- by Anna Pha
- The Guardian
- Issue #2059 03-07-2023
PricewaterhouseCoopers Building In Johannesburg, South Africa. Photo: TapticInfo – flickr.com (CC BY-SA 4.0)
Taxpayers are funding an inefficient system of outsourcing, wasting billions of dollars, in a process riddled with conflicts of interest that results in massive private profits. At the same time the public service has been robbed of its skills base and thousands of jobs lost.
The tax scandal surrounding PricewaterhouseCoopers (PwC) has brought to the fore only some of the consequences of government functions being taken over by the corporate sector: The revelations around PwC are just the tip of the iceberg.
Public services and government agencies have been gutted from within with massive staff losses and contracting out of services. Anyone using these services knows how dysfunctional and corrupted they have become.
PwC is one of the Big Four consultancy firms, alongside Deloitte, Ernst and Young (EY), and KPMG. It is a multinational monopoly with operations in 157 countries providing accounting, auditing, consulting, and other services to both the public and private sectors.
Between 1st July 2012 and 30th June 2022 PwC pocketed $414 million and together the Big Four pocketed $1.246 billion from Commonwealth government contracts.
In the same years, $80.8 billion in contracts were awarded – equivalent to around 55,000 full-time staff or one third of the current 144,300 employed by the Australian Public Service (APS). 56 per cent of these contracts were with the Department of Defence.
AusTender has recorded more than 800,000 contracts outsourced to the private sector by the APS and government agencies to the tune of $565 billion in the past decade. Most of these contracts are for work that would previously have been carried out within government departments and agencies such as the former Commonwealth Employment Service.
Not only is work outsourced but the big firms have staff embedded in the public service and government agencies. Casual employment and labour hire are rife.
BREACH OF TRUST
Former PwC partner Peter-John Colins was advising the Board of Taxation and Treasury on legislation to tackle tax avoidance by multinational corporations, and then using that confidential information to advise international clients on how to get round those laws.
“[…] Collins was aware that the confidential knowledge he gained from the consultations with Treasury would be leveraged to market PwC to a new client base,” the Tax Practitioner’s Board (TPB) said.
The TPB disqualified Collins for two years as of 23rd December 2022 and ordered PwC to have training and processes in place “to ensure conflicts of interest are adequately managed.”
Treasury has referred the matter to the Australian Federal Police (AFP) to investigate PwC’s conduct.
Almost 40 per cent of the AFP’s contracts in the last two years were with PwC for a total of $20 million including auditing its books. Its Commissioner is reported to be close to former NSW Police Commissioner Mick Fuller, who now works for PwC.
The Guardian is not questioning the integrity of the AFP, but there is always the perception of a conflict of interest to consider.
CONFLICT OF INTEREST
Mining transnational Adani applied for a loan of $1 billion from the Northern Australia Infrastructure Facility (NAIF) for its Carmichael coal mine.
So PwC was working for Adani, working for NAIF, and working for the department that oversees NAIF. With such a set-up, readers might be surprised to learn that Adani didn’t get the $1bn loan.
Because of a conflict of interest!
Not the conflict of interest between PwC and its clients on both sides of the deal, mind you. No, the conflict of interest was that Queensland Premier Annastacia Palaszczuk was dating a senior PwC executive.”
Two NSW government departments – Treasury and Transport – signed separate contracts with KPMG to advise on managing the state’s transport assets.
KPMG went ahead with the overlapping work for the two departments without notifying either of them that it was doing the same thing for the other department. Incredibly, the departments received contradictory advice from KPMG.
Treasury’s contract with KPMG was worth $10.5 million and that of Transport just over $10 million.
If ever a situation dispels the myth of the private sector being cheaper and more efficient this example must take the cake.
This, like most work outsourced by government departments, could and should be done internally at far less cost to tax payers.
The Big Four accounting firms wield considerable influence in the corridors of Parliament through revolving doors. They hire former politicians and senior public servants and embed their own people in ministerial offices.
To cite a few examples: PwC recruited Tim Reardon, Secretary of the NSW Department of Premier and Cabinet, federal cities minister Jamie Briggs, and Australian Signals Directorate executive Jane Quodling.
KPMG hired Queensland Premier Anna Bligh’s chief adviser and NBN executive Mike Kaiser and Gillard/Rudd government trade minister Craig Emerson.
Deloitte took on former AFP Commissioner Andrew Colvin.
EY’s recruits include Dean Yates, secretary and special adviser on infrastructure to the Victorian Department of Premier and Cabinet, and Christopher Pyne, former federal Minister for Defence Industry.
These appointments open doors with politicians, and give insights into government and policy-making. They serve to entrench the outsourcing of government departments’ work. This is compounded by staff from these firms being embedded in the public service.
There are no restrictions on public servants stepping immediately into consultancy and advocacy roles. Politicians are supposed to wait 18 months, but this is not enforced.
The Centre for Public Integrity advocates ending this revolving door and enacting tougher post-separation employment provisions and transparency measures.
The situation is compounded by political donations to the major federal parties. Combined donations of the Big Four total $4.3 million over the decade to June 2022. PwC is the largest contributor with $2.1 million.
The provision of core public services by the for-profit private sector has resulted in a decline in service provision as anyone attempting to deal with CentreLink could confirm, and is costing governments more.
A number of myths are used to sell the idea of privatisation and the associated contracting out of services, policy-making and other government functions. We were told the sector private is inherently more efficient. We are told that markets and competition lead to improved quality, contain costs, are more accountable and provide cheaper services.
These are neoliberal capitalist myths. There is no accountability. There is little or no integrity, as the PwC example shows. But there are massive profits to be made at the expense of the public purse.
When neoliberal governments talk about “handing everything over to the markets” they are talking about handing over government policy-making and political power and all public enterprises to the naked dictatorship of the big corporations.
This process has been underway since privatisations were commenced under Labor in the 1980s and accelerated under the Howard who slashed public service staffing and privatised the Commonwealth Employment Service with disastrous outcomes for the unemployed.
The Albanese government has acknowledged the decimation of the public service. “Labor is committed to rebuilding the APS, its capability and ensuring that jobs that need to be done are delivered, where appropriate, by public servants,” he promised.
The APS is not the only area where work should be done inhouse. There are also all the government agencies.
There is an urgent need to promote the public sector itself – the advantages it offers and the potential it has if expanded and democratised. It can play a major role in job creation, and can provide the government with the means to influence the whole economy, so that the needs of the community are put first, not corporate greed and power.