Colour head shot of Katy Gallagher, current Minister for Finance.

Senator the Hon Katy Gallagher

Minister for Finance

Podcast interview - The Guardian Australian Politics

Minister for Finance
Minister for the Public Service
Minister for Women

Robodebt; Australian Public Service; APS reform; Consultants and contractors; Higgins matter; Budget surplus; Super on PPL; Women’s Economic Equality Taskforce.

PAUL KARP, HOST: Hello I’m Paul Karp - Guardian Australia’s Chief Political Correspondent. Today I’m joined in the pod-cave by Katy Gallagher, the Minister for Women, Finance and the Public Service.

It’s been two weeks since the release of the Robodebt Royal Commission report and this week it was revealed that senior public servant, Kathryn Campbell, has been suspended without pay after adverse findings by the Royal Commission. We’ll delve into how the government is responding to findings about public servants and have a broader conversation about public sector reform in the wake of Robodebt and the PwC tax advice scandal.

Hello Senator Gallagher.


KARP: The Government's initial response to the Robodebt Royal Commission focused on adverse findings about Coalition Ministers. But were you shocked about what the Royal Commissioner found about the extent of the public services' willingness to enact what was found to be an unlawful scheme?

GALLAGHER: Well, I think to begin with, I mean, Robodebt’s obviously been a very shameful chapter in terms of government and public administration in general. So, I think there is a lot to learn out of this Royal Commission. I think it confirmed a lot of the things that we had heard from constituents and others, other stakeholders, like the community sector, for example, that was dealing with the real life impact of a program that was so deeply flawed as this. And obviously, aside from executive government's role, which was substantial in this, and I don't want to pretend it wasn't, and ministerial involvement, obviously, the public service has to be accountable for what happened there as well. And it's going to be an important part of the response to the Royal Commission, but it will also align with the work that we started a year ago about public sector reform. I mean, this wasn't something that happened, I guess, out of the blue. The public service was under enormous pressure. There had been, I guess, years of dismantling and weakening the public service, in my opinion. And we've seen, I guess Robodebt is obviously the most public and I guess harmful example of what happens when you don't value a public service and the response to that.

KARP: The Canberra Times reported and the Prime Minister Anthony Albanese had confirmed on Thursday that former Department of Human Services Secretary, Kathryn Campbell, was suspended without pay on the Monday following the Robodebt report. Now have any other public servants already been suspended? Or is it just Campbell for now?

GALLAGHER: Well, I want to be very careful here. Obviously, the Public Service Commission falls under my areas of ministerial responsibility, but is an independent statutory authority as well. They have an important job to do here. There was the reason why there's a chapter that's sealed in the Royal Commission report, and as the Commissioner said, it was to ensure that there was some procedural fairness applied to individuals that may have been named. We're at the beginning of that process. So, I don't think it's right for me to go into individual examples other than to say, I can assure you and your listeners that the Public Service Commission has processes in place to make sure that those areas of the Royal Commission's report where it relates to individuals are being handled appropriately and seriously.

KARP: Well without naming names or breaching anyone's right to privacy and due process, though, I suppose the question is, whether she was suspended because it was judged that the findings were more adverse about her or whether there are more public servants that have been suspended while the independent review process is going on?

GALLAGHER: Yeah, look and I can understand people's interest in this and knowing that, and at the appropriate time you know, that information should be made clear, but I'm being very cautious in my role as Minister for the Public Service, not to say anything that will impact on the processes underway. I think that's right. It's fair. I think the assurance I can give you and your listeners is that these matters are being taken seriously, there are processes that have been stood up to ensure that potential code of conduct investigations are undertaken and that where appropriate, people are held accountable for their actions. But that is, it's early days. I'm hopeful that that won't take too long to resolve. But the work is underway and it's a real priority for the Public Service Commission.

KARP: And do you want to explain what the process is there? There's an independent reviewer that has to make findings separately to the Royal Commission. How quickly do you think code of conduct investigations might be finalised?

