The PwC tax leak furore has drawn attention to the Australian Government’s consultancy outsourcing addiction. Decades of governments, at all levels, have overseen a huge exponential increase in consultancy contract work put out to the private sector for tender.
“824,178 contracts were reported on AusTender with a start date between 1 July 2012 and 30 June 2022, with a total commitment of $565 billion in value.”
– Australian National Audit Office
The Morrison government in 2020/21 spent $20.8 billion on consultants and outsourcing, according to the most recent audit. (Stephanie Convery, The Guardian, 6 May 2023) One would have to ask, after looking at these figures, if there is half a trillion dollars of work available why wouldn’t we have this handled in-house by the public sector? The reason why is that the overarching story running Western governments over the last 40 years has been one promulgating ‘small government’. 16, 000 jobs have been cut from the public service over the last 10 years, according to ACTU Secretary Sally McManus.
Private Sector Favoured Over Public Sector in Neoliberal Government Trend
The Neoliberal narrative has told everyone that the private sector is best equipped to handle everything because it is profit driven and, therefore, efficient. Whilst governments and the public sector are riven by ideology, outdated infrastructure, and, therefore, wasteful and inefficient. A long time ago there may have been some truth in these statements but times have changed. The world has moved on and so has the public sector in response to these winds of economic change and some lean years. The trouble now is that the private sector has eaten up much of the available skilled labour in this sector and has poached many of the brightest accountants, lawyers and economists. Indeed, the cross fertilisation between the public and private sectors raises questions about things like loyalty to the nation vs loyalty to their corporate masters.
“Consultants have credibility because they are not dumb enough to work at your company.”
– Scott Adams
PwC Tax Leak Furore Fans Anti-Consultancy Feeling
The PwC tax leak, which may become a crime now that the Australian Federal Police are investigating it, highlights the potential problems within this messy situation. It should be noted that the Australian Federal Police regularly use PwC as consultants – spending over $20 million since 2021. Do you get the sense that this corporate web is everywhere you look and the insidious nature of the Australian Government’s consultancy outsourcing addiction. Those of you with an appetite for conspiracy theories may find a real focus for your suspicions here.
“The boss of PricewaterhouseCoopers (PwC) Australia has stood down as the consulting firm feels the fallout of a partner betraying the trust of its biggest client: the federal government.”
– ABC News
Australian Public Service Decimated By Governments
The Australian public service, we were told during the Royal Commission into the Robodebt Scheme, is supposed to operate without fear or favour. This manifestly did not occur during the design and operation of the Robodebt scheme. Senior bureaucrats like Kathryn Campbell were embroiled in the Robodebt disaster, which cost the lives of vulnerable Australians wrongly accused of owing large amounts of money. The scheme was illegal in conception and execution and government ministers like Scott Morrison, Alan Tudge, and Stuart Robert were all tainted by it. It is considered one of the greatest betrayals of the Australian people by government in our history. Bureaucrats repeatedly ignored their duty to uphold the law in favour of currying favour with their ministers. Some senior public servants on salaries around a million dollars annually were intent on their job security over any moral or legal considerations. PwC was involved in preparing a report into the Robodebt scheme. Perhaps, in an era of massive government spending on private sector consultancy, those few public service mandarins remaining were kow towing to their government ministers with greater obsequiousness in response to these economic pressures. The Morrison federal government oversaw the decimation of the public service during their decade in power.
“However beautiful the strategy, you should occasionally look at the results.”
– Winston Churchill
Big Noting Ministers Bestowing Corporate Favours
Being somewhat familiar with sales presentations and the procurement process I can imagine the power dynamic within government. Ministers would be ultimately responsible for the decision after a panel has reviewed the tender and made recommendations. Imagine the sense of power involved in awarding consultancy work worth hundreds of millions of dollars to a firm. Imagine the inclination of those going after the contract to sweeten the process and hopefully influence the outcome. It is an environment ripe for corruption and the kissing of bottoms by those applying for the tender. Is it any wonder that governments far prefer to conduct the business of government in this manner and that the outsourcing of consultancy work has grown exponentially. On top of the lovely feeling of bestowing a wealth of work upon companies like PwC there is the reduction in responsibility for the consequences. Outsourcing the work of government puts an arm’s length between the minister, his department, and whatever comes of the research or service completed by the consultancy firm. Governments prefer not to take the blame for things wherever possible and outsourcing billions of dollars’ worth of work reduces the chances of being held directly responsible for stuffing things up.
“Consultants are people who borrow your watch and tell you what time it is, and then walk off with the watch.”
– Robert Townsend
Corporate Influences On Modern Western Governments
The PwC tax leak has turned a spotlight on the power and influence of corporations within modern Western governments. The slashing of the public sector over decades by governments in adherence to the Neoliberal narrative preaching ‘small government’ has seen the outsourcing of previously considered essential government services. The beginnings of this trend actually began in the United States, during the Kennedy administration, back in the 1960s with the Rand Corporation. A shift occurred in the way the work of governments was viewed and evaluated. The moral imperative was replaced with economic considerations. The Rand Corporation was approached by the US Department of Defence after WW2 to analyse its operations.
“RAND’s early research also formed the core of pathbreaking economic analyses of major social policy issues, such as improving the U.S. health care system and providing affordable housing to low-income families. RAND developed the planning, programming, and budgeting system that Secretary of Defense Robert McNamara’s “Whiz Kids” promoted throughout the U.S. government in the early 1960s. The system became the federal standard under President Lyndon Johnson in 1965.”
– RAND
Economists and accountants began to run the ruler over social policies mentioned in the quote above. Eventually, we find ourselves in a world where charities and NGOs regularly spout the economic cost/benefit of the programs they lobby for in preference to stressing the moral imperative. However, has the US health care system and affordable housing situation ultimately benefited in the 50 years since? No, because when you judge everything by narrow economic criteria instead of maintaining the moral expectations upon governments to take care of their citizens you end up in an ethical wasteland. Corporations are, generally, run differently from governments in that the profit motive drives all before it. PwC analysing the Robodebt scheme is crunching the numbers without the onus of care which government is supposed to adhere to. This is why the private sector has difficulty in running aged care facilities with the level of care necessary to properly look after vulnerable people. Even though the wages in this sector have been at a disgracefully low rate for years the staffing levels in these facilities have been maintained below the optimum level for a high standard of care. Prisons run by the private sector have the same problems but the general populace lack empathy for incarcerated Australians. Similarly, Robodebt was allowed to run for years because Australians believe that the unemployed do not deserve compassion. The fact that the Jobseeker rate is so far below the accepted poverty line and successive government do nothing about this shows the attitude of the majority of voters toward this matter. We have become a nation of dilettante accountants judging everything by the economics, rather than realising that some things need to be done irrespective of cost.
“If all you have is a hammer, everything looks like a nail.”
– Abraham Maslow
The government predilection for an economic evaluation of all its policies and potential policies has created this motza for consultancy firms. A public sector slashed by 16, 000 jobs means outsourcing becomes necessary to meet this requirement. The public expectation for stringent economic analysis, which has been drip fed to us over decades, has been tacitly encouraged by governments to bolster their credibility. Accountants have become essential requirements to the functioning of governments at levels never seen before. The proliferation of ‘bean counters’ is similar to that of lawyers in the modern halls of government. Both of these professions are a part of a self-professing trend. Every potential policy move by government is, often, preceded by multiple reviews. These reviews are, often, outsourced to consultancy firms. Governments in the modern world are terrified of making mistakes, so they get consultants to run the ruler over possibilities again and again. What used to be done in-house by the public service is outsourced to firms like PwC.
“Consulting: If you’re not a part of the solution, there’s good money to be made in prolonging the problem.”
– Anonymous
What Is PwC?
“PwC is the brand under which the member firms of PricewaterhouseCoopers International Limited (PwCIL) operate and provide professional services. Together, these firms form the PwC network. ‘PwC’ is often used to refer either to individual firms within the PwC network or to several or all of them collectively.
In many parts of the world, accounting firms are required by law to be locally owned and independent. Although regulatory attitudes on this issue are changing, PwC member firms do not and cannot currently operate as a corporate multinational. The PwC network is not a global partnership, a single firm, or a multinational corporation.”
– PWC
PwC Tax Leak or Crime Against Australia?
Peter John Collins, the PwC tax partner at the centre of the tax leak has been banned by the Tax Practitioners Board for 2 years. Many Australians consider this punishment to be woefully inadequate. Treason has been mentioned but this is usually a charge mounted during times of war. It is akin, however, to insider trading for a tax accountant partner to share confidential information with those commercial interests most likely to directly benefit from this information. It is a gross betrayal of the trust bestowed upon a tax professional and the company he represents as a partner by the Australian government. The Australian Federal Police are investigating the breach by PwC.
“PwC has been under pressure to release a full list of partners who were included in the emails and of the clients that potentially benefited from its advice. The firm provided a list of 63 names to senators at the start of the week, as well as naming four former partners whom it said were involved in the sharing of information and nine partners who have been stood down by the consultant pending the outcome of a review. “
– Financial Times
PwC employs through its network of partner firms some 9, 000 Australians in a variety of accountancy, legal, and supporting managerial and consultancy roles. PwC is like a giant octopus straddling the business and government landscape in Australia. The firm has been highly successful in attracting tender work, especially from governments generating them revenue in the billions of dollars. Auditing work gives firms like PwC access to confidential financial information from their clients. The fact that PwC is also involved in managerial and financial services consultancy means that it is involved in a variety of situations where interests overlap and potential conflicts of interest arise. Many industry insiders and pundits consider that PwC is too big and has too many irons in the fire.
PwC Top Education Group Investment Potential Conflict Of Interest
The ABC News has revealed that PwC was involved in another potential conflict of interest in their $5.5 million investment in college Top Education Group, whilst simultaneously being the consultant to the government regulator. Individual PwC partners also invested personally in Top Education Group during 2016-17.
“The investments in 2016 and 2017, totalling $8 million, were made in the run-up to the May 2018 float of the company on the Hong Kong securities exchange. PwC’s former chief executive Tom Seymour sat on Top Education Group’s board until last year.
Despite this significant shareholding in the college, PwC continued to take on consulting work for the Tertiary Education Quality and Standards Agency (TEQSA), even though Top Education Group was directly impacted by TEQSA’s regulatory decisions.”
– ABC News
If governments abjure their responsibility by outsourcing to private enterprise then incidents like the PwC tax leak and the above breaking story about Top Education Group will become more prevalent. In all probability there are likely to be many more incidents of which we are currently unaware, as the sheer volume of outsourced government tenders is enormous. It is important to realise this is a direct correlation of the neoliberal trend toward so-called ‘small government’ by successive governments in Australia. In actuality, much more work is being done and money spent via the Australian Government’s consultancy outsourcing addiction than ever before.
“Expenditure on consultancy services hit almost $900 million in the last financial year, an analysis of AusTender data from the national audit office shows.
A report by Auditor General Grant Hehir shows the figure has grown steadily from $352 million in 2012-13 to $888 million in the last financial year, with almost $330 million worth of contracts awarded to KPMG alone.”
– Government News
Multi-Disciplinary Practices & Legal Professional Privilege
Lawyers are concerned about multi-disciplinary practices like PwC overusing legal professional privilege (LPP) when representing a tax client.
“An Australian Federal Court has ruled that accounting giant PwC overused legal professional privilege when representing a tax client—a move that could deter clients from using multi-disciplinary practices and make their law-and-consulting offerings more difficult to manage, law firms say.
The decision stems from a case heard last year, in which the Australian Taxation Office (ATO) disputed claims of legal professional privilege over 15,500 documents claimed by PwC on behalf of its client Flora Green, a subsidiary of Brazilian meat processor JBS Global.
The tax office argued the form of the engagements did not establish a relationship of lawyer and client sufficient to claim legal professional privilege, and the services provided by PwC were not those of a relationship between lawyer and client sufficient to claim legal professional privilege.
It also argued the documents in dispute were not communications made for the dominant purpose of giving or obtaining legal advice from one or more of PwC’s lawyers.
To decide the case, Justice Mark Moshinsky examined a sample of 116 documents, and found 49 were privileged, six partly privileged and 61 not privileged. ”
– Law.com
Corporate Concentration Means No Competition For Consumers
PwC and the other giant partner firms involved in multi-disciplinary practice are another example of the corporate concentration occurring in Australia. Oligopolies are everywhere you look and seek to do business within the Australian landscape. Lack of competition delivers price setting abilities to these giant firms and removes consumer power in the market. The high inflation sticking around in Australia has been identified by an OECD report as the result of a profit-price-spiral.
– Australia Institute
Corporations in Australia are raising their prices to recoup any losses from the pandemic and to take advantage of the government money pumped into the economy during the public health crisis. It is not high wages generating high inflation in our economy but companies in rude health chasing record profits. Qantas has declared record profits in the billions in 2022/23 and despite receiving billions from the federal government during the pandemic shows no sign of paying anything back. The Commonwealth Bank of Australia (CBA) on the back of steep interest rate rises records billions in half yearly profit. Woolworths and Coles make solid profit increases thanks to the cost of living spike on the back of high inflation. Meanwhile, Philip Lowe, the RBA governor defends corporate Australia and demands workers deliver increased productivity before being granted wage increases. This is despite the fact that their wages are going backwards because of the high inflation and CPI increases reducing purchasing power. This is the financial system in which we live, where bankers back business and the working poor are seen as the sacrificial lambs during the corrective process of monetary policy combating high inflation.
