<brd>
In years to come, when people wonder why Federal Government computing is in
such a mess, this article will be a useful reminder of what "a
bloody-minded ideology behind policies, incompetence in implementation and
a breathtaking dismissiveness..." can lead to.
And it looks as though it's more of the same for Sydney Airport.
</brd>
$20 billion nice guy
SMH
Date: 25/08/2001
http://www.smh.com.au/news/0108/25/review/review3.html
Behind John Fahey's 'outstanding bloke' image lies a saga of poor
management and hasty sell-offs by the former finance minister, reports
Laura Tingle.
At the May press conference called to announce he would be leaving
politics, John Fahey was asked what he recalled as the highlights of his
career. He cited "that moment of euphoria when we won the Olympic Games",
the reform of the legal profession in NSW and the reforms he introduced to
the State's industrial relations system.
He had thought about the lows ("most of them are unprintable") but singled
out his "regret" that in 1993 the premiers and then prime minister had been
unable to resolve Mabo.
The press conference transcript then reads:
Question: "You didn't say anything about your current portfolio ..."
Answer: "Oh look, well, why would I talk about privatisation (laughter)?
"Look, I am delighted to have been part of a team that has exercised
enormous discipline and in turning the books around ... I've had some
adrenalin flows and some 42 or 43 asset sales.
" ... I suppose there's few people that have done more privatisations if
any, in the world than I have done.
" I still believe that that's right for good reasons when you put the sort
of right formula in place and away you go, and I have Sydney Airport still
ahead of me. It's not over yet."
There, in a nutshell, is the John Fahey dilemma.
Not even he, unless pressed, really seems too enamoured of what he has been
doing for the past five years.
Fahey ventured this week that his May list may have reflected the fact that
many of his achievements were gained when he was leading a State
government, rather than simply as a member of a team - the role he has
taken during the past five years in Canberra.
When pressed about his achievements as finance minister he says he is
"delighted and proud to be part of a fiscally responsible government",
cites expenditure cuts which have allowed the doubling of medical research
spending and his introduction of accrual accounting in the Budget.
"It was a tough time but I think we have managed to deliver in a way which
hasn't been seen for a long time," he said on Thursday.
A lot of people might agree with this last sentiment but for different
reasons.
Fahey and his portfolio have been at the centre of the deliberate cultural
pillage the Howard Government has inflicted on Australia's public sector
for the past five years.
His brief - apart from paring back spending - has been to transform the
public sector back to some pre-Whitlamite, if not pre-World War II, model
of small government.
Even those who would endorse such a trend would have to conclude on the
evidence that the finance portfolio has best illustrated the worst of the
Coalition's rule of the past five years: administration has not been this
Government's strong point.
Peter Costello told a "friends of John Fahey" dinner last week in Sydney:
"In my view, he became Australia's best-ever finance minister. An
outstanding minister and an outstanding bloke".
Fahey's fortunes in Canberra have been favoured by the fact that he is a
"great bloke". Yet just what evidence Costello chose to assess him as
Australia's greatest-ever finance minister is harder to track down.
In the past year, the criticisms of the way Fahey and his Department of
Finance and Administration (DOFA) have run the portfolio have been
consistent and persistent - most notably from the Auditor-General.
It has taken a string of damning audit reports to turn the spotlight on
Fahey and for this both the media and the Opposition are culpable. Finance
has never been a "sexy" portfolio. The stories in it are complex and
unfriendly to television.
But in Fahey's case, the lack of scrutiny has been all the greater both
because of the "outstanding bloke" factor and because the Opposition made a
series of pragmatic decisions that issues like outsourcing were too
complicated to run in Question Time - the major fodder for television's
political coverage.
With scrutiny, what has repeatedly emerged is a bloody-minded ideology
behind policies, incompetence in implementation and a breathtaking
dismissiveness from Fahey and the department when confronted with these
criticisms.
There have been big costs, too. Taxpayers have conservatively lost at
least $20 billion in assets sold at undervalued prices, in lousy foreign
exchange management, or funds ripped out of government services on the
promise of illusory savings from handing over services to the private
sector.
The cost is also in the fact that we no longer own many of the buildings
the Government occupies, or the computer systems on which it runs - and
will pay dearly for both in the future - and that the institutional memory
of the Public Service on policy has been largely lost as numbers have been
cut and those not prepared to bend to an increasingly political agenda have
left in disgust.
And - despite his departure from the portfolio at the election and his
battle with cancer - at least one of his biggest decisions is still to
come: the sale of Sydney Airport.
Fahey's record is not a pretty one. He has presided over the sale of about
$48 billion in assets like Telstra, and a total sell-off of assets
including things like buildings of about $60 billion.
The biggest sales - like Telstra - have been dogged with controversy over
their pricing and the extravagant fees paid to advisers.
The first Telstra float, for example, sold off a chunk of the
telecommunications giant at prices which its listing on the stock exchange
proved within minutes had undervalued it by at least $3 billion, and by as
much as $16 billion, based on its market valuation a year later.
Then there have been the management debacles.
Take foreign exchange management.