GALLAGHER: Well, I think that depends. I mean, there isn't a set timeframe. I've certainly in my discussions with the Public Service Commissioner said that I would like this, you know, in terms of me making sure that he has the resources available, he's got the teams available. We've got an independent reviewer in place. My job is to make sure that he's able to fulfill those responsibilities in the shortest time possible. I think that's fair, not only for the individuals that are involved, but it’s also in terms of this, Robodebt’s been going on for some time, you know, people who've been affected by it, I think would want some closure to what's been going on as well. So, I mean, my view is as soon as it possibly can be, but there isn't a timeframe and it depends on a whole range of factors, including how the individuals themselves you know, seek to have their matters finalised.

KARP: In the wake of the Robodebt report, the Department of Social Services Secretary, Ray Griggs, spoke about the need to improve public sector values including contestability and courage. How will the Albanese government ensure that the public service provides genuinely frank and fearless advice so this sort of thing doesn't happen again?

GALLAGHER: Yeah so, we've got a Bill in front of the Parliament now it's, I think it's in the House. It will come to the Senate, which starts that work. I mean, essentially, we're looking at how we can legislate to strengthen the public service. So it can't be undone by, you know, a series of cuts or changes to the way executive government engages with the public service. So that's one of the ways, so looking at the Public Service values enshrining them in legislation, enshrining in legislation the need to be more transparent and more accountable. Publishing things like the APS Census, all of these things go to, I think strengthening the APS as an institution that is separate to, obviously works with executive government, but stands on its own as an institution that's fundamental to the strength of our democracy, which is how I see the public service. The Prime Minister has been very clear in his leadership and his message to secretaries and to ministers, that he values the public service, the role they play, and he wants that frank and fearless advice. I mean, that is a message he's given ministers. It's a message he's given secretaries. He's told ministers I want you out and about in your departments, you know, engaging with people that are supporting you in your work and I think when you've got that kind of leadership at his level, and you align that with the work we're doing under public sector reform and you look at what we're about to pass in legislation, you can see that we're deadly serious about making sure we're not only strengthening the APS, we're improving its capability, but in a very significant way increasing its independence.

KARP: Now, at the start, you mentioned that Robodebt was the worst manifestation of a degraded public service. What are the other signs that you had in mind when you said that?

GALLAGHER: Well I think it's, Robodebt is the obvious tangible example of what happens when you weaken the APS in the way that has been done over the last decade or so. But there are, you know, coming into Government, looking at capacity and capability. I think it's worse than I thought from Opposition – like I knew that, you know, the public service had seen year on year kind of dismantling and, in some cases, disrespectful engagement with it, but I didn't understand how eroded the capability part of the public service was. So some departments for example, not having policy capability at all or you had big departments with a couple of people that were responsible for policy. I mean, that's a core responsibility of the APS is to develop policy, that had been significantly eroded away. I think the issue which no doubt we'll get to as well around the use of external labour, consultants, contractors, labour hire was worse than I thought. The way it had, not infiltrated, but it had become embedded within the public service as opposed to existing outside of, I think is another example, where we had concerns from Opposition that were confirmed, but perhaps were worse than I had thought from Opposition. And, you know, we're in a process now of trying to disentangle some of that as well.

KARP: There's been a lot of scrutiny on consultancies since it was revealed Peter John Collins was deregistered for misusing confidential information from consultations about multinational tax changes. But are there other elements of the consulting business model, you know, whether it be how they win government contracts or their practices beyond the PwC scandal that concern you?

GALLAGHER: Um, yeah, there are. I mean, I think one of the issues that's come up and you know, came up a number of times in Estimates is how conflicts of interests are managed. And, you know, examples of that in different departments where multiple pieces of work were underway with consultants that had multiple clients that may have been, you know, linked to all of those pieces of work, I think is a concern that we need to understand more of. You know, the nature of how they, look and to some degree, I think their business model has evolved around the need of the public service for them to do the work. You know, it's not entirely just come from consultancy land. It's the fact that the public service was demanding more and more and more from consultants because of these you know, essentially, the biggest issue was the staffing cap that was put in place, and that really distorted that relationship that had existed I think, between the use of consultancies for specific tasks under specific arrangements to really bringing external companies and labour hire arrangements into the public service to almost become part of the public service. And that is a real problem.

