In a week dominated by an outsourcing scandal and revelations surrounding PwC – one of the world’s largest accounting firms – attention has been drawn to the alarming leaking of secret information from the Australian Taxation Office (ATO) to other consulting firms and PwC’s clients. The leaked information, which potentially holds valuable insights into the Australian government’s plans regarding multinational corporations and taxation, has sparked a heated debate on the issue of government outsourcing. It is now becoming evident that the disclosures made so far merely scratch the surface, with indications of more revelations to come, not just concerning PwC but other consulting firms as well.
The magnitude of this issue becomes apparent when examining the exorbitant amounts of money spent on consultants and outsourcing: during the final year of the Morrison government, an astonishing $20.8 billion was allocated to these services. To put this into perspective, this figure is equivalent to employing 54,000 full-time staff or 37 per cent of the entire federal government public service. While the Albanese government has expressed its intention to address this issue and curtail excessive outsourcing, immediate reductions are not feasible due to ongoing contracts that cannot be terminated abruptly, some of which have a duration spanning several years.
It is essential to acknowledge that certain areas of government activity require the specialised expertise of the private sector and reintegrating these functions back into the public service quickly poses significant challenges. It is now clear, however, that no amount of confidentiality agreements with external providers can guarantee the protection of sensitive material belonging to the federal government, emphasising the urgent need for a comprehensive review of the outsourcing practices.
The PwC scandal and the ‘Big Four’
A critical aspect that emerged during Senate hearings this week is that relationship between the ‘Big Four’ accounting firms – PwC, KPMG, EY and Deloitte – and political donations to parties on both sides of the political spectrum – over $4 million over the past decade. The conflict of interest arising from such financial contributions casts doubt on the fairness and impartiality of policy-making processes and there is a need for more robust regulations prohibiting these donations, considering their potential influence over governmental decisions and elections.
The Australian Greens Senator Barbara Pocock questioned Peter de Cure from the Tax Practitioners Board during the Senate hearings, and his responses shed light on the inadequacy of the current system’s response to the actions of PwC. The failure to consider whether PwC breached professional codes, particularly in acting honestly and with integrity, has raised serious concerns about the resolve and effectiveness of oversight committees. The absence of any referrals for financial penalties, despite the gravity of the situation, adds to the growing skepticism surrounding the regulatory mechanisms in place.
The ongoing Senate hearings continue to uncover shocking details, and it is anticipated that more revelations will follow. Beyond the questionable behaviour of individual consultants at PwC – such as the former head of international tax, Peter Collins – the larger issue at hand is the overreliance on external expertise, which has steadily increased since the 1980s. Influenced by neoliberal ideologies and a desire to distance themselves from anything remotely associated with communism after the fall of the Berlin Wall in 1989, governments embraced the outsourcing trend, often to an extreme extent. However, the time has come for a substantial reduction in this reliance on the private sector, as the detrimental effects of excessive outsourcing become increasingly evident.
The issue of outsourcing also extends beyond consultants to the management of procurement from the private sector on behalf of the government. In the case of PwC, the lack of effective checks and balances allowed for the leakage of sensitive government information, exposing potential vulnerabilities in the system.
The AFP has failed to investigate potential outsourcing breaches
The current situation has brought into question the role of other bodies, such as the Australian Federal Police, in overseeing and addressing potential breaches. The revelation that the AFP received information about a confidentiality breach involving PwC back in 2018, without taking substantial action, highlights the need for a thorough investigation into the relationship between PwC, government agencies, and regulatory bodies. The integrity and trustworthiness of the government are vital for the effective functioning of democracy, and any compromise in these areas could have serious consequences.
Beyond the PwC scandal, there is a growing realisation that a broader re-evaluation of outsourcing practices is necessary. Privatisation, ethics, and the alignment of private sector interests with public goals are all critical aspects that demand attention. While the private sector can play a role in certain areas, infrastructure development and vital services are best managed by the government to ensure the public interest is served and prevent profit gouging at public expense.
Although calls for a Royal Commission have been made, some argue that a complete overhaul of the system, while maintaining essential services, may be a more effective approach. Rebuilding government operations from scratch with transparency, accountability, and the public interest at the forefront, could address the underlying issues that have led to the current state of affairs.
With the potential for further revelations and ongoing Senate hearings, the debate surrounding the role of consultants and the future of government outsourcing is likely to intensify in the coming weeks.
The Albanese government faces the challenge of striking a balance between utilising external expertise when needed and safeguarding national interests. This PwC outsourcing scandal is a prime example of this. It is a delicate task that requires careful consideration and a commitment to transparency, integrity, and the public interest.