The shock expressed at the amorality of PricewaterhouseCoopers’ brazen misuse of confidential Government information is understandable and overdue. Not just overdue because the initial breach of confidentiality took place in 2013 and was detected by the ATO in 2016, but because the sky-rocketing use of consultants in the Australian Public Service (APS) since the election of the Abbott Government in 2013 made such a scandal inevitable.
Whilst providing expensive advice to Government on the creation of vehicles to ensnare multinational tax dodgers, and then using your involvement in their creation as a marketing strategy to attract the same multinational tax dodgers as clients seems a particularly egregious example of private companies putting their own interests above that of the client they’re ostensibly serving, the stark truth is that the latest PwC scandal isn’t even the first time that the Big Four consultants – Deloitte, EY, KPMG and PwC – have been caught doing exactly this. In 2015, the British parliamentary Public Accounts Committee found that, after staff from each of the Big Four had been seconded to the Treasury to provide technical advice on tax, including drafting legislation to prevent multinational corporations avoid tax by artificial means known as transfer pricing, they went on to “use their insider knowledge of legislation to sell clients advice on how to use those rules to pay less tax”.
We shouldn’t be surprised. Conflicts of interest lie at the heart of the consultants’ business model, whether because they stand to benefit financially from the advice they give, or they walk gaily on both sides of the street, tailoring sometimes contradictory advice to meet the competing needs of competing clients.
The go-to solution for consultants providing advice to Government is generally streamlining and downsizing. They speak of efficiencies and flexibility, recommending Governments concentrate on core competencies while contracting in “surge capacity” and contracting out specialist services. And who stands ready to provide these newly required external personnel? Why, none other than the consultants who recommended them in the first place! They consistently provide advice that, if followed, leads directly to their enrichment, with initial advice often provided at heavily discounted rates so they’re in the box seat to secure the additional and often ongoing work that will make it worthwhile. “We can’t afford to [work pro bono or at a discounted rate] indefinitely” said the head of public sector at KPMG to The Guardian in 2011, “but we can in the short term. We’re hoping to position ourselves well… if you can get in at the part of the programme when you are working out how to do it, the hope is you can stay there”.
Think of the spate of privatisations visited upon long-suffering citizenries in the 1980s and 90s by administrations led by Thatcher in the UK, Reagan in the US, and Hawke, Keating and Howard in Australia. Not only did consultants provide advice to these Governments as to which state assets were suitable for privatisation, the Governments then contracted the same consultants to advise on how best to offload the assets, and they were then employed by the private companies bidding for said assets in order that the companies could draw on the consultants’ knowledge accumulated across the public contracts (knowledge that was later also put to good use plundering the assets of developing countries at the behest of the World Bank and the IMF). Once there were no more obvious candidates for wholesale privatisation, or the public and its representatives baulked at further sales (think Deloitte’s advice to flog off Australia Post. Australia Fucking Post!), the consultants turned their attention to swathes of functional capabilities within public service departments themselves.
The ideological undermining of the role of the APS and the outsourcing to consultants of a range of roles running the gamut of policy development to service delivery is the direct cause of the diminution of the APS’s functional capability. This in turn reinforces the need to buy in external support that comes at greater cost and with lesser accountability. It’s a virtuous circle from which the Australian people are excluded. Since the introduction of the Average Staffing Level (ALS) cap by the Abbott Government in the 2015-6 budget, spending on consultants and external contractors has skyrocketed. The idiocy of the ALS cap is that it didn’t cap how much work needed to be done, or even how much money could be spent on the work that needed to be done – just how many people could be directly employed by Government Agencies to do it. In last week’s Senate Estimates, the Department of Agriculture Secretary Andrew Metcalfe justified the appointment of PwC as both a “strategic” and “delivery” partner with its associated multi-million-dollar payday by noting that the combination of the pandemic, biosecurity threats and the merger of the agriculture and environment departments created more work than could be completed by the existing workforce. As the ALS cap meant he could not hire more staff, “the majority of that work had to be done by contractors and consultants.”
In the report of the nineteenth review commissioned into the APS in the last decade, Our Public Service Our Future, a former public servant was quoted sadly saying:
I left the APS to come back as a contractor. Now I work with permanent APS staff doing the same job as them… I gain the corporate knowledge and then leave to do my next contract.
In certain departments there are now more external contractors employed than public servants (looking at you, Defence). The Government’s Audit of Employment found that the overall amount spent by the APS on external labour in 2021-2 was $20.8b – the equivalent of an additional 53,911 full-time equivalent jobs on top of the 144,271 actually employed. The $1.1b spent on consultants alone could employ an additional 12,000 public servants. For all their constant advice about the supremacy of the market, a full 30% of the global consulting market is drawn from the public sector.
Following the Tax Registration Board’s decision in January to deregister Peter-John Collins, assiduous investigation by the Senate eventually caught out not just the full extent of PwC’s shocking breach of confidentiality, but its stonewalling of the ATO’s initial inquiries and its deceitful cover-up in the aftermath. It was a mere “perception problem”, said then CEO Tom Seymour in March, claiming dishonestly that everyone with knowledge of the breach had already left the firm (two months later – thank goodness! – a few have been sent on holiday).
