Public service report casts a harsh light on state’s spending

Earlier this year, when it was put to Suburban Rail Loop Minister Harriet Shing that the government’s biggest infrastructure project might be limiting its investment in other areas, she replied: “Government should never be about doing only one thing at a time.”

Nor did anyone say that it was. But the publication of Helen Silver’s report into the workings of the Victorian Public Service (VPS) makes it clear that government cannot be about trying to do so many things at once.

“The Review has heard that, in recent years, the scale and pace of executive government’s ambition and demands for responsiveness have at times outstripped VPS capacity,” Silver wrote. “This has seen growing delivery risks, rising staff burnout, and strategic functions being de-prioritised to meet short-term demands.”

The release of the report on Thursday has put a focus on job cuts. The Allan government will strip out 332 executive and senior technical jobs and 1000 jobs in total as it scraps some agencies and merges others. Change on such a scale is bound to generate opposition, but Premier Jacinta Allan and Treasurer Jaclyn Symes have gone only half as far as their selected adviser Silver recommends.

Silver emphasises early on that her review “does not include frontline staff”, emphasising that cuts elsewhere in the public service can enhance efficiency provided they are carried out systematically and savings targets are set for each area of public service rather than as an overarching number.

To that end, she recommends scrapping the general efficiency dividend, which has operated as an attempted brake on public service spending since 2013, describing it as a “blunt tool” that is “now affecting departments’ ability to operate effectively”.

She also acknowledges the “disproportionate” growth in executive-level positions in the public service. Since 2019, the VPS has grown by 16 per cent. Over the same period, executive numbers have increased by 52 per cent.

Silver concludes that the resulting “top-heavy” system “blurs accountability … and places a higher priority on risk avoidance, which ultimately weakens capability and culture”.

The problem of blurred accountability under this government was also on the mind of former ombudsman Deborah Glass in October, when she described the publicly funded Premier’s Private Office as “apparently completely unaccountable”.

She recalled testimony from a former senior public servant in the Department of Transport, Richard Bolt, that construction of the Suburban Rail Loop would “crowd out” better uses of public money.

In her report, Silver notes that she was “not tasked with reviewing the government’s capital program”, but that “it is not possible to provide strategic and comprehensive advice about government’s operating expenditure ... without some consideration of the impact of general government sector infrastructure investment”.

As our state political reporter Kieran Rooney pointed out in May, the state’s mountain of debt keeps growing despite the cuts proposed. Silver does mention the need for stronger oversight of infrastructure spending and that Victoria and the Commonwealth should negotiate “equitable cost-sharing for critical infrastructure … ahead of commencing capital works”.

This is where the good intentions of the report run into reality. Silver demonstrates that Victoria isn’t getting its fair share by population of Commonwealth infrastructure funding. But what is the Allan government going to do about this?

Another area in which she identifies a shortfall in Commonwealth provision is health, which with education accounts for the majority of government spending (31 per cent and 23 per cent of operating expenditure respectively) and is outpacing inflation. The report finds that 41 per cent of emergency department cases in the state in 2022-23 involved patients who should have been dealt with through primary care services, which are a federal responsibility.

“There are significant opportunities for reform in health,” Silver writes, “with varying degrees of complexity and sensitivity.”

The Age agrees with Silver that the current situation in which the government has topped up hospital budget allocations after they have been overspent is unsustainable and makes budget repair far more difficult. But does the Allan government have the will to grasp this nettle, and can it bring healthcare providers and workers along with it in re-conceiving how spending is approached?

The challenges reflected in the Silver report are not peculiar to Victoria – as our senior economics correspondent Shane Wright recently reported, public spending and debt are issues across the nation, and will continue to be as our population grows and ages. The structural problems of how Commonwealth funding is distributed among the states are another perennial bugbear.

That said, the report starkly illustrates the choices made by the Victorian government to load its balance sheet with debt to fund infrastructure projects and to pursue more initiatives than it has the people to effectively deliver without compromising on quality or independence.

The government’s ambitions have galloped far ahead of its capacity to pay for or properly deliver them. Now we have the reckoning on both accounts, the public will see this in their services and dealings with government.

As the initial hubbub over the Silver report subsides, our government will need to set out transparently precisely what it believes it can and cannot do, and how it intends to pay for the former and to exit the latter.

We got a discouraging glimpse of the government’s approach on Friday, when it used its budget update to put off an unpopular tax slug until after the election.

The much bigger task of bringing the public service back to a scale matched to the state’s finances – one that will require tough political decisions – cannot be postponed to another electoral cycle.

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