You know, we have had examples of consultants sitting on sort of executive committees of government. In my view, that is not appropriate and it is not the way that public service should manage itself so it's almost like a behavioural response that has occurred to policies that were in place and I honestly think and I know you'll expect me to be political here, but I think the staffing cap was so detrimental to the culture within the public service. I don't know that that it was intended that way when it was bought in, if you believe former Finance Minister Mathias Cormann, it was bought in to manage growth of staffing numbers in the APS. But what happened was it came in, departments had to apply for an exemption if they wanted to employ APS staff in permanent jobs. And rather than go through that process, and ultimately, perhaps not be successful, they just bought in external consultants to do the work. And not only did that become a problem from that relationship point of view, it also became a problem from a cost point of view. Because in this Budget, we've converted about 3,300 positions that were employed under external arrangements into permanent public service jobs because that's what they actually are. And we've saved about over $800 million across the forward estimates from doing that. So it's expensive. I don't think it's efficient and I don't think it's appropriate and that's what we're trying to unpick now. It'll take longer than one year of course to fix some of that and find the right balance, but we’re deadly serious about it.

KARP: There's a perception that consultants come up with whatever answer the client wants, whether it's PwC's work on Robodebt, or evaluation for the Commonwealth Games. How do you ensure that consultancies when they are used by the public service are genuinely independent and offer value for money there?

GALLAGHER: Yeah, I mean, that's a good question. And I think part of the answer for us, I mean, I can't speak about state public services, but part of the answers to us is the work the APSC and the public service reform unit are doing around strategic commissioning. So really, understanding what it is you need and what it is you are buying in. What is the specific work you're doing? You're not just commissioning someone to solve a problem for you or to, you know, to justify a decision that's already been taken. So, putting in place a framework for those decisions so that when consultants and contractors are engaged, it's very clear the work that they're being asked to do and how they're going to be doing it.

And I think to some degree, the in-house consulting model that we're developing up through the public service reform unit is also to assist departments with that, but I would also say from a consultancy point of view, you know, they have had, I think, some significant reputational damage done over the past, well, since really the Tax Practitioners Board case was highlighted. And so, they've got skin in the game too. I mean, the companies themselves are going to, I think, no doubt they already are if they haven't already, they will be looking at how they conduct their business and the reputation that their company has attached to the work that they do. Because I think there is a perception now out there that you know, consultants will write what you want them to write, and I don't think that's their job. And I don't think that's what the APS needs from them in a healthy relationship.

KARP: You've not ruled out a Royal Commission into consultancies. How bad would it need to get you know in terms of what we find out about their business model before you'd think about pulling that trigger?

GALLAGHER: Well, I don't know that that's a decision for me anyway. I mean, when I was asked this question, I responded with the fact that there are processes underway at the moment, including an AFP referral. And we'll await those, and the Senate is doing the job that it needs to do. I mean, the Senate is the scrutiny expertise in the Parliament and they have uncovered a lot of this information. To Deb O'Neill, who's been leading this, doing an incredible job, Barbara Pocock, as well. They have their inquiry underway, and I think there's more to be done there and wait to see what that reports to the Senate. But we're not waiting for that either. Like we're already putting in place where we've identified areas, whether it be through the PwC issue or just through going through the procurement rules and having a look at where that can be strengthened, we're already doing that. And I have no doubt that will make a difference to departmental decisions and also the way consultants engage with the public service.

KARP: Do you agree with Allan Fels that the Big Four consultancies should be split by separating their audit functions from their consultancy divisions?

GALLAGHER: Well, look, I mean, I saw those comments and I know that this is one of the things that I think PwC has looked to try and do in response to the situation they've found themselves in, but I don't have a formed view on it. I think the audit function is essentially where consultants started. That was the role that they did and then they have moved into this more into this kind of government work, management, consultancy kind of space, which I have to say has been highly lucrative for them. And so, no wonder they did. We're going to try and wind some of that back. So, you know, I think the audit function is their established role.

I think one of the challenges though, and again, when you look at what the public service might need from consultants, or a consultancy company, one of the strengths they bring is their ability to, I guess work across their organisation with a whole range of different experts, you know, you can call on you know, probably tax is the wrong example to give here, but you could call, you know in a big consultancy firm you could call on your health advisors and your economic advisors and your social policy advisors and pull that together in consolidated advice and I think as some of these PwC has looked to, from my looking from the outside in, to kind of ring fence some of this work that potentially can challenge that model, in which case you might lose some of the benefits, genuine benefits that come, but I haven't got a formed view on it. 

