Saturday, August 10, 2019

How politics came to trump economics in Canberra

How does the federal government really work? Is it as we were told in Yes, Minister, with the bureaucrats actually in charge, quietly manipulating the politicians? Or are public servants actually the servants of their political masters, as the pollies focus more on getting re-elected than running the country well?

Does Treasury dominate the other departments and the economic advice going to government? Do bureaucrats still give ministers "frank and fearless" advice, or has their role been usurped by the ever-growing army of ministerial staffers, politically aligned think tanks and lobby groups?

In truth, it’s hard for outsiders to be sure. But a new book by a former 30-year senior Treasury officer, Paul Tilley, Changing Fortunes, is surprisingly frank and fearless in spelling out how things work, and how Treasury’s relationship with the elected government has "changed dramatically in recent times".

Last month Scott Morrison said he saw the bureaucrats’ role as implementing the government’s policies. Their advisory role was limited to advising the government of any problems that might arise during that implementation.

Tilley makes it clear this isn’t just what Morrison would like, it’s pretty much what he and his recent predecessors have long had. Treasury gives much information to the treasurer, but avoids giving written policy advice it believes would be unwelcome. What little frank advice is given comes verbally, as part of the private discussion between the treasurer and Treasury secretary.

Tilley says the art of policy advising involves understanding the true nature of the problem, predicting the consequences of policy options and framing effective policy advice.

To be influential, however, policy advisers need to find a balance between having sufficient separation from the raw politics of government to maintain a strong policy framework, on one hand, and having sufficient responsiveness to ministers to be listened to, on the other.

"Treasury’s influence spectrum had ‘frank and fearless advice’ at one end and full ‘responsiveness to government’ at the other," he writes. The trick was the find the right spot in the middle.

But by 2014, under Tony Abbott, "Treasury was now at the full responsiveness-to-government extreme," he writes.

His book is a history of Treasury from its establishment in 1901. "Treasury has long considered itself to be the best economic policy advising agency in Australia.

"Its favoured economic policy framework has for the most part been grounded in neoclassical economics - a belief in the power of markets, and the inherent tendency of supply and demand forces to move towards equilibrium.

"Non-achievement of equilibrium must be caused then, by some market impediment or government interference, and Treasury has seen it as its job to tackle those impediments or that interference.

"If there has been one enduring belief within Treasury – its light on the hill – this is it," he writes.

This is what Tilley means by Treasury’s possession – unlike so many other departments - of a "strong policy framework".

"If there has been a central defining culture in Treasury, it has been around analytical excellence – having the strongest policy framework and the best ideas. If there has been one recurring constraint on Treasury’s policy effectiveness, it has been too narrow in its focus and closed to alternative perspectives," he says.

Tilley’s title, Changing Fortunes, recognises that, over its 118-year life, Treasury’s influence has waxed and waned.

For its first 30 years it was the government’s bookkeeper. It evolved into an economic policy agency only after the Great Depression revealed its inability to provide authoritative advice on economic policy.

The economists arrived from the 1930s, with the advent of Keynesianism. The "golden years" for the economy in the 1950s and ‘60s were also golden for Treasury, which grew in size and status, leading the debate about economic ideas and allowing its influence and strength to give it "a level of arrogance".

This did not sit comfortably with the increasingly assertive governments of the post-Menzies era. Treasury was pushed out into the cold by Gough Whitlam, and kept there by Malcolm Fraser. Treasury’s advice remained frank and fearless, but was considered dogmatic, and often wasn’t listened to. I think this was when our Yes, Minister era ended.

Relations became more constructive when Bob Hawke and Paul Keating arrived, and continued so under John Howard and Peter Costello. "There was a sense of partnership in the Treasury-government relationships, and with the advancement of economic reforms that Treasury advocated it again influenced the policy agenda."

But for the past decade, first under the Rudd-Gillard-Rudd government, then under Abbott-Turnbull-Morrison, the "political chaos" has robbed governments of the sustained political capital needed to pursue difficult reforms. Governments fighting for their political survival have maintained a "relentless push for message over substance".

"In the daily political and media battles of the last decade, Treasury policy advice has not been sought, and at times not very effectively given. In those battles, it has been economic and budget facts and figures, not policy advice, that have been demanded," we’re told.

"The habit has developed of not providing policy advice that ministers don’t agree with. Policy advice on contentious issues now is discussed with ministers’ offices in its preparation and if the office indicates that the minister would not be comfortable with the proposed advice an information brief goes instead.

"The office’s (politically attuned) policy advice can then be provided over the top of the Treasury information brief."

The balance of policy influence has shifted to the political offices and external stakeholder groups, with the public service becoming more information providers and implementers of government decisions, he says.

"The government, therefore, is left without a strong source of genuine policy advice. The consequent lack of a consistent economic narrative over the last decade is plain for all to see."