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The federal government should stop spending billions on outsourcing to big four consulting firms while they simultaneously advise some of Australia's biggest companies on how to minimise tax liabilities, think tank Per Capita has warned.
In a submission to federal Parliament's inquiry into procurement by government, the Labor-linked research organisation said the growth in outsourcing of core government functions usually performed by public servants damaged essential program delivery and put at risk the integrity of policy advice provided to government ministers.
Parliament's Joint Committee of Public Accounts and Audit ordered an inquiry into consultancy spending after seeing the findings an Australian National Audit Office analysis into government procurement in December, with warnings federal departments may be under-reporting their use of consultants by hundreds of millions of dollars a year.
Per Capita told MPs Australians should be entitled to know exactly why the main recipients of outsourced government advisory services were consulting giants as PwC, EY, Deloitte and KPMG.
"At the same time as the government is deliberately reducing the capacity of the APS to provide frank and fearless, expert advice from permanent staff, it is spending billions of taxpayers' dollars on advice from private, highly profitable firms, which concurrently provide advice to some of Australia's biggest companies on how to minimise their tax liabilities," the submission said.
"The Australian people have a right to ask why so much of their money, in direct payments and foregone taxation revenue, is being swallowed up by these big advisory firms.
"Money that would otherwise be retained in, or contributed to, government revenue to pay for public services is essentially going to the shareholders of private companies as profits, dividends and high executive salaries. Perhaps more importantly, though, the risk to the long-term health of our democracy of these outsourcing practices is significant."
The submission warned increasing outsourcing of the core functions of the public service posed inherent risks for the effective delivery of services to the public, and for the integrity and quality of advice to decision makers.
Since coming to government in September 2013, the Coalition has reduced the size of the public service workforce by about 15,000 positions. The audit report showed the cuts coincided with a doubling in spending on private consultants with specialist skills.
Contracts established because of "need for specialised or professional skills" grew from more than $200 million in 2012-13 to more than $500 million in 2016-17.
The inquiry has already heard Defence, the federal government's biggest spending department, has paid more than half a billion dollars on external consultants fees in the past five years, with costs growing more than tenfold since 2012-13.
The Social Services Department told the committee it had brought down spending on consultancies from $20.5 million in 2012-13 to about $14.1 million in 2016-17.
Its largest spending components included "corporate objectives or policy development", research programs and market research.
In the same period, the department's spending on labour hire contracts had grown from $50 million annually in 2012-13 to $98.8 million in 2016-17, including for computer services, temporary staffing and recruitment services.