I know, Deb O'Neill and her work on the committee and others are looking at this and it may be that that's a recommendation. I imagine tighter regulation, looking at the structures of some of these companies, because you know, I'm sure all of that will come through the committee process and the Government will look at those recommendations very seriously if they're made. I shouldn't pre-empt them, but I presume that's some of the areas that the committee is going into.

KARP: You were targeted pretty fiercely by the Coalition in the last parliamentary sitting fortnight about what you knew when about Brittany Higgins’ allegation. Do you think that scrutiny from the Opposition went too far and what should happen now to defuse the situation?

GALLAGHER: Look, I've made a statement to the Senate on these matters. I take my responsibilities to the Senate seriously and am accountable to them. I feel that I was accountable to them. There's a fair bit of politics at play, in a sense it comes with the job. But you know, my job at the moment is to focus on things like the APS, focus on things like the Budget and that's what I do. You know, there's I'll leave it to others to make any other comments. But I believe I've been accountable to the Senate in the contributions I've made and I've certainly responded to the Coalition and all the questions that they've asked of me.

KARP: The Budget surplus has been revised up to $19 billion at a time that household budgets are under strain. Now, the early indications are that with a few exceptions, like the $2 billion for social and affordable housing, the government's intention is to try and save as much of that as possible. How did you decide as a government that slaying the inflation dragon was more important than looking at doing another round of cost of living relief? And, you know, how bad would things have to get before you might revisit that decision and consider more relief?

GALLAGHER: Yeah, so I mean, these are decisions we took in the Budget. It was really how do you, and you know, and we forecast a surplus in in the Budget papers, smaller than what we believe will be the final budget outcome which will be released towards the end of September. But these were, in a sense, the decisions we took then haven't changed based on a modest increase to that surplus. And it was really about how do you repair the Budget, bank some of this increased revenue that we've been getting through things that we sell primarily in company tax receipts, how do we, you know, apply that to sort of our fiscal policy settings and maintain and invest in cost of living relief, where we can where it's tailored and targeted and timed in the right way, so as not to add to inflation? Now, I think we got that balance right. Our Budget has a huge package $14.6 billion going into cost of living relief, energy bills, cheaper childcare, cheaper medicines, all of that money flowing through and people will see that over the next few months.

But Jim and I, Jim Chalmers and I have been clear that you know, we, we make decisions through the ERC based on the economic circumstances at the time, inflation is a huge challenge. We didn't want any of the decisions we took to add to that challenge, because that is, you know, that seriously impacts on households as well and affects their quality of life, their living standards. So, this has been a balancing, in a sense of balancing set of decisions, how do we provide cost of living relief where we can, how do we repair the Budget over time so we get those fiscal buffers in place that we're going to need and you know, governments of the future are going to need and not add to inflation. But you know, these are matters that are front and centre on our desks every day really. And you know, we will be a responsible government and respond where we can as those challenges emerge.

KARP: Last one, paying superannuation on paid parental leave, now that costs money, but we know given the surplus that you've got it, and it wouldn't be inflationary because it would be going into people's accounts to be spent many years down the line. Is that something we could see sooner rather than later?

GALLAGHER: Well, I think again, Jim and I've made no secret that this is something that we would like to do, when we can afford to do it, and it in works in with other decisions. So, we've certainly said that publicly and we remain committed to that. And I would say that shortly I'll be getting the Women's Economic Equality Taskforce report. It's due to me this month, so it should be with me pretty shortly, which I think is going to provide a really updated contemporary advice to Government on the steps that we need to continue to take around addressing women's economic inequality as it exists. I have no doubt that this matter, super on PPL will be, you know, something that has come up through their work. But I also think, there's a whole range of other priorities that have come through as well that they've been talking to me about, we've been dealing with these through the Budgets that we've put in place, the last Budget had a very strong focus on women's economic equality. And we'll continue that, but I think the report that comes from the Economic Equality Taskforce is going to be critical to our next steps and our thinking.

KARP: That's all we've got time for. Thank you so much for joining us, Minister.

GALLAGHER: Thanks for having me on.