Fahey's department is responsible for establishing the financial guidelines
upon which most of the bureaucracy is supposed to operate.
The Auditor-General found widespread disregard of risk management
principles in foreign exchange management within the bureaucracy,
including the Department of Finance itself. The losses just for the four
departments audited last year were $3 billion.
Similarly, the audit office found the selection process for government
consultants - who received $375 million in fees last year - failed to
comply with DOFA guidelines.
Then there was Employment National, the government-owned job agency which
went from being the dominant force in the Job Network to a bit player as a
result of a botched tender.
Finance's role in this was supposedly to protect the taxpayers'
shareholding. Instead, Employment National's $72 million profit in 1998-99
was turned into a $92 million loss in 1999-2000 after big asset write-downs
on office leases and equipment.
There is the Commonwealth car debacle. The 16,000 vehicle fleet was
privatised in 1997 and there has been a dispute ever since with Macquarie
Bank over $40 million.
All these pale into insignificance with the $5 billion information
technology outsourcing adventure which was supposed to yield savings of $1
billion - taken out of departmental budgets in advance - but which the
Auditor-General said last year had produced identifiable savings of only
$70 million.
When the Government finally responded to the public outcry and sent the
managing director of the Australian Stock Exchange, Richard Humphry, in
to investigate, Fahey released the damning results of his report at 6.10pm
on a Friday in early January - not, one presumes, because he wanted people
to take a lot of notice of it.
(Fahey and his department have also flatly refused to release information
on the outsourcing contracts to the Parliament).
On all these issues, Fahey has tended to dispute the auditor's methodology
or findings.
The man who would pick up his portfolio if Labor wins the next election,
Lindsay Tanner, says: "Look, one or two auditors-general report and you
could say there is a debate about methodology. There will always be a
debate dealing with arcane accounting standards but what we have got here
is a pattern and you have to conclude he's done a very ordinary job which
has been a consistent combination of incompetence and ideological
arrogance."
The most recent controversies have been about the sale of government office
buildings, and the management of MPs' perks.
Suffice to say on the sale of office blocks, the Audit Office makes a
compelling case that DOFA sold buildings on the basis of a flawed financial
model that in turn was designed to justify a general instruction to sell
everything and that the result is that buildings have been sold cheap, and
taxpayers will pay more in rent than they would have in ownership costs.
Fahey has been in furious debate with the Auditor-General, Pat Barrett (a
former finance official), over this particular report - suggesting he has
overstepped the mark by criticising government policy, not just its
implementation.
Fahey and the Government seem a little oblivious to the fact that the
auditor-general is a servant of the Parliament, not the executive.
Fahey has also been hotly disputing the technical aspects of the Audit
Office report on property sales, and insisting that the sales program was
successful since it raised $131 million more than its target.
But it is not necessary to go into the accounting details of the report to
be disturbed by it.
DOFA told the Audit Office in April "that its role was to implement a
property divestment program endorsed by ministers" and that it "was not
charged with the role of protecting the overall interest of the
Commonwealth".
And in doing so, the department probably delivered the most damning
indictment on itself and the Howard Government.
Just imagine that approach being taken in the days of the Khemlani affair.
Similarly, the Audit Office noted in its report on MPs' perks that Finance
had told it that neither its own officials nor MPs were subject to a
requirement - governing all other spending of taxpayers' money - that
spending on politicians must be an efficient and effective use of public
funds.
David Cox is now a Labor backbencher but was the chief of staff to the most
notable finance minister of the previous Labor years, Peter Walsh.
His economics are as dry as the outback, and his obsession with
administrative details - with one infamous lapse - legendary. He says:
"The finance minister's job is to make sure whatever policies the
government pursues, there is proper consideration of the long-term
financial implications.
"That means containing expenditure. It also requires ensuring adherence to
proper accounting standards and financial controls.
"Fahey, encouraged by his department, wanted to contract out government
operations and sell assets to reduce debt, apparently with the objective of
permanently reducing the size and the role of government.
"Unfortunately in their haste to achieve that objective, they have behaved
like a bunch of financial cowboys doing bad deals and making up the
accounting standards afterwards to justify them."
Now the sale of Sydney Airport looms.
It is said to be the only issue in Fahey's portfolio that he kept tabs on
during his recent illness.
There is also reason to believe he thought it should be sold last year,
before the Prime Minister became captivated by the idea of a new airport at
Kurnell.
The biggest single infrastructure sell-off to date will help shape the
final judgment on his ministerial reputation.
That judgment may take some time to emerge.
Asked earlier this year if the sale of a public asset like the airport
should be more transparent, John Fahey said: "There will be every
transparency and the transparency will be at the appropriate time."
Yet it is symptomatic that the sell-off has been done in haste, in
considerable secrecy and with little scrutiny.
The only thing that is transparent at the moment is that the sale is being
conducted to maximise the price, but at a cost which spells maximum noise
for people under the flight path.
-- Competence, like truth, beauty and contact lenses, is in the eye of the beholder. -- Laurence Peter, The Peter Principle (1969)Regards brd
Bernard Robertson-Dunn Canberra Australia brd@dynamite.com.au brd@austarmetro.com.au
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