The ANAO Performance Audit of the Community Development Program

The ANAO released a performance audit of the Community Development Program this week (link here). The Community Development Program applies to most income support recipients resident in remote Australia, and 80 percent of its 33,000 participants are Indigenous. The audit was quite narrow in its aims, since it was designed to primarily assess the effectiveness of the transition from the Remote Jobs and Communities Program (RJCP) which was established by the previous Government in 2013 and ran through to 2015. Nevertheless, the ANAO report outlines a wealth of policy relevant information and for those interested in remote Indigenous policy, repays close reading.

I previously commented on the CDP program in a March 2016 post titled ‘The worsening crisis in remote employment programs’ (link here) where I reported on academic research raising serious issues with the programs breach rates and discussed the perverse incentives embedded in the scheme. The program is currently the subject of a Senate Inquiry which is due to report on 15 November 2017 (link here), although there was some commentary in Senate Estimates this week that a request for an extension to December was being made.

The initial media response (link here paywall) to the audit report in The Australian (‘Dead used to inflate jobs numbers’) focussed on accountability issues amongst the providers delivering the scheme thus relegating the responsibility of the Department for the administration of the program to a second rung, with the Minister nowhere in sight.

This is not surprising as the ANAO appears to go out of its way to make its headline conclusions as anodyne and boring as possible. The single recommendation in the report, that:

 the Department of the Prime Minister and Cabinet review the Community Development Programme provider payment structure, particularly the incentives it creates and its alignment with the underlying policy objectives of the program changes  (para 2.27)

deals with only one quite obtuse aspect of the multiple findings in the body of the report, and crafts it in terms so general that the Department could theoretically agree to the recommendation even where it intended not to make any changes at all.

How else to interpret the focus on third party providers in the ANAO’s headline conclusions and single recommendation, and the concomitant diversion of focus from the role and contribution of the Department (and behind it the Minister), in relation to the Community Development Program?

This goes to more fundamental issues relating to the role and influence of the public sector’s oversight agencies. They invariably set out to avoid conflict, to persuade, and to nudge, but not to hold agencies (and their ministers) strictly to account. Real accountability has become too risky, a bridge too far. In theory the key oversight agencies report to the Parliament, however the reality is that the Executive dominates and controls most of what occurs in the Parliament, with the result that the potential freedom of action of oversight agencies has become circumscribed. Yet we continue to fool ourselves that our oversight agencies are independent. They have the potential and capacity for independent agency, but if they choose to flaunt it, or even exercise it freely, their freedom of action, their budgets, their access to the networks of influence would be swiftly circumscribed. One has only to look to the treatment meted out to the Office of the Australian Information Commission to see this in action (link here).This is an issue which extends well beyond the Indigenous policy issues which are the focus of this post; nevertheless, it deserves wider consideration and debate than currently occurs.

Notwithstanding the headline conclusion of the ANAO report: ‘The transition from the RJCP to the CDP was largely effective’ (para 4), the ANAO report lays out a myriad of issues which reflect poorly on the way the Minister (as the public official ultimately responsible) has administered the CDP. As ever, the devil is in the detail.

I won’t attempt to analyse each and every issue of concern raised by the ANAO, as I wish to focus on some higher level issues. Nevertheless, as a preliminary step it is worth pointing to a number of the deeply problematic issues identified by the ANAO in their detailed analysis. These issues include:

Ø  the design of the CDP was not informed entirely by sound analysis of the RJCP (para 5);

Ø  a series of problems with the incentive structure for providers (paras 4 and 6);

Ø  serious under-subscription of two complementary schemes, the Employer Incentive Fund and the Indigenous Enterprise Development Fund (para 9);

Ø  the transition implementation timeframe from RJCP to CDP was too short resulting in providers not understanding the new program well, and many of the implementation risks identified by PMC in its implementation plan coming to fruition (para 13);

Ø  there is scope for greater transparency in the Regional Employment Targets built into provider agreements (para 21), and

Ø  the phone contact call times have tripled in the two years since CDP was established (para 3.32).

In addition, and surprisingly given the Government’s rhetoric on strengthening evaluation, the ANAO reports that

Ø  the evaluation strategy was developed seven months late in early 2016, and

Ø  a summary was not approved by the Minister until April 2016 (ten months after commencement).

According to the ANAO, this reduced the scope to collect performance relevant data. Moreover, the evaluation strategy was not peer reviewed by an independent reference group, and evaluation strategy milestones were not aligned with the Government’s timeframes for considering future funding for the program (paras 23 and 24). It seems that in the case of the CDP, data is not gold, but dross.

Buried in the ANAO report are a number of significant accountability findings including

Ø  the identification of poor financial management of provider payments by DPMC in the transition phase including a finding that 30 percent of payments / commitments in 2014-15 were not supported by evidence and thus not payable (paras 2.37 to 2.54- in particular 2.41); and

Ø  poor provider performance including at least nine instances of potential fraud (paras 3.38 to 3.52  and table 3.5). This latter issue was the matter which drew the attention of The Australian in their reporting (link here) whereas THe Guardian focussed on breach rates before picking up providers counting the dead in its second paragraph (link here).

A further serious issue identified by ANAO was the substantial underspends in the program, amounting to around $50m in 2015-16 (para 3.13). The ANAO indicated that the reasons for the underspends relate to ‘fluctuations in the total number of jobseekers in the CDP and lower jobseeker attendance in Work for the Dole activities’. The ANAO also refer (in para 3.56) to a number of prepayments being linked to the existence of underspends, code for the department spending money in advance of need to avoid an even larger underspend.

While the ANAO make reference to the extraordinary rates of breaching elsewhere in the report (paras 3.28-29), they don’t draw the link here between tougher requirements and participant preparedness to vote with their feet and walk away. The propensity for this to occur can only be magnified in locations where income management or the cashless debit card operates. As pointed out in my previous blog post, the assumption by policymakers that incentives that gain traction in mainstream contexts will also gain traction in remote Indigenous contexts is highly problematic. The end result is an ever more punitive system which fails to deliver outcomes.

The bottom line however is that the underspend translates to $50m in welfare benefits which did not reach Indigenous income support recipients, who are amongst the most disadvantaged citizens in the nation, and apart from the pain inflicted on individuals has the additional consequence that the funds are not available for circulation within remote regions’ economies. Notwithstanding the Government’s stated support for economic development, policies which have the effect of limiting the quantum of entitlements transferred to remote citizens also limit economic activity within remote contexts. This is an inevitable consequence of the hard line ‘welfare reform’ policy changes being pursued by the Government. The substance of this point appears to be accepted by the Government as the DPMC submission to the current Senate Inquiry into the CDP referred to above notes that the Government:

is considering options in a new employment and participation model for how any loss of income support, due to the application of penalties, might be invested back into community (page 11).

Perhaps the most significant performance issue identified is the cost effectiveness of the program. In comparison to RJCP, CDP costs around twice as much per jobseeker, and costs around five time as much as Jobactive, the mainstream noon-remote employment program (paras 3.9-10).

Yet despite the doubling in unit costs, employment outcomes (as a percentage of jobseeker placements) were only marginally better under CDP than RJCP: see para 4.16 which notes that in relation to 13 week employment outcomes, RJCP averaged 41 percent while CDP averaged 47 percent. The rationale for the huge bureaucratic shift from RJCP to CDP appears virtually non-existent (notwithstanding the ANAO statement that is too early to assess whether CDP is administered efficiently (para 15).

But the reality is not in the percentages, but in the absolute numbers (for both schemes). There are 33,000 CDP participants across remote Australia, but employment outcomes were 254 per month for RJCP and 311 for CDP. That is, less than one percent of CDP participants are obtaining 13 week employment outcomes per month. On these metrics, both the RJCP and CDP objectives of ‘supporting jobseekers and reducing welfare dependence’ (para 1) appear laughably ineffective. And one might ask, at what financial cost to taxpayers? And at what human cost to remote citizens?

Yet the Minister is quoted in The Australian as welcoming the report, saying on the one hand it had recognised effective implementation of the CDP, but foreshadowing major change on the other:

We are getting jobseekers in remote Australia off welfare and into work….we will soon commence consultations on a new remote employment model for Australia.

The Minister introduced CDP a mere two years after the introduction of the RJCP in June 2013, citing increases in welfare dependence under the program, and within two years was announcing consultations would begin to devise yet another remote employment scheme. See the discussion in Senate Estimates this week (link here) which outlined early moves to begin consultations for a new remote employment programs based on wages rather than income support.

While the Minister and the Department claim that the decision to replace the RJCP was based on strong analysis (refer paras 2.2 to 2.7 of the ANAO report), the underlying confusion identified by the ANAO strongly suggests that the decision was about politics as much as policy. In particular, the ANAO note in para 2.7 that the DPMC provided advice to the Government in October 2014 that there had been a significant reduction of 90 percent in jobseekers achieving 26 week employment outcomes compared to the previous year’s outcomes. Yet when requested to provide evidence to support the advice, DPMC were unable to do so.

If the decision to establish a new program in 2015 was justified, and the new program is working as the Minister claims then there would be no need for further change. On the other hand, if it is not working (as the cost data, breach data, and underspends suggest), then the Government needs to take responsibility for