Australians could be forgiven for thinking that PwC would immediately be placed on a black-list and never engaged by the Government again. What was instead revealed at Senate Estimates was the extent to which PwC is integrated into the very heart of Government. The Department of Education entered into two of its nine $8.2m contracts with PwC after its double-dealing was exposed. The Department of Agriculture revealed they’d had to admonish their “strategic partner” PwC for using confidential information to mount a pitch for new contracts to boost their existing bounty of $40.32m. The Department of Defence came prepared and could list the value of their 54 PwC contract to the last cent – $223,299,943.56 – with Finance ‘fessing up to $255.2m worth. Even as Treasury referred PwC’s activities to the Australian Federal Police, they retained PwC as their internal auditors.
And questions were quickly raised as to whether the AFP could be completely impartial in its belated investigation of PwC given PwC are also the AFP’s internal auditors, not to mention the fact that AFP has a further six contracts with them worth $6.73m, mostly led by good mate of AFP Commissioner Reece Kershaw and racehorse enthusiast, former NSW Police Commissioner Mick Fuller. The AFP had certainly shown no enthusiasm to investigate PwC in 2016 when the ATO asked them to assess the potential to do so, although in fairness they made their decision based on very limited information as the ATO apparently believed PwC deserved confidentiality more than Treasury deserved to have its agreements upheld and more than the Australian public deserved answers about a staggering breach of trust. The inaction of the ATO and AFP in relation to PwC stands in stark contrast to their pursuit of whistleblower Richard Boyle when he called out the ATO’s predatory behaviour towards vulnerable taxpayers.
PwC secured over half a billion dollars of contracts with the Federal Government over the last two years. Despite the vast rivers of public money flowing into their coffers, as a partnership PwC has no legislative obligation to report on its profits or salaries. We have no right to know that its 2019 profit was in the vicinity of the $537m it recently earned from the Federal Government, nor that its approximately 500 partners take home an average of $900,000 each and every year.
It’s not just the Federal Government that has privatised a myriad of key functions. The Andrews Government spending on consultants has tripled in eight years, including 32 separate contracts with PwC. The NSW Government spent more than $1bn on consultants over the five years to 2022, including KPMG, who executed the double somersault backward pike of earning two separate multi-million-dollar fees to provide two opposing analyses of the Transport Asset Holding Entity (TAHE). The KPMG report commissioned by the Department of Transport predicted TAHE would leave the state budget $10b worse off than claims by Treasury, while the KPMG report commissioned by Treasury gave a ringing endorsement of Treasury’s figures. Go figure!
The uncanny ability of consultants to walk both sides of the street does more than render competing advice useless. It can also compromise the advice it gives to Governments seeking to pursue policies that are out of step with the interests of its more lucrative clients (yes, there are a few). When the Morrison Government preferred McKinsey’s $6m bid to develop their pathway to Net Zero “policy” over that of our own CSIRO, many believed it did so because it was only seeking a shield behind which to hide their climate inaction in the lead up to COP26 and the Federal election. The resulting policy “scamphlet” seemed to support that view. But how impartial could McKinsey be anyway when an October 2021 New York Times investigation revealed that in recent years they had provided advice to at least 43 of the world’s biggest polluters “including BP, Exxon Mobil, Gazprom and Saudi Aramco, generating hundreds of millions of dollars in fees for the firm”? How can a consultancy provide meaningful advice to Governments on how to reduce carbon emissions whilst providing advice to carbon-intensive industries on how to protect their profits?
Their track record was less than stellar. In their book, The Big Con, Maria Mazzacato and Rosie Collington reported on McKinsey’s much scrutinised advice to the UN Framework Convention on Climate Change that mysteriously advocated a reduction in deforestation should be achieved by curtailing the agricultural practices of Indigenous communities rather than stopping large timber corporations from cutting down forests, despite the Indigenous practises contributing a mere fraction of the deforestation of the logging companies. It was perhaps no coincidence that McKinsey’s clients included logging companies operating in the forests in question. Other significant deviations from the idea of “independent advice” include a preparedness to change or withhold information or analysis if a client expresses reservations or opposition to any conclusions reached. When too many inconvenient truths were exposed in PwC’s $1m examination for Services Australia of the travesty that was Robodebt, PwC agreed to ditch their final report entirely.
It goes without saying that the Big Four donate generously to both sides of politics, the $4.3m they’ve given over the last decade a miniscule amount relative to their gargantuan return on investment. Whatever scandals befall them, the consultocracy seems secure, the sometimes revolving and always open door between Government Ministers, Ministerial advisors, senior public servants and party officials and the consultancies a powerfully effective conduit for inside knowledge, influence and money. Christopher Pyne, just one of many ex-politicians, senior State and Commonwealth public servants and party officials now on the payroll of the Big Four, negotiated his deal with EY before he’d even left parliament and salivates over the piles of consulting cash afforded by AUKUS. Hell, there are so many consulting jobs flying wildly around in the “AUKUS space” it seems even Scott Morrison might catch one.
Whether clientism, ideology or laziness underpins the development and maintenance of the “shadow public service”, Australia is ill-served by this never-ending profiteering without conscience.