Public Sector (Functions and Resources Audit) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 27 September 2017.)

The Hon. R.I. LUCAS (19:48): I rise to speak to the second reading of the Public Sector (Functions and Resources Audit) Amendment Bill. As the Hon. Mr Darley indicated, this is a follow-up bill from his Statutes Amendment (Public Sector Audit) Bill which we discussed some time ago. As the Hon. Mr Darley outlined in his second reading explanation, he listened to the points of view that were put during the second reading debate of that particular bill and he has come back with a renewed approach, new enthusiasm and vigour, which I see on a fortnightly basis at the Budget and Finance Committee when the honourable member raises with each chief executive officer the notion of whether or not they have conducted an operational audit of their agency and, if they have, what the results of that audit might have been.

I think it is fair to say, without putting words in the Hon. Mr Darley's mouth, that there have been one or two who have said they have done some work in relation to the operational audit; most are still struggling to understand the true import of what the Hon. Mr Darley has been talking about. Put simply, as I outlined when we debated the companion bill earlier, I have enormous sympathy for the principle the Hon. Mr Darley has prosecuted during the Budget and Finance Bill debate.

As I understand his principle (and he can correct me if I am wrong) it is essentially saying that, rather than when one is confronted with perennial budget savings tasks, as agencies are, just taking a bit off the top of every particular function, actually conducting an operational audit to decide whether there is still a need for this particular function and, if there is not, is there a higher priority function that the resources can be diverted from one particular program or project to another particular program or project within whatever the budget allocation that has been provided to the chief executive has been.

Put colloquially, it has been, rather than the salami approach, where you take a shaving off each particular part of your agency, you actually have a root and branch review or an operational audit of what it is that you do. So, the principle, as I indicated when we debated the companion bill earlier, I am enormously sympathetic to and supportive of. I raised concerns with the drafting of the last bill: this one certainly is an improved version.

As I indicated in a private discussion with the Hon. Mr Darley, I still have some concerns with the drafting of this bill, and I will outline those concerns, but in outlining our concerns I indicate that certainly the Liberal Party will be supporting the second reading of the bill. However, if the Hon. Mr Darley does want to proceed to a final vote at the third reading, we will not support the bill at the third reading, if that is the intention of the honourable member. We will certainly support the second reading to further explore the issues in the committee stages.

As I have indicated privately to the Hon. Mr Darley, my personal view is that, if you have a government that is prepared to enact the principles of root and branch reviews or operational audits under the control of the minister, and ultimately under the control of the cabinet, the Treasurer and the Premier, that is the best way to ensure that this occurs. I have an aversion to locking things into a legislative or statutory requirement.

I understand, if I was the Hon. Mr Darley, that his concern might be that maybe one or both parties (and he can express that view), unless it is legislatively required, will never ever do it. As an Independent member, or a minor party member as he is, he is perfectly entitled to hold that particular position. However, I would say that the Hon. Mr Darley has certainly worked with me assiduously for many years now in the Legislative Council and for a number of years on the Budget and Finance Committee; I think he certainly knows what my views are, and would be, should we be in the fortunate position of being in government post-March of next year.

The problem with the earlier bill, which he has addressed in this bill, was that, essentially, the CEO was going to conduct the operational audit, and whatever he or she found then had to be actioned. I said, 'Well, hold on, ministers and governments should be governing, not CEOs,' and he has sought to address that in this drafting, and has significantly improved the drafting from that perspective. However, my personal preference is not to require this by statute or by legislative change.

However, if we were to go down the path, the view that I have, and that my party shares with me, is that when one looks at proposed new section 80A, subclause (3), the subclause essentially says that:

(1) A Minister—

which is the appropriate way—

must, as soon as practicable after the commencement of this section, conduct a review of—

(a) the functions undertaken by each administrative unit for which the Minister is responsible…in order to identify areas in which budget savings may be made or areas in which budget deficiencies exist.

(2) A report on each review conducted under this section must be laid before both Houses of Parliament within 6 months after the commencement of this section.

What I will say in relation to subclauses (1) and (2) is that it sounds a long time, but it is an enormously tight time frame for, say, SA Health, which is spending $5 billion plus of an $18 billion budget. In essence, everything in terms of that operational review will have to be completed, conducted, processed by the minister and whomever else in government, and then tabled within six months after the commencement of the section.

I guess there is some flexibility in terms of when the government would actually proclaim the start of this particular section, but let's assume that is there and once it is in it will be six months after the ministers have been appointed, or if there is a change of government or a change of ministry, I would assume is the intention. That is another question, actually, whether that is actioned in the legislation as to what happens on an ongoing basis or whether this is just a once-off function and resources audit. That is a question that the Hon. Mr Darley can address in further consideration of the bill. The subclause (3) is the one that says:

(3) If a report has been prepared by a Minister under this section, the Minister and the Chief Executive of the administrative unit…must ensure that any budget reductions applied to the administrative unit are applied in accordance with the findings in the report.

