Wednesday, April 04, 2007

Australia's Treasury and the Formation of Public Policy


Photo: Dr Ken Henry, Secretary, Australian Treasury

Under the headline "Revealed: Treasury chief's blast at government policy", today's Australian Financial Review carried a story reporting on a leaked speech made by Secretary of Treasury Ken Henry to Treasury staff. I cannot give you a link to the story because the AFR does not allow free access to its coverage.

The story created considerable media excitement because of its apparent criticism of the way Government policy was being formed, together with the revelation that Treasury had apparently been sidelined in some recent policy discussions including especially the PM's $10 billion dollar water plan.

The Labor opposition leapt at the material, while Ministers responded in a dismissive way. Water and Environment minister Turnbull was especially dismissive. Quoting from an ABC radio report:

HAYDEN COOPER: But Mr Turnbull maintains climate change and water are not issues for Treasury officials to deal with.

MALCOLM TURNBULL: This is not a narrow or arid economic analysis issue, this involves a lot of big questions, it involves dealing with practical people, people who've got a lot of dirt under their fingernails, who work all day in the bush and know how things work. And they're the people I'm spending my time consulting with and listening to.

Following the controversy, Dr Henry quickly released a full copy of the speech along with an clarification. You can find both his speech and his press release here.

I am sure that the story will run for some time. However, I thought that I might make a brief comment from my own perspective because Dr Henry's speech provides an interesting and in my view positive insight into the formation of public policy in Australia.

First and for the especial benefit of my international readers, unlike the US system the Secretary of the Australian Treasury is not a political appointee but a public servant. Treasury itself is one of the original Departments formed at the time of the Australian Federation. It's core role is the provision of economic policy advice.

Treasury, along with the Departments of Prime Minister and Cabinet and Finance, is what is known in Canberra parlance as one of the central coordinating agencies. These agencies must normally always be consulted on matters going to cabinet. Here one of the challenges always faced by the Cabinet Office is the desire of ministers to bring things into cabinet below the line, without the preparation of the required formal cabinet submission.

Traditionally, the cabinet process has worked like this. Matters going to cabinet require preparation of a formal cabinet submission. Interested agencies, and in the full process this always includes Treasury, must be consulted and their responses included in the cabinet submission. This is what Dr Henry is referring to in his speech when he refers to coordination comments.

All submissions are meant to be lodged with the Cabinet Office a specified period before the cabinet meeting. This in combination with the coordination comment process is designed to give agencies and ministerial offices time to brief their minister in advance of the cabinet meeting. All this gives Treasury considerable influence.

In carrying out its role, Treasury has always prided itself on the rigour of its thought and its willingness to give what it sees as objective advice, sometimes to the discomfort of ministers and even governments. Even when I was in Treasury I did not always agree with the Departmental line, less so when I left the Departments and was providing countervailing advice to my former colleagues. However, I never doubted the intellect of Treasury staff nor their pride in what they did.

In this context, I was saddened that Dr Henry's speech to staff was in fact leaked, because that leak is itself a breach of the Treasury ethos and especially the relatively open internal nature of the Department with its emphasis on discussion, ideas and information exchange.

On the other hand, I also found the speech itself enormously reassuring in that it showed that the traditional Treasury ethos is still alive and well despite all the changes that have taken place in public administration over recent decades. Three quotes to capture the tone:

The Government, our ministers and other agencies are under no compulsion to rely on our advice. In respect of water, that point is all too obvious. We are competing for influence with other central agencies, line agencies and independent policy advisers, such as think-tanks, commentators and consultants.

What gets us to the policy table is a reputation for deep analytical rigour and economy-wide thinking Analytical rigour and economy-wide thinking gets us to the table, but it’s not enough. If we are not effective in communicating these messages to our ministers and stakeholders and influencing their thinking, we will fail in our mission.

The quality of our relationship with Treasury ministers is of vital importance for very obvious reasons. We need to be responsive to our ministers, tailoring our advice to the current economic and political environment, but at the same time safeguarding the integrity of our advice. We need to nurture our ministers’ confidence and their trust in us. As I have noted on other occasions, I have never known the Treasurer to not welcome frank and honest advice when it is provided in-confidence and in good faith.

I commend the speech to you.

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