Productivity is not going to be delivered by workers working harder. Productivity is far more likely to be generated by further automation via things like AI and investment in machines. The fact that many of our sectors operate as rentiers, extracting rents from things like mining leases, toll roads, financial products, labour-hire, and high tech services means there is little impetus to increase productivity. If you are extracting revenue via rent seeking it is not primarily about productivity. Modern economies here and around the globe have changed and there are questions about whether central bank economic thinking has kept up.
“The age of entitlement is alive and well in Australia. Governments of all persuasions dispense favours at public expense to those who can buy political influence — commission agents hawking financial products, “salary packagers” helping firms avoid tax, licensed clubs, private health insurers, toll road operators, and pharmacists, to list a few more recent examples.
It’s a lazy business culture, making for unearned wealth and contributing to the notion that there is little connection between contribution and reward. While corporations and their industry associations have been the greatest rorters, the culture has infected parts of the union movement as well – if a few bosses are taking unearned billions from the system, why shouldn’t the workers and their unions pocket a few million among themselves?
The greatest cost of this business culture, however, is in terms of expectations of profits. When rent-seeking and protection of privilege can yield such high returns, real investment – in physical plant, in innovation, in low carbon technologies, in human capital, in risky start-ups – is a mug’s game.”
– New Matilda
PwC Consumer Protection Reports
– PwC was involved as a consultant in a review of consumer protection in the travel sector in 2010.
– PwC prepared a report into Telecommunication Consumer Safeguards in 2018.
– In 2020 PwC produced a cost-benefit analysis into the Regulation of automated vehicles when in-service.
I list the above to just provide an inkling into the volume of work that PwC does on behalf of government into just about every field and sector. The Australian Government’s consultancy outsourcing addiction is everywhere you look when casting an eye over the state of play in the 21C.
Understanding Your Consumer Credit File & Rights
In this brave new world of governments outsourcing their responsibilities to the private sector it is important to understand your consumer credit report and rights within the system. An economic recession is highly likely, as Philip Lowe the RBA governor appears to be committed to dampen demand by steeply raising interest rates for a prolonged period in a bid to return inflation to the 2-3% target range. Inflation is currently at 6.8% in Australia. First thing to do is get a hold of copies of your consumer credit file from the 3 credit bureaus. You can receive a free copy every 3 months or whenever you have been refused credit on the basis of the information within it. I have listed the phone numbers of these agencies below:
Illion Ph. 1300 734 806
Experian Ph. 1300 783 684
Equifax Ph. 138 332
Checking the information listed on your credit report is advisable in light of the warnings about scammers and identity fraud currently in the news. Spend some quality time with the document going over every detail to ensure all data is correct and true. If you discover inconsistencies and/or errors immediately contact the credit provider and the credit bureau. There are specialist legal eagles who work in this field if you want some help.
Understanding how the consumer credit system operates is a very good idea for all of us, as credit plays a very important role within our lives and the economy. Consumers are protected by the National Consumer Credit Protection Act 2009 (National Credit Act).
“ASIC administers a single national consumer credit regime contained in the National Consumer Credit Protection Act 2009 (National Credit Act), which includes the National Credit Code as Schedule 1 to the Act. The National Credit Act replaces previous state-based consumer credit codes and the Uniform Consumer Credit Code (UCCC) and applies to the conduct of Australian credit licence holders.”
– Moneysmart
References
ASIC, FAQs: Dealing with consumers and credit, Viewed 12 June 2023.
Australian National Audit Office, Australian Government Procurement Contract Reporting- 2022 Update, 2 February 2023, Viewed 1 June 2023.
Convery Stephanie, Morrison government spent $20.8bn on consultants and outsourcing public service in final year, audit finds, The Guardian, 6 May 2023, Viewed 1 June 2023.
Grattan Michelle, Grattan on looming changes for bureaucrats in the Canberra ‘bubble’, 8 April 2022, Viewed 1 June 2023.
HR Career, AFP probes with PwC nearby, 29 May 2023, Viewed 1 June 2023.
Nathan Rob, The Tender Process: From Start to Finish, 6 April 2021, Viewed 1 June 2023.
Rand Corporation, A Brief History of RAND, rand.org, Viewed 1 June 2023.