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The main purpose of government is to promote the welfare of its people. And yet over the last few decades, through numerous inquiries, it’s become clear that the Australian government has not succeeded in providing services for the Australian population as well as might be expected. Mark Considine, a professor of political science at the University of Melbourne, pinpoints exactly when the government began to slip in its delivery of services to vulnerable Australians and how it might correct course.
David Halliday: You wrote The Careless State in 2022, a searing indictment of privatisation and deregulation of Australian social policy. For those unfamiliar, what’s the current state of affairs when it comes to social services?
Mark Considine: It depends on which service we’re talking about. Up until the 1980s, governments supported social services either by direct delivery, or by providing various kinds of funding to churches and other nonprofit organisations. That sort of model (using what’s often called ‘block funding’ or ‘annual funding’) ran across health, large parts of the welfare system, vocational training. And then from the 80s onwards, we saw all of those nation-wide services in the social sector go through a contestability and then a competitive allocation process. Government made its own services contestable by comparing them to the market and allowing the market to bid for part of what government had previously done all by itself.
But very quickly that contestability moved to competition. The government stepped back from direct delivery and started using private providers, both for-profit or nonprofit. Private providers were paid to come in and deliver services. And that was a watershed moment because it changed the way government was funding things, but it also changed the power relations with agencies. Some private organisations, particularly church organisations who’d been in the game for more than a hundred years, were now in a competitive environment where the service they were delivering might be allocated to somebody else. And we’ve moved that model on, but that’s essentially where Australia sits.
This was part of this wider enthusiasm for financial deregulation that was ubiquitous in the 1980s. Was this under a Labor government?
The first big changes were in the Hawk-Keating period. And I talk about this a little bit in the book. There was a degree of bipartisanship about this in the beginning. It’s hard to read people’s intentions, but it looked from the outside as though the federal government was hoping that competition would drive not only more efficiency, but I think they were also convinced that you’d get more service innovation if the hungry market players were turned loose.
And the left/right dynamic here was quite important. Disability services is probably the best example where those from the left who wanted change were deeply critical of government-run services and sometimes of the nonprofit services that government directly controlled. They campaigned quite strongly for more choice, and more control. And this idea of having a multiplication of service delivery points from different providers became a catch-cry in advocacy organisations who were deeply critical of the established nonprofit sector. The choice revolution became a revolution because both sides of politics had their own reasons for embracing the same idea. The choice revolution was all about getting for-profit companies into the welfare game.
So one side was advocating from a human dignity perspective, and the other from a profit motive? You don’t often see those colliding.
And that was the case in employment services and in vocational education and training. It was the case in childcare and aged care and we had nearly 20 years’ of that and then we revisited it all again with the NDIS reform. But the central theme here is not privatization; the central theme is the inadequacy of that choice paradigm. That was the trap for government, the community, and users. It looked like such a beautiful solution to so many problems and it had this bipartisan buy-in. But in fact, it was a deeply flawed way of delivering services.
Decades after ‘the choice revolution’, what do these systemic problems look like now?
Think of it this way: once the government decided the choice was going to be a favorable answer to both advocacy organisations and the right side of politics (and therefore be assured of a safe implementation), it took off. People started talking about the idea that an unemployed person in Wagga, instead of going to the CES and getting whatever service they had available, would now be able to look at four or five different providers in Wagga and say, well, which one of those is going to meet my needs? I’ll go to ACME employment and if they don’t help me or if I’m not satisfied, then I’ll move and I’ll go somewhere else. And in the minds of the party faithful this Adam Smith-type world was expected to generate very attentive service providers. And it would produce a service that would be attractive to the client and therefore they would make money from the government.
The second part of the story was that it saved government a lot of bother in figuring out exactly who to give the service to, because you could offer it to multiple providers and then see how they got on. If a couple of them were duds, just get rid of them and offer that business to somebody better. The choice model not only meant ‘choice’ for the client, but it was choice for the policy bureaucrats. They could then say, ‘we really don’t have to get very close to the service itself. We don’t have to design the service. We don’t have to deeply monitor the service. We just decide what we’re going to pay, and we look at the outcomes. If the outcomes are no good, we can choose a different provider.’ This whole choice engine was going to solve a lot of problems for the clients and for the government, or so they hoped.
