Labor pledges to slash consulting and contractor bill by $3 billion

01 May 2022 3 min. read

The outsourcing of public sector work to consultants and contractors is at the core of perennial political debates between the country’s major parties. Now, Labor intends to slash the government’s external staff bill by $3 billion.

The opposition Labor party has restated its pledge to slash $3 billion in federal government consulting and contractor bills over four years should it win next month’s election.

As part of the plan, Labor will reinvest a portion of the savings back into rebuilding the internal capacity of the Australian Public Service (APS), while also scrapping the contentious staffing caps designed to keep its numbers in line with 2006-07 levels.

Actual APS employment and equivalent in consultancy spend

The policy announcement is the latest in an ongoing ideological battle over private sector government outsourcing between the two major parties, but one which appears to be coming to a head as the federal consulting spend has continued to balloon year-on-year to the extent that the seven major beneficiaries – McKinsey, BCG, Accenture, and the Big Four – are now pulling in more than $1 billion in combined annual fees alone.

Undoubtedly, the pandemic has contributed to rising consulting costs, along with the national digital transformation agenda, yet Labor is arguing that the APS should have the internal capacity to carry out the bulk of such work. Additionally, according to Australian Bureau of Statistics figures cited in a recent Australia Institute report calling for greater transparency, government spending on external staffing had already doubled over the five years to 2020.

In response, Labor says it will rebuild the capacity of the APS by boosting numbers and reducing waste, with the aim of a ‘sensible’ 10 percent reduction in its first year in office and an initial reinvestment of nearly $500 million, including on more than a 1,000 front-line service delivery workers for Services Australia, the National Disability Insurance Agency, and the Department of Veterans’ Affairs – the latter which recently brought in McKinsey.

As a flow on from the abolishment of the average staffing level cap, Labor said it would also conduct an audit of employment within the APS in its first year with a view to converting temporary forms of work such as labour hire, casual or contract roles into more permanent positions, stating that the “privatisation of the APS by stealth” had condemned “tens of thousands of public sector workers to the risks and stresses of insecure work”.

The Community and Public Sector Union was quick to welcome the announcement. “It is in the interests of both the capacity of the APS and staff to keep this work in-house,” said CPSU national secretary Melissa Donnelly. “Every time public sector work is siphoned off to consultants it is a missed opportunity to build capacity and capability, and in a tightening labour market if staff are constantly overlooked for consultants, they’ll simply go elsewhere.”

Naturally, Liberal was less supportive of the proposed measures, having introduced the APS staffing caps in 2015. Finance Minister Simon Birmingham told the press that the opposition’s plan wasn’t remotely credible. “Labor’s claimed savings on contractors are as likely to happen as Anthony Albanese is to fly to the moon. The idea that Labor will uncap public service numbers but somehow end up with a saving by spending less on contractors is fanciful.”