Minster for Finance and the Public Service Katy Gallagher has revealed the Albanese government will impose a new tax on the public service on using contractors and labour-hire that will rake in an estimated $375 million over the forward estimates, with the forthcoming Budget set to turbocharge the current contractor crackdown.
Dubbed an “additional external labour levy”, it is understood the new measure will use the same methodology to extract the previous $3 billion external labour save applied in the 2022-23 October Budget, with agencies relying heavily on contractors to be hit the hardest.
In a fresh series of external supplier cuts revealed on Sunday, the government will also pocket the $624 million in savings from deleting external consultants and keep the lid down on future spending, while using the now outsourcing tax to pump the headline figure to $1 billion in savings.
The latest pre-Budget window dressing is on top of an already declared $3 billion in savings taking the overall pruning of external suppliers to the APS to $4 billion.
But a large proportion of the $624 in savings arose from junked, cancelled or shelved technology projects that increasingly came off the rails in the later Coalition years amid a constant rotation of ministers caused by persistent leadership turmoil.
It now appears the government has hit pause on big-bang transformational IT projects like Services Australia’s billion-dollar Welfare Payments Infrastructure Transformation, which had its key component, an entitlements calculation engine, written off because it didn’t work.
That project alone was worth more than $300 million and would likely have required a similar amount again to remediate the build that was widely regarded as badly under-scoped from the start in terms of complexity.
Other abandoned grand-system follies include GovERP, which was meant to standardise back-office functions for several onto the SAP software product suite but also choked on its own complexity and rising costs.
The government’s tech troubles are so bad the Joint Committee of Public Accounts and Audit (JCPAA) in March issued greatly expanded terms of reference from its initial target, the junked a $92 million visa-outsourcing tender for Home Affairs, to include at least eight other major federal tech projects and their procurements.
There is a direct relationship between the scrapping of major tech transformation projects and expenditure on external contractors and consulting firms because many major projects are sold into the government or procured via strategic advice and project management provided by the Big Four.
“Since the election, there are around 8,700 roles that were done by contractors or labour hire that are now being performed by public servants. This includes an additional 2,400 conversions to be reported in the 2024-25 Budget, a statement issued by Gallagher said.
“The use of the biggest consulting firms has significantly reduced under the Albanese Government, dropping by $624 million year-to-date this financial year compared to the comparable period in 2021-2022. Public servants are now doing this work that was previously outsourced.”
Gallagher on Sunday said that “around 8,700 roles that were done by contractors or labour hire” were now being “performed by public servants” and that the figure “includes an additional 2,400 conversions to be reported in the 2024-25 Budget”.
However, that figure does not automatically translate to permanent full-time head count because previously outsourced roles may have been part-time or contingent workforce used for high-demand periods like tax time, major policy shifts or capability rollouts.
Agencies like Defence have also imposed two-year bans on rehiring public service staff who are poached consultancies only to have them resold back to the agency at a greatly increased cost.
The boasts about restoring APS headcount also give the government an easy wedge against parts of the Opposition, especially its leader Peter Dutton, who are trying to appease their own hard rump by promising public service cuts and a spending crackdown.
“Two years into the public service rebuild, it’s no surprise that the Liberals are already drawing up plans to cut at least 10,000 public servant jobs and reduce services. It is clear Peter Dutton wants to go back to the era of robodebt and slash the services that Australians rely on,” Gallagher chimed in on cue.
Two years into the public service rebuild no public servants have yet been sacked or formally sanctioned for robodebt either, despite a long-running royal commission and report with the outcome of referrals for possible prosecutions still under wraps.
There will however be another stocktake of APS jobs in the form of a fresh “Audit of Employment” that is likely to canvas the distribution of labour in the APS against the context of new flexible work conditions that could potentially take the wage heat out of essential but hard-to-fill positions that get filled by hired help from the so-called ‘coalition of the billing’.
While the Coalition may have binged on external labour hire, a lot of this came in the form of IT contractors the public service failed to attract into permanent ranks because of the huge wage disparity between the public and private sectors that agencies themselves have admitted is as high as $100,000.
Another challenge the Albanese government faces in rehiring 10,000 permanent public servants is the contingent liability they generate from the public service’s generous superannuation conditions.
These liabilities previously resulted in the sale of major assets like Telstra and the creation of the Future Fund during the Howard government and were followed by a boost in the efficiency dividend during the last Labor government that earmarked up to 14,000 APS jobs for elimination — a task gleefully undertaken by Tony Abbott upon taking office.
READ MORE:
