Efficiency dividend

The most efficient hospital, a collaborator joked yesterday as we were programming Independent Convergence, is one that has no patients. The most efficient festival has no artists nor audiences. And the most efficient government department generates nothing inspirational, nothing that can give us confidence in the future, nothing that can make us proud to be Australian.

On Thursday, the Department of Communications and the Arts released its Portfolio Additional Estimates Statements (PAES) 2016–17, a document designed to inform Parliament of changes to its resources since the May budget release. Such documents are not designed to shock, and yet this time there were surprises: new cuts to the Australia Council in the form of an efficiency dividend removing up to $9.2m across the next three years.

Here’s Ben Eltham’s response in Crikey, here’s Arts Hub’s take, and here’s me on Radio National’s Books & Arts with Sarah Kanowski.

In response, here’s what the Minister’s office provided to the ABC:

  • “The efficiency dividend applies across the whole of government for three years from 2017-18. This was announced in last year’s Budget and is reflected in this week’s release of the Additional Estimates Statements.
  • “The standard efficiency dividend has been increased by 1.5 per cent in 2017-18, 1.0 per cent in 2018-19 and 0.5 per cent in 2019-20 for all government agencies.”

When the current efficiency dividend was first introduced in 2012, key cultural and operational agencies were either fully or partially exempt. These included the ABC, SBS, Safe Work Australia, the CSIRO, the Australian Customs and Border Protection Service, the Department of Defence, and the Australian Council for the Arts.

When the increase to the efficiency dividend was announced in the May budget, no explicit statement was made as to whether the increase applied to the Australia Council. The other day’s PAES release is the first time such a statement has been made – which also has the effect of making its implementation a retrospective one, as it applies across the past seven months since the beginning of the financial year. That’s not good news for an Australia Council already devoted to making best use of what’s left of its funds, given the unexpected changes of the past few years.

Within the Australia Council’s funds, the efficiency dividend does not apply to the Major Performing Arts organisations, which are commonly described as being ‘quarantined’ from all cuts. Given that’s some $110m out of a total $185m budget, the efficiency dividend hits more than doubly hard on the portion of the budget to which it does apply.

Ironically, a $9.2m cut almost matches the $10m investment the Australia Council made out of its own reserves just to be able to afford the downscaled Four-Year Organisations program that could best achieve outcomes for the independent arts. This was the other surprise in the Ministry’s estimates statement. In the PAES, this draw is described as an “Increased support for the small-to-medium art sectors” initiative aiming to “increase positive outcomes for the arts in Australia.” Given that government agencies are not permitted to spend more than their annual appropriation in any year, this unprecedented step would have required a great deal of behind-the-scenes hard work on the part of the Australia Council and its board – work that has now been devalued by the application of the efficiency dividend.

So what is an efficiency dividend? And why are changes to Australia’s arts and cultural investment unexpected rather than strategic?

An efficiency dividend is a percentage decrease applied annually to government budgets, to encourage more cost-effective uses of resources. It’s a flat percentage cut on everything. The government’s explainer describes it as “nothing new,” a measure that’s “been in place for 25 years.” Prime Minister Bob Hawke described it as “the payment of an efficiency dividend of which the Australian taxpayer will be the ultimate recipient.”

A similar result is achieved by not making annual budget increases, given the costs of doing business rise every year. In Victoria, where public investment in the arts is not increased in line with inflation, each year publicly funded organisations and agencies have been expected to do more with less since 2011. At the hyper-lean non-profit-organisation end of the creative industries spectrum, this means that – however unintended – government is now an investor in the contraction of the industry and not a driver of its development. Organisations are downscaling their operations, losing talented staff and taking fewer risks.

If the outcome of unindexed funds means doing more with less, the outcome of annual decreases is dire. The government’s own explainer on the efficiency dividend notes the criticism that it’s a blunt instrument that hurts smaller agencies disproportionately. Small annual percentage cuts are a sleeper: cumulatively, they add up to a great deal, such that the Australian taxpayer ultimately becomes the recipient of diminished public service.

Efficiency, after all, is not a vision for Australia’s future. Efficiency is a way of working – it’s a way that we expect government to work – but it’s no substitute for an approach to budgeting that’s strategic, purposeful and evidence-based. Efficient public servants work effectively to develop sophisticated approaches to budgeting that realise sophisticated policy visions. We expect no less as taxpayers.

When cuts are made without rigorous policy or strategy behind them, and their consequences never modelled, the future of Australian creativity and innovation is jeopardised. Despite the thorough research and development behind the Australia Council’s plans – and despite the passion for the arts of Arts Minister Mitch Fifield, former minister George Brandis, and Prime Minister Malcolm Turnbull – Australia now lacks a strategic approach to developing the next generation of artists, to developing career pathways, to fostering experimentation, to supporting literary organisations, to powering industry service organisations and creative community collaborations. Alison Croggon has calculated the drop in investment in individual artists at an astonishing 70%. Even the Arts & Disability program is only able to be supported for a limited period.

All so that the dividend to be returned to the taxpayer can be one of efficiency.

Is this the most confident statement we can make about the future of Australia’s arts and culture?

UPDATE

On Tuesday 28 February 2017, the Senate Estimates sessions heard from key Ministry of Communications and the Arts people about the impact of the efficiency dividend on the Australia Council.

Richard Eccles, Deputy Secretary of Content, Arts & Strategy, told senators not only that no new efficiency dividend applied to the Australia Council, but that on the contrary, the Australia Council had had a $5m increase.

Watch here (from 10:31) and compare Mr Eccles’ testimony to the Portfolio Additional Estimates Statements (PAES) 2016–17 papers to which he refers directly. The $5m which Mr Eccles has confused for a funding increase is one of the two $5m draws on reserves made by the Australia Council to be able to meet its forward commitments – a total of $10m wiped out almost entirely by the $9.2m impact of the newly applied efficiency dividend.

More detail would have been presented in the afternoon’s scheduled arts session, which would no doubt have clarified Mr Eccles’ misunderstanding. Unfortunately, the session was postponed to the April Estimates hearings because questions on the inappropriately high salary of the Australia Post CEO dominated the morning’s allocated time.

 

 

FURTHER BACKGROUND: A Catalyst for advocacy (27.04.16); Complex ecology, complex ironies (13.05.16); Arts face growing uncertainty despite momentous year (16.01.17) and other advocacy.

IMAGE: Tweet by David Ryding, Director, City of Literature, Melbourne (@MelCityofLit), on Friday 13 May 2016: “Soon resident orgs will fill these seats. None funded today. Next year maybe like this all the time.” Screengrab captured today.