And that’s the reason it spread like wildfire, particularly in Canberra, which historically has not been a strong service delivery-oriented level of government. The federal system generally funds various things, but doesn’t deliver them. We’ll leave the army and border protection out of this, but generally the only exception is the pension, but no-one expects the government to have a hands-on service for that, that’s an automated process. The hands-on things like education and health and welfare and social and age care and so on, they’re all state responsibilities. This choice idea really suited the federal mindset, which was ‘we do the steering, we don’t do the rowing’. That was the catch cry of the 80s and 90s.
Once we had that as the main paradigm for efficiency and innovation, a couple of interesting things happened as a consequence: the first was that the services were given to the service provider to shape and develop according to their own recipe. This is the so-called ‘black box’ model.
The black box model – can you tell us more about that?
If you’re going to have a choice model in the purchasing or commissioning stage, you want to see what they can come up with. The government isn’t going to provide the all the steps and processes needed to use to deliver the service. If that were the case, the government might as well run it themselves.
What they wanted was to give the innovative potential to economize and innovate and come up with whizzbang solutions and use those to meet targets. Giving performance targets to get people into jobs or get people trained or get kids into childcare.
When a system is outcomes-focused, it leads very naturally and logically to the development of the black box, which meant that governments didn’t really know (and in many ways didn’t want to know) what went on inside the service box. That was the proprietary property of the owner of that business and only the regular performance checking compliance issues gave a high-level indication of what might’ve been happening inside the service.
So private providers ended up taking advantage of low-level accountability?
Two things happened, and they lead to the same end. The first was that the government itself very quickly was dumbed down. You start to find that these big public agencies didn’t actually know anything about the detailed service they’re paying for. Their skilled managers were picked off and went to work in the private sector and managed these businesses for twice what they were earning in the Commonwealth Public service.
And what’s left behind is a compliance regime always chasing after what’s already happened. They never get in front of the game. Government incompetence becomes systemic.
And then on the other side, a percentage of the entrepreneurs quickly figure out that they can make more money using their business model to reduce the service to the client and take more cash as profit. And if the government can’t really see them doing that, then it’s relatively low risk.
In Australia, we have this phenomena where welfare millionaires – even billionaires – became a very common occurrence across all these sectors. People were making tremendous profits out of employment services, out of vocational training, out of childcare and aged care. And not because they’d figured out a really intelligent way of providing a high-quality service for less, but because they’d figured out how to dud the consumer behind the government’s back.
And you end up with providers gaming the system.
Yes, and in a sense, putting pressure back on the honest providers to say, well, you better pay attention to this because if you are not keeping up with us, we’ll take your business. So there was tremendous pressure, particularly on the nonprofits, for everyone to play the same game. What we find is that this produces a type of ‘herding’ in which all the providers find a model that produces a low to medium quality service. No one risks bigger investments to excel.
It’s a disconcerting look at Australia, isn’t it?
It is, and it’s become something that other countries have looked at with amazement, even the UK, which used to be a kind of model that Australia would often look to for innovation in policy design. People over there scratch their heads now. They say it’s just extraordinary how far down that road Australia went without realizing the structural deficiencies.
How did Australia get 40 years down this road without anyone pumping the brakes?
Nobody knows really what’s in the minds of prime ministers and ministers, but my speculation about the Australian story is that because this was initiated on the Labor side there was insufficient party competition regarding the model. There were many cases where people you’d describe as left-of-center moving from the nonprofit sector to set up their own childcare or their own employment service. So you started to get a political constituency around the government that was benefiting from this and very much up in Canberra advocating for it. And I’m not saying there was direct conflict of interest because that probably was handled according to the rule book. But the politics of the various pro-market schemes created a powerful lobby.
The climate of opinion was just so much in favor of the choice model. To speak about its deficiencies was a bit like announcing you were from another planet. You weren’t really part of the inside conversation and on the smart side of politics. Suddenly there was a whole group of entrepreneurs who, for the first time in the history of the welfare state, were actually in favor of it. So you had this kind of political quasi-consensus. It was quite tenacious, hard to shake.
