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It’s time for the states to be the heroes

The big news this week was the sale of Medibank and everybody seemed to win on day one.  Charlie thinks it was a brilliant move but Louise argues that if there is a winner, there must be a loser.

As the government was keen to point out during the week, Medibank is an insurance company and should be completely free to look after its own affairs. And its first step to that resulted in it putting $5 billion in the bank raised from a very excited market.

It seems like the Treasurer and the Finance Minister were right in claiming that the market would be a much better owner and perhaps this success will make them very interested in a speech given recently by Terry Moran AC – the Secretary of the of the Department of Prime Minister and Cabinet for much of the period of the Rudd and Gillard governments.

Terry’s learned address traced the history of our federation since 1901 and finally concluded that the Federal Government should stop providing services.

An example would be that the responsibility for education should be given fully to the states and an agreed share of income tax revenues paid to them for that purpose.  The roll-on effect at Federal Government level should be a dramatic restructure of the public service.

“Don’t you mean cut,” says Louise.

That and more. The fundamental role would change as well – from service provision to technical and strategic advice. Charlie’s eyebrows went up as he mumbled, “Sounds like we don’t need them for very much.”

Some months ago I argued that our three tiers of government were seriously underperforming. The question seems to be which one to leave out but there’s no perfect solution.  Terry Moran is one of our most thoughtful public servants and he has started to move towards an answer by recognising the key problem – Federal Government just isn’t working as a service provider.

It was a great state leader who showed the way about fearlessly fixing a budget. Jeff Kennett did the job by selling assets that the state couldn’t run well and sharpened the performance of the public sector with more-flexible contract arrangements and importantly, by reducing its number!

So what about our federal public service that was formed on January 1, 1901. Well as at June 2014, we have 159,126 public servants.  “Gee, that’s a lot,” says Louise.  “What do they do?”

The largest is the Department of Human Services with 33, 658, followed by the Australian Taxation Office with 24,274 and the Department of Defence, with 22,330.  That’s not counting the 30,000-40,000 soldiers and sailors on top of that. Louise says, “But we’re not even at war”.

Public service numbers grew every year from 2001 to 2012 under the Liberals and Labour,  with the biggest annual increases occurring under the Coalition and the highest annual increase achieved by John Howard with an almost 10 per cent increase in 2006. But now, thank goodness, the numbers are starting to fall.

Louise thinks its like coat hangers; you close the wardrobe door and they multiply.  Charlie says they come from the drycleaner but he can’t understand where the public servants came from.

And sacking a few doesn’t work because the wages keep increasing. In  2013 the number reduced by 0.8 per cent but wages went up by 4.1! It’s the coat-hanger theory; they’re taking over the world.

Terry Moran is right.  The Federal Government should get out of providing domestic services and let the states be the heroes. And if they don’t do the job, they get thrown out.

And that’s the way it was originally set up before WWII. But the states ceded their income tax powers to the Feds as a wartime measure but the Feds never gave it back and went on to try to run everything.

Time to turn this right around.

This story Administrator ready to work first appeared on Nanjing Night Net.

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