget or paying higher taxes in order to maintain or expand public services. A growing chorus of analysts also challenge the economic wisdom of short-term public sector funding cuts.

Public servants and community members who value their services should be concerned about the cuts announced in this week’s budget. And we should anticipate further cuts. The Premier is taking advice on ”ideas to save money” from Gary Sturgess, who previously advised the Greiner government to sack 50,000 public servants. Between 2003 and last year, Sturgess headed the Serco Institute, the research arm of a corporation with a growing global empire of formerly public sector-run services. Sturgess is an advocate of private sector primacy – an ideology that assumes the private sector is inherently more efficient than the public sector and should always be preferred.

But Australians don’t support this ideology. Just 5 per cent of us feel that ”ordinary Australians” have benefited from privatisation and deregulation, and a clear (and bipartisan) majority believe corporations have been the main beneficiaries of these changes. There is no public appetite for privatising publicly owned assets such as ferries, power stations, etc.

While ”small government” ideology hits a populist nerve, it is no substitute for informed public policy. For a live case study of the consequences of dramatic short-term cuts to the public sector, we can learn from Britain’s ”Big Society” experiment. The British Prime Minister, David Cameron, has dismantled and outsourced government functions to ”any willing provider” in the name of community empowerment and responsible economic management.

But the first comprehensive audit of his ”Big Society” policies, published last month by Civil Exchange, revealed the contrary. Corporations and the largest not-for-profit organisations have thrived while the community sector – including charities and volunteer-based groups – has cut services, retrenched staff and risked closures. Our research into the potential impacts if comparable policies are implemented in Australia reaches similar conclusions. A strong state does not negate a thriving community sector or diverse and effective service delivery. This is not a zero-sum game.

Public interest advocates in Britain were slow to respond to the onslaught of ”Big Society”. In Australia, there has been minimal discussion of the federal opposition’s pledge to sack 12,000 public servants ”for starters”, compared with the outcry when much smaller numbers of miners or manufacturing workers’ jobs are threatened. This week’s NSW public sector cuts could prove valuable in one sense – they might trigger an energetic and evidence-based debate about the role, size and capacity of the state in a ”good” society.

Dr James Whelan is director of the public service research program at the Centre for Policy Development.


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