The Pricewaterhouse Coopers Australia scandal and the crisis of public service outsourcing

An Australian senate committee has revealed that despite signing confidentiality agreements with the Australian government, intelligence was fed on the government plans to PwC personnel both in Australia and internationally.  The firm used that information to give 14 companies from the United States of America an early warning of the changes, netting additional fees of AU$2.5 million and potentially depriving Australia of tax revenue.  Just days before the new Australian multinational tax avoidance laws came into effect in January 2016, US technology giants set up new company structures to sidestep the legislation using PwC advice.  These included Uber and Facebook.

PwC Australia was successful in hiding and playing down the scandal until this year when the scandal exploded and dominated news headlines for months.  The general public has been outraged. PwC Australia recently sacked the former Chief Executive and 7 other partners. PwC Australia also announced they would sell off the part of the business that deals with government contracts to a private equity firm for AU$1.

The scandal has exposed the crisis of government outsourcing and the hollowing out of core public service function.  The Treasury, Australian Tax Office and The Australian Federal Police have all been blindsided by how they investigate this case given that PwC Australia is so integral to their core operations. The Australian Public Service spent AU$21 Billion last year on external contractors and consultants.  That is equivalent to 54,000 fulltime workers (and currently the entire directly employed workforce is 144,000).  An extremely cosy relationship has formed.  Much of the scrutiny that is applied to government grants is brushed aside through often opaque million-dollar contracts.  The Big Four consultants PwC, KPMG, EY and Deloitte donated AU$4.3 million over the last decade to major political parties, with PwC donating AU$2.1 million.

Melissa Donnelly, National Secretary of the CPSU representing federal public service workers said,

“There is a problem when Australian businesses, which not only avoid their own tax obligations here in Australia but encourage others to do the same, profit heavily from doing government work. And then there is the PwC scandal — the love child of outsourcing and tax avoidance. This scandal makes it abundantly clear there isn’t just a problem or two with the system or a kink in the hose; there is a very real and urgent need for a complete overhaul of government outsourcing.”

The scourge of outsourcing and power of the Big four is also apparent across all levels of government in Australia.

Karen Batt, Federal Secretary of CPSU SPSF representing state government public service workers said,

“The scandal should be a wake-up call to all Governments across Australia. The use of consultants, such as PwC, is a legacy of the neoliberal push to cut public service numbers and replace with external for-profit consultants. The result is a complex web of competing obligations between making a profit for the company and its shareholders and providing Governments with advice. The two cannot co-exist as the scandal involving PwC so strongly shows. Governments should take heed of this and rebuild public service capability to ensure a return to honest and frank advice where the policy is foremost not the profit.”

Graeme Kelly, General Secretary of the United Services Union representing local government public services workers in New South Wales said,

“Outsourcing and labour-hire are expensive for councils, have poor outcomes for workers, while service quality and reliability frequently suffer. Local Government is often the largest employer in many regional communities and decisions to outsource work to contractors across the industry undermines job security with little benefit to the local community. Many councils engage PwC and other big consulting firms who are major supporters of outsourcing and labour-hire. PwC’s profit seeking must be stopped, consulting firms that promote outsourcing and breach trust should be banned from dealing with all forms of government, including local government.”