The second reason was that the senior bureaucracy in Canberra became rusted onto this model very quickly. The Mandarin class never really liked the running of actual services. It’s difficult, it’s messy, and you’ve got to get your hands dirty. Whereas competitive commissioning is really just a few big levers that you pull every two or three years and then the system runs itself. They believed this was a way of being high-level strategic managers and freeing themselves up from all that day-to-day staffing problems and capital works and things running late, all the rest of it.
And that really helps cement the consensus around sticking with the model, and trying to adjust it as it kept failing. It meant more trips to the productivity commission or more reviews. Systemic failures could be discussed as a need for more ‘market stewardship’ or new regulatory instruments. But each new version repeated the same mistakes.
How many reviews are we talking?
Depending on how you count them, in the aged care sector there were 19 or 20 reviews across this period, trying to keep up with the failures of the model. That’s my view of why it went 10 or 15 years longer than it should have. In the normal cycle of things, you would’ve had party competition about it and more interrogation across the parliament to really try to drive some change. And that’s what happened in other countries. The UK still runs services with a significant level of private provision, but not in the kind of black box way, depending on the service. In the UK, there’s a much greater sense of the government having a view of what service delivery should look like and being prepared to stipulate and mandate the components of that service. And there are many more public service options to use as innovation trials and benchmarks.
You mentioned the UK. How are other countries dealing with these challenges?
In the UK, even in the high point of Blair and the so-called Third Way, the political philosophy never let go of the idea that government should stay in the service delivery game. They might’ve had arguments about whether it’s a national government or a local government responsibility. But they never jumped right across that chasm the way Australia did, getting out of service delivery and giving it to someone else. In employment services, for example, they never closed the public job centre and never divorced policy from delivery.
The various versions of this on the Labor side were always a much more mixed-economy model, which meant that the policy bureaucrats in Whitehall stayed pretty close to the detail of how the service rolled out. There were a few wild moments and I think in the first version of the Prime contractor model in employment services, there was a big black box problem there. But they rewound some of that fairly quickly and put a more transparent model back in. The other countries that followed a similar model in the 80s and 90s included the Netherlands, Denmark and Israel. And they all have moved back towards using some private service provision, but making it a part of a supply chain in which the government still takes responsibility for the service.
You mentioned 19 reviews into aged care in Australia. You must find this baffling that this broken system just lumbers on.
Aged care is arguably the worst of our failures. Services for long-term unemployed people got to a pretty low ebb as well under this model. But they weren’t tortured and tormented in the way that vulnerable aged care participants were and, in some cases, still are.
Here, the federal-state story comes into play. The original effort by the federal government to try and support more aged care activity involved supply-side help through low interest loans to enable nonprofit organisations to build more residential services and retirement villages and specific solutions for people who couldn’t do that for themselves. It was almost a philanthropic approach where the government would help a service get started and empower that agency to implement.
That gradually moved to a demand-side model where there was voucher funding for certain kinds of people to be supported to go into these retirement places. But the feds themselves never went out there and said, ‘we’re going to actually find the land, build some buildings, create a plan on what a region will need in years to come to make sure that everything is lined up’. And that was partly because they took the view that the constitution gives that role to the states and the states already were running their own aged care facilities. So you had this uncertainty about whose hand was really on the tiller from supply side of public policy and this caused major issues in the steering and systemic development of that set of services.
Eventually, they moved nearly all of their funding – as they did in childcare – to a voucher-type model where somebody else takes care of figuring out how to build a facility and find the staff. To the government, that’s a black box. They just pay x dollars a week for one sort of person and y dollars a week for another sort of person and register them to get that money.
Nobody takes responsibility for the overall plan for the development and then capital building of the service delivery infrastructure. It becomes a stop-start haphazard approach. And all based on a funding model that tried to look the other way and say, ‘we don’t do supply, we’re just funding individuals’. That has proved to be just a recipe for a service that’s not delivered equitably, not delivered at a high quality, and full of rorts and underperformance. And to this day there’s still states and federal agencies saying, we don’t do service delivery. So there’s a fundamental flaw, particularly in those services like aged care and childcare and residential care in disability where we haven’t got the capital works and planning responsibility lined up with the demand side of the story.
