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Lifting Public Sector Performance - email sent 11/5/13

Gene Tunny

Re: Despite cost disease, Government can boost public sector productivity, Queensland Economy Watch, 11/5/13

Your article pointed to a number of fundamental differences between the public and private sector (eg public sector’s taxpayer funding and lack of simple bottom line criteria for success) and thus suggested that proposals by the Queensland Commission of Audit (eg out-sourcing) offer excellent prospects for achieving cost savings.

However the most fundamental differences between the public and private sectors are that: (a) the primary function of government is ‘governing’ (ie creating an environment in which others can ‘do things’); and (b) in the production of goods and services (ie in ‘doing things’) the public sector is (usually) only involved in functions that are subjected to significant market failures (see Governing is not Just Running a Large Business).

The best way to reduce the cost of government is to focus on its primary role (ie governing). When the focus is on boosting efficiency in providing goods and services that are subject to significant market failures, then ‘governing’ (ie creating an environment in which others can ‘do things’) is likely to be very poor because ‘governing’ requires a quite different and more sophisticated type of knowledge and experience. ‘Governing’ Queensland would require a core public service of (say) 1000 skilled and knowledgeable professionals plus operational agencies that could be kept fairly lean by a focus on ‘governing’. However in the 1980s there was a naïve belief that Australia’s economic productivity could best be improved by subjecting governments’ operational functions to market pressures. This largely eliminated the competencies required for competent ‘government’ while being able to do nothing about the market failures that made market-based arrangements inappropriate for most public functions (see Decay of Australian Public Administration, 2002+). Thus governments have been left thrashing around with the ‘cost disease’ problems that your article mentioned, and with an increasingly obvious incompetence in actually ‘governing’.

The proposals by Queensland’s Commission of Audit are an inadequate solution to this problem, as the Commission was set up and has worked on the same naïve assumptions about the nature of the problem that prevailed in the 1980s (see Reforming State Governments: Does Queensland's Commission of Audit Have the Answer?). By way of background it is noted that concerns similar to the above were first put to all Members of Queensland’s Parliament in 1995 (see Towards Good Government in Queensland), but failed to generate any glimmer of understanding.

I would be interested in your response to my speculations.

John Craig