I understand the point that the honourable member has made, but let me take the member and the chamber through a practical example. Soon after the election, the minister, he or she, conducts this operational audit. By and large, probably the minister is going to get the CEO to do the work and then recommend to the minister, and the minister then, appropriately, is the person who would sign off on the results of the operational audit.

What happens in terms of cabinet government and what the implications of the drafting of this is, is if, for example, Treasury has said, 'You have to save $10 million,' or whatever it is, then the decision rests with that minister's report that has been made public, because this requirement is that that report has to be made public within six months. Whatever that minister, he or she, decides is what is made public, and this requires that any budget saving has to be done in accordance with that.

Circumstances change, but the simplest example is this: there have been many examples that I am aware of, both when we were in government and now that we are in opposition, where cabinet overrides an individual minister. That is, a minister thinks, 'Okay, if I have to make a saving, this is what I am going to get rid of,' or 'I will stop this particular program.' The CEO might have recommended it, and the minister agrees to it.

If and when there is a whole of government consideration, whether it is actually by cabinet or, probably more likely, a cabinet subcommittee, then the cabinet subcommittee or the cabinet says, 'Hold on, you've got rocks in your head, minister. You think that you're going to implement that particular change and we're going to sign off on that as a government and as a cabinet. There is no way in the world. You go back and you are going to have to implement the saving in some different way. You are going to have to keep that particular program, because the government has made a decision'—or in a lot of these circumstances it might just be the Premier who has made the decision—'that that particular program is just too important not to be kept, and just because you as an individual and the chief executive officer recommended that that is where the budget saving comes, we the government are not going to allow you to do that.'

The dilemma with statutorily trying to lock all the doors in this particular way is that sort of option is not available. Good government, good cabinet government, has to allow that sort of collegial cabinet decision-making where ultimately the government (the cabinet) takes a decision in terms of where perhaps a big cut might occur. When you are talking about smaller cuts and smaller programs, at the margin those sorts of issues might not have political significance for the government of the day, but a big program and a big cut might.

I have to say, though, there are some cuts that have been canvassed at varying stages. The favourite cut of South Australia Police commissioners over the years have proffered when they have been told by ministers and governments that they have to meet budget savings is that they say, 'Okay, yes, we will make the budget savings. We will get rid of the police band and the police greys.'

The Hon. M.C. Parnell: Not the greys.

The Hon. R.I. LUCAS: Yes, the police band and the police greys, and—

The Hon. K.J. Maher: The member for Hartley, he is the only one who wants to do that.

The Hon. R.I. LUCAS: No, the—

The Hon. K.J. Maher interjecting:

The Hon. R.I. LUCAS: I am talking about police commissioners, because the strategic decision—

Members interjecting:

The Hon. R.I. LUCAS: Come on, team. The strategic decision that—

The Hon. K.J. Maher interjecting:

The Hon. R.I. LUCAS: It is going to be a long night if the Leader of the Government is going to play games and interject all the time, okay?

The PRESIDENT: It is going to be a very long night. That's right.

The Hon. R.I. LUCAS: The strategic decision that police commissioners or chief executives can take is, 'We will put up the budget cut or the budget saving which is going to cause the maximum political damage and there will be the least public support for. We know that the premier and the government of the day will reject those particular savings.' I have been there, I have done that in the last Liberal government when budget savings were suggested, and the most politically sensitive savings from a public viewpoint are the ones that are offered up knowing that the government of the day would shy away from that particular savings task. It is for those reasons, as I said.

My personal preference is that we do not lock all doors in relation to how we manage good government, financial management and competence, and what you would hope to have is a good government with good ministers who are prepared to do the sorts of things the Hon. Mr Darley is suggesting. I know his frustration is that he has been at the Budget and Finance Committee and he has seen that this is not occurring and, therefore, he wants to lock it away.

As someone who, hopefully after March 2018, at least has a chance of being on the other side of the political fence in terms of government and opposition, I am not as attracted to locking those particular doors and removing the flexibility to ultimately have cabinet and government decision-making as opposed to the actual individual decisions of a minister in every particular circumstance. They are the detailed concerns that I have with the current drafting of the legislation.

I say it is a quantum improvement from the previous one which I was trenchantly critical of, so our position, for the benefit of the honourable member, is that we will support the second reading to allow further consideration and discussion. However, if the honourable member wishes for this to be finally voted on at the third reading tonight, we would not be voting for the bill at the third reading.

The Hon. J.A. DARLEY (20:03): First of all, I would like to thank the Hon. Gail Gago and the Hon. Rob Lucas for their contributions. I have taken note of the comments made by the Hon. Rob Lucas and what I suggest we do is take the second reading vote and then I will move an adjournment.

Bill read a second time.