What are the specific policy areas that require the most immediate dramatic overhaul?
It’s different in each case. They all share some common symptoms, but they’re actually different policy areas. So let’s take the NDIS, which is still very innovative and potentially a pathway model that will help us solve other issues in other models. As we know, it’s not without its problems, but one of the things the NDIS structure did put in place is this somewhat problematic choice ideology. I’m not against people having choices – it’s ideal. But my version of the choice problem is: do you want to go into a restaurant where there’s five things on the menu or do you want to go into a restaurant where there’s 500? Having all this variation, all these different iterations isn’t actually empowering. It might only indicate that nobody really knows what the hell’s going on.
The NDIS story is different because they put in place what I’d call a middle layer where choice could be matched by voice. These were the local area coordinators who weren’t part of the government bureaucracy. They were usually a non-profit organisations with experience in the disability sector who got the contract in their region to enlist clients and help them make their application for service. So the middle ground mediation roles enable people to have some choice, but it also increased the voice of the client. It’s like saying, here’s what we think you are looking for, here’s what we think’s going to be a fit. What do you think of that solution? Let’s put that forward to the agency and see if we can get it funded.
All these services need to empower the voice of the client and that’s probably going to need a structural solution with some kind of middle-ground mediator capability, independent of the service providers or any other faults that might exist in the supply chain. The poor old client shouldn’t have to wait until somebody at the far end of the food chain finally realizes things are not working.
This middle-ground mediation, is this something that would benefit all areas of service delivery?
They’ve got some other deficits that they need to address, but that would certainly be valuable. What that middle ground mediation capability points to is the need to raise the level of transparency about the service people are being asked to choose. This means recognizing that clients or users have certain collective interests. In childcare and aged care, residential aged care, you can have a glossy website, you can go and have the sit-down with the client management team and have a walk around the facility. But it’s not until you’ve moved in that you actually find out what is the day-to-day reality of being in this place. And by the time you’ve done that, it’s phenomenally difficult to get out. So the only way to improve client-centered capability is to improve the level of transparency of those services. Childcare’s the same.
Now, how do you do that? It depends on the service. Sometimes it’s about making them more open to the public, having more general transparency so that everything isn’t locked and bolted. Sometimes it’s about having a family access through internet services so they can see what grandma’s doing at the moment and talk to her on screen. And sometimes, as other countries have shown, it’s about having properly empowered client or family committees especially in residential services like aged care. Services in countries like the Netherlands for example, if they’re receiving public funding, they’re required to have a properly empowered client or family committee and the CEO has to talk to that committee, and show them plans, include them in decisions and so forth. There are many different mechanisms to build transparency.
You’d think a common-sense idea like that would have been embraced already.
When you’ve got a model that says the service is actually owned by the private provider and is only receiving money from the government to run that service in return for X and Y outcomes, that’s a private property. And the owners of that private property will be very quick to point out that they have to protect the interests of their managers and the staff. Maybe they will say that they have 11 different herbs and spices and that’s their secret recipe that they shouldn’t have to share.
Protect the shareholders.
Yes, and then there’s the shareholders. So while I don’t think any of those are legitimate reasons to keep a public service hidden from public view, they’re the reasons regularly trotted out.
Another problem is our regulatory system. In most of these services, it’s both busy but pretty relaxed, even though we’ve had quite a lot of scandal, most of these services are inspected on a limited, rotating basis. The service knows well in advance when the inspections are coming, they clean up, they get ready, they have little sessions with clients and staff to prepare them for what to say if questions are asked. It’s generally a well-rehearsed story. But if you are in the Danish residential care system, you have no idea when they’re coming. They can come any time of the day, they make a point of coming at night or outside the normal period. They arrive with four or five people, they come straight into the office, they open the filing cabinets, the computers. Everything is on display and that’s regarded as good practice to make sure when they write a report that’s saying the service is good, that everybody in the community will say, great, that’s a good service. Whereas now if you get a report from the regulator saying the service is good, what that means is it looked okay on the day they were there.
They had time to get the flowers ready.
