Recommendations

Infrastructure

Recommendation 1: Improved management of Commonwealth infrastructure The condition of Commonwealth infrastructure varies markedly. Better asset management is needed to ensure long-term sustainability. The Commission recommends the Government: a. ensure all agencies maintain current asset management plans which cover the full range of activity from acquisition, management, maintenance and disposal; b. require agencies to report on the value of deferred maintenance and repairs in the notes to their financial statements, drawing on the asset management plan; c. develop an estimate of the cost of remediating contamination on all Commonwealth property and report this as a contingent liability in Budget papers and agency financial statements; and d. create a new centrally managed provision to fund major capital assets, from which agencies can seek funding as part of the Budget process. This provision should be equal to the value of depreciation on the Commonwealths major own-use assets plus the net sales proceeds of such assets.

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Recommendation 2: Commonwealth investment in infrastructure Quality infrastructure is important to drive productivity and economic growth. While the States are best placed to identify projects that best suit local needs, the Commonwealth has a role in coordinating nationally significant infrastructure. The Commission recommends that to the extent the Commonwealth directly invests in or finances infrastructure: a. the Commonwealth only invests in infrastructure projects either alone, or jointly with the States and or the private sector, where a rigorous and transparent cost benefit analysis indicates that the project would provide substantial net benefits to the community; b. the Commonwealths contribution of finance be targeted to those projects that provide broad economic or social benefits beyond commercial returns but cannot be completely funded in the short term by user charges and would not otherwise go ahead; and c. while favouring grant or equity contributions, the Commonwealth not be constrained by the form in which finance is provided other than to ensure complete transparency, including appropriate provisioning in the Budget.

Recommendation 3: Road user charging There is significant scope to expand road user charging, particularly for heavy vehicles, to reduce congestion and increase funding from those that directly benefit from road use. The Commission recommends that the Commonwealth work with the States to develop mass-distance-location charging reforms. Over time, these reforms should be extended to universal road user charging for all vehicles to the maximum extent possible.

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Recommendation 4: Improving national transport regulation An efficient and well regulated transport system is critical to the cost structure and competiveness of Australian business. The Commission recommends improving the regulation of national transport by: a. ensuring that, where appropriate, national land transport regulatory reforms are fully and consistently implemented in each jurisdiction as soon as practicable; and b. abolishing the cabotage policy.

Recommendation 5: Infrastructure funding for the States and local governments The Commissions Phase One recommendations on addressing the degree of vertical fiscal imbalance within the Federation propose that the States have access to the personal income tax system so they are in a better position to fund their own priorities including infrastructure. In this situation, the need for separate tied funding from the Commonwealth for infrastructure will diminish. Recognising that reforms to the Federation will take time to develop and implement, the Commission recommends in the interim that existing infrastructure funding arrangements between the Commonwealth and the States be consolidated, with: a. a single funding pool to be set aside and available for allocation to the States on a formulaic basis, including appropriate funding for maintenance and disaster mitigation with the Commonwealth having no involvement in project selection; b. eligibility for access to the funding pool would be conditional on each State having in place robust project evaluation and governance processes including cost benefit analyses that meet relevant criteria set by the Commonwealth; c. Financial Assistance Grants paid to local governments for local roads and made through the States should be included in this arrangement; and d. as part of the consolidation, the Government should reconsider whether the Nation-building Funds should be maintained in their current form or instead rolled into the single funding pool.

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Public sector performance and accountability

Recommendation 6: Role of the Australian Public Service Commission As one of Australias largest workforces, it is important to improve public sector productivity and better harness talent across the Australian Public Service including by supporting merit-based appointments to maintain an apolitical public service. The Commission recommends that changes be made to the Public Service Act and associated arrangements including that: a. the Public Service Act 1999 be amended to ensure an overriding obligation of those working in the public service to serve the Government is to be highly productive; b. the role and responsibilities of the Public Service Commissioner be assumed by the Secretary of the Department of Employment; c. existing functions of the Australian Public Service Commission be transferred to: i. the Department of Employment in relation to workplace relations matters and employment conditions, as well as those functions relating to Senior Executive Service professional development; ii. the Department of Finance in relation to the operation and management of the whole-of-government training and development contracts, as part of its coordinated procurement contract arrangements; and iii. individual departments and agencies in relation to other operational functions through their human resource and corporate areas; d. the role of the Merit Protection Commissioner be abolished, with the Department of Employment to undertake responsibilities on Code of Conduct matters; and e. removing provisions for appeal processes in relation to promotion decisions for lower level positions in the Australian Public Service.

