Integrity experts back Coalition calls for Andrews to rein in spending on consultants

The Victorian opposition has called on the Andrews government to wean itself off its reliance on consultants as the PwC tax scandal reverberates at the state level.

In exclusive comments to The Age on Thursday, Opposition Leader John Pesutto said a Coalition government would restore “frank and fearless” public service advice and strengthen anti-corruption measures if elected in 2026.

Opposition Leader John Pesutto says consultants should be reserved for issues where the government lacks expertise.Credit: Penny Stephens

“Consultants should only be used when the core functions of government don’t extend to the expertise you require,” Pesutto said. “Using this principle, our intention would be to reduce the number of consultancies.

“We are actively considering anti-corruption measures across government where private sector organisations are engaged in delivering important public projects and programs.”

Pesutto’s position was backed by the former public sector commissioner, who said there were gaps in accountability when using outside consultants.

The opposition leader’s comments come after The Age reported calls from integrity experts and prominent lobbying firms for new rules to reduce conflict of interest risks around the professional services consulting firms the government relies on to manage major programs and projects.

Integrity experts warned that the big four firms – KPMG, PwC, EY and Deloitte – face potential conflicts of interest because they have privileged access to sensitive government information while they also advise private clients about government policies and work.

Experts say the big four are not bound by rules that apply to other lobbying firms, which require the declaration of their interests, clients and contracts on the state’s lobbyist register.

The scandal over PwC emerged in January when The Australian Financial Review revealed that the firm’s tax partner, Peter Collins, shared confidential government briefings about tax policy with partners and clients.

The Victorian government has been increasingly reliant on professional services consultants, who are given privileged access to confidential details to work on policy, programs and projects, which include contributing to cabinet submissions.

Premier Daniel Andrews says his government has sought advice on the PwC scandal from the Commonwealth.Credit: Justin McManus

Recent examples include PwC’s work on plans for the contentious Suburban Rail Loop and KPMG’s involvement in many housing, planning and health projects. EY is a key player on the $11 billion North East Link.

In March, The Age revealed that spending on consultancies had tripled since the Andrews government was first elected, as government departments paid almost $1 billion over eight years to a handful of private sector companies for advice, research and analysis.

Integrity experts have also raised concerns about the “revolving door” of public servants and senior staffers who move between top government jobs and positions with companies seeking favourable government decisions.

Former Victorian public sector commissioner Adam Fennessy, a one-time secretary of the Victorian environment department before he spent three years at EY, said: “My view is that in Australia, including in Victoria, the pendulum has swung too far toward reliance on consultants.

“There was so much work that went out of government.”

Fennessy, now the dean and chief executive at the Australia and New Zealand School of Government, said the Victorian, NSW and federal governments had publicly committed to bringing “capability” back into the public service.

“That’s important,” he said. “It takes time. It’s not easy to reinvest in capability. But we must do it.”

He said there remained a role for independent consultants, for when highly technical and specialised skills, independent insurance and auditing was needed.

“But there are gaps in transparency and accountability,” Fennessy said.

“I think that there is an opportunity for all Australian jurisdictions to do better and learn from each other.”

The Andrews government is yet to respond to the PwC scandal. On Thursday, Premier Daniel Andrews reiterated that his government had sought advice from the Commonwealth and was considering a response.

“Let’s just wait and see what comes from the federal processes,” Andrews said. “Hopefully, we can have a national, nationally consistent way of dealing with this.”

Pesutto said state Labor had “prioritised its cosy relationships with the top end of town at the expense of accountability for use of taxpayer funds on the delivery of critical infrastructure projects”.

He said the banking and finance sectors had strict laws and regulations around information used by clients to win deals.

“The Andrews government should consider introducing similar regulations in Victoria to protect the integrity of taxpayer funded major projects and programs that involve major consultancy firms,” Pesutto said.

Community and Public Sector union secretary Karen Batt said: “Government departments need to wean themselves off their over reliance on contracting their thinking to expensive consultancy companies.

“The focus should be about building the capacity within their own workforce, as it’s more accountable and cost effective.”

The Morning Edition newsletter is our guide to the day’s most important and interesting stories, analysis and insights. Sign up here.