And when you have this kind of compliance-based regulation they all study for the test. And while there’s no silver bullet solution, there are many things which all help in lifting transparency, engaging the voice of the client. All with the intention of lifting the level of visibility, not just to rub out the bad providers, but also to take really successful innovations and spread them around the rest of the system. At the moment, you could be up the road from a really good service, and you’d have no idea. You wouldn’t know perhaps until years later that was actually one of the best services in the country. All roads go back to the funding agency and then back down again. And in a black box world, there’s a limited exchange of information about how to get better and what really works.
Are we seeing public opinion shift on all this and a greater political will to make changes?
There is a shift in the way the wind’s blowing. It’s always hard to know until things happen, but the level of frustration, particularly amongst politicians who carry the can for these services, came to a pretty sharp point during the pandemic when the aged care system proved to be very problematic . The lesson was that public services were the safest. The state-run services in Victoria, for example, held up really well. But as you moved away from a classic state-owned-and-run nursing homes out to the smaller for-profit entrepreneurial aged care providers, you started to hear the stories of scandals leading to death. These stories were just so prevalent that there’s now a group of politicians on both sides really who’ve come to the view that there is something structurally wrong with how we’re doing it. And they’re willing to have more of a conversation about the right way to improve it. Now that doesn’t mean we’re going to get dramatic change, but I think it certainly we’re in a better conversation about it than we’ve been for the past 20 years.
It's about moving back to this core question: how do you get a system that delivers the best possible service to vulnerable people? If that’s your criteria, plenty of examples in all of these cases tick that box from nonprofit and for-profit organisations. There’s generally much more fraud on the for-profit side, and that’s a reputational problem that they have. But there’s no doubt that there are some very good for-profit providers.
So to me, it isn’t a question of saying, let’s just rule the line on who’s in and who’s out and that’ll magic up a solution. In most of these cases, we need a multi-agency model where government has the help of specialist providers, but we need to give up the black box. If we’re going to have a high-quality service, we need to know exactly what’s inside the box.
And when we’ve learned which parts of it are really working well, we’ve got to immediately share that knowledge with others, and don’t wait for the three-year contract to finish. There’ll be another minister and another government by then. There needs to be a much more systemic approach to lifting up the best practice, spreading it quickly, validating it, and helping everybody get better.
Now, does that destroy competition? I really don’t think competition has helped us. You can have private providers helping deliver the service without some mythical whip of competition driving them. Sure, you need the right to kick them out if they’re routinely bad. That’s a commissioning model that you use for any service. But the idea that they’re all racing against one another, trying to grab territory and somehow that is going to make the world better is just mistaken That might be the case in parts of the product market, but that doesn’t actually work well in the service market for vulnerable people.
So what’s the next step here in fixing the system that better provides for vulnerable people?
It depends where you are in the food chain. For people like me, it’s to keep researching and bringing to light the kinds of mechanisms and practices that are likely to generate positive change, not just at the legislative level or the funding level, which is part of the problem.
We could increase the funding, and that would be good, but as we’ve seen, increasing funding in itself doesn’t actually improve quality. So the focus from experts needs to be on that question of what constitutes a high quality service model and what makes it transparent and improvable? That’s going to be different in childcare and aged care and in employment services. But each of us needs to do more to elevate that at the public level.
In terms of families who use these services and community organisations who care about them, the agenda as I see it, should be to significantly improve the transparency of the services and do everything possible to get daylight in there. And also to get the voice of the user or the user’s family included in the regular business of the service. And at the bigger institutional level, the states and the feds have to figure out how we get a proper supply-side capital works budget planned for things like residential services and childcare, flexibly deployed in the communities where they’re needed. Then we’re not at the beck and call of either the real estate market or the private investment market to decide whether grandma has to be put in a facility that’s three hours away from anybody that’s ever going to go and visit her, or where she can stay integrated with her community and connected to people she knows. So those are the three corners of the triangle.
It’d be worthwhile touching base in years to come. Hopefully we’ll see a shift in the story.
I hope so. There are some good signs, but they’ll only turn into sustained benefits if we all keep our shoulder to the wheel.
Mark, thank you for your time.
The Careless State: Reforming Australia’s Social Services by Mark Considine, Melbourne University Publishing.
David Halliday is editor of Eureka Street.