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Recommendation 7: Public sector efficiency improved spans of control Average management structures in the Australian Public Service are top heavy, particularly at the Executive Level 1 and Executive Level 2 classifications. The Commission recommends that spans of management control be improved by requiring: a. eight major departments and agencies to prepare plans that report on current management structures and spans of control, and opportunities for improvement, immediately for Cabinet consideration; and b. all portfolio secretaries and agency heads to prepare plans to improve management structures and spans of control for ministers within 12 months.

Recommendation 8: Public sector efficiency Corporate services There are opportunities to improve the efficiency of corporate services across the Australian Public Service. In accordance with the Commissions Phase One recommendation to standardise corporate business processes and adopt the staged introduction of shared corporate services, the Commission further recommends: a. the Department of Finance should conduct detailed benchmarking of Australian Public Service spending on human resources against private sector spending to identify common efficiencies; b. corporate business processes should be standardised to the most efficient practices, given the wide variation in costs across the Australian Public Service; c. departments should provide corporate services for all agencies within their portfolio with fewer than 200 staff; and d. the Government should introduce shared services for finance and procurement functions as early priorities.

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Recommendation 9: Improving information on government programmes and public sector performance Australians should have useful information about the objectives of government programmes, how much the Government plans to spend, what it actually spends, and what it achieves. To improve information and drive better public sector performance, the Commission recommends that: a. all information on programmes be provided in portfolio budget statements with appropriate scope and depth; b. more meaningful key performance indicators be developed for each programme and be included in portfolio budget statements; c. the Australian National Audit Office undertake regular audits of each departments programme performance information and its relevance, as contained in portfolio budget statements, including the efficacy of key performance indicators and the quality of the reporting against each indicator; and d. the Department of Finance develop and maintain a central register of all programme expenditure on a programme-by-programme basis to better inform ministerial decision-making.

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Recommendation 10: Programme evaluation systematic reviews as part of the Budget process There is no systematic evaluation of programmes at the Commonwealth level. The Commission recommends that new arrangements be introduced to ensure that existing programmes are routinely assessed as part of the Budget process by: a. the Department of Finance developing and publishing detailed evaluation guidelines which will help all agencies to assess the appropriateness, efficiency and effectiveness of government programmes; b. introducing a mandatory requirement as part of the annual Budget requiring agencies, in consultation with the Department of Finance, to prepare and submit evaluation plans in portfolio budget submissions, which are to include a schedule of planned and existing programme evaluation activity over the next four years; i. with final evaluation reports being provided to the Department of Finance on completion; and ii. portfolio ministers reporting to Cabinet each year in their annual portfolio budget submissions on the results of the evaluation activity detailed in their evaluation plans, attaching completed evaluation reports.

Recommendation 11: Programme evaluation rolling strategic reviews of major spending programmes Government programmes continue to grow in complexity and breadth, with some activities cutting across portfolio structures. To strategically assess government activity the Commission recommends: a. the Department of Finance conduct around six rolling strategic reviews each year on existing government expenditure programmes, with: i. the reviews to be conducted jointly with responsible agencies; ii. results and any recommendations to be brought forward by the Minister for Finance as part of the annual Budget process; and iii. agency heads to be responsible for implementing recommendations agreed by government.

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Recommendation 12: Performance evaluation rolling audits of agencies The performance of individual government agencies is central to delivering effective and efficient government. The Commission recommends: a. a small number of rolling Portfolio Agency Audits be undertaken each year, led by an independent person or panel, or the Department of Finance, to comprehensively assess efficiency and effectiveness across all aspects of an agencys operations, programmes and administration, with: i. results and any recommendations to be presented to the portfolio minister and the Minister for Finance, and considered as part of the annual Budget process; and ii. agency heads to be responsible for implementing recommendations agreed by government; and b. that the Department of Defence be the subject of the first Portfolio Agency Audit, led by an independent person or panel.

Recommendation 13: Clearer delineation between policy and service delivery At the Commonwealth level, most service delivery functions have already been separated from policy functions. However, the Commission has identified a number of opportunities to better connect policy with service delivery: a. regulatory and service delivery entities should confine their functions to administering agreed policy, but should not be prevented from providing feedback to the relevant policy department on ways to enhance service delivery arrangements which go beyond their delivery mandate; b. implementation and commissioning capabilities across government should be improved with a strengthened role for the Cabinet Implementation Unit; c. graduates in policy departments should be given a rotation in a front line delivery role, and vice versa as part of their graduate programmes; and d. greater use should be made of data analytics and randomised controlled trials to strengthen links between policy and service delivery and inform evidence-based decision-making.

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Rationalisation of remaining agencies, boards and committees

Recommendation 14: Reduce the number of non-principal government bodies Further to the Commissions recommendations to rationalise the number of government bodies contained in its Phase One Report, the Commission recommends a significant rationalisation of the 696 non-principal government bodies, including by: a. taking action on 482 existing non-principal bodies by: i. ii. iii. iv. v. abolishing 35 bodies; merging 6 bodies; consolidating 57 bodies; privatising 1 body; reviewing with a view to rationalising 383 bodies; and

b. regularly reassessing the operations and continuing need for all remaining non-principal bodies.

Recommendation 15: Further action on principal government bodies Building on the recommendation in the Phase One Report, the Commission recommends action for the following principal bodies: a. consolidate the Australian Government Solicitors Office of General Counsel into the Attorney-Generals Department and undertake a review to establish options for the wind-up of the remainder of the entity, including possible sale of the entitys client book; b. the office of the Public Service Commissioner be relocated to the Department of Employment, with some existing functions of the Australian Public Service Commission also amalgamated into that department; c. Comcares claims management function be outsourced and private sector underwriting of Comcares workers compensation insurance scheme pursued; and d. an independent review be undertaken of Airservices Australia with a particular focus on the scope of its activities as well as its planned capital expenditure programme.

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Commonwealth grant programmes

Recommendation 16: Commonwealth grant programmes Further to the Commissions recommendations to improve the administration of grant programmes, including through the establishment of a central register of grants, the Commission recommends that: a. all agencies undertake a comprehensive assessment of all existing grants programmes to identify grants programmes that can be merged, abolished and transferred to the States. This assessment should inform the 2015-16 Budget; b. that priority be given to broad-banding or merging existing grants programmes in the areas of Indigenous affairs, health and mental health and those that are schools-related with a view to achieving significant administrative savings; and c. in addition to the specific grants programmes identified for abolition in its Phase One Report that a further 14 grants programmes identified be abolished.

Further potential savings in other Commonwealth spending areas

Recommendation 17: Parenting Payment Single establishing a new benchmark Parenting Payment Single provides important support to sole parents with young children, recognising their reduced capacity to work. The Commission recommends that changes be made to make it more sustainable by: a. changing current Parenting Payment Single indexation arrangements to a new benchmark of 25 per cent of Average Weekly Earnings; and b. transitioning to this arrangement, approximately over a 15 year period, by indexing the Parenting Payment Single maximum rate by the Consumer Price Index until it is equal to 25 per cent of Average Weekly Earnings.

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Recommendation 18: Better targeting assistance to students Youth Allowance assists young people to participate in education. However, this assistance could be better targeted. It is recommended that: a. Relocation Scholarships be converted into a voluntary income-contingent loan, similar to Student-Start-up Scholarships; only be offered in the first year of relocation; and that students moving within cities no longer be eligible; and b. portability rules for Youth Allowance and Austudy be aligned with those for other working-age payments, allowing payment to continue for up to six weeks if the recipient is required to travel overseas for specific circumstances.

Recommendation 19: Better aligning working-age payments Currently, people aged 60 or over receiving certain working-age payments receive a higher rate than younger recipients. The Commission recommends that the rates of Newstart, Widow and Sickness Allowance for those aged over 60 be aligned with those for other recipients.

Recommendation 20: Reforming education supplements A range of assistance is available to income support recipients who commence study. To reduce duplication and better target assistance the Commission recommends that: a. the Education Entry Payment be abolished; and b. the Pensioner Education Supplement only be provided to recipients during study terms or semesters.

Recommendation 21: Housing Help for Seniors There is a pressing need to ensure that the cost of the Age Pension remains sustainable and targeted to those in genuine need. The proposed Housing Help for Seniors programme will introduce a new exemption that would treat seniors with a similar level of wealth differently, in terms of Age Pension eligibility, depending on whether they recently downsized their home. The Commission recommends that the Government not proceed with the announced trial of Housing Help for Seniors. xxviii

Recommendation 22: Payments to local government The Commissions Phase One recommendations on addressing the degree of vertical fiscal imbalance within the Federation propose that the States have access to the personal income tax system so they are in a better position to fund their own priorities. This will include support for local government. In this situation, the need for separate tied funding from the Commonwealth will diminish. The Commission recommends that tied grants to local governments cease, and to the extent that programmes are identified as priorities, local or State governments provide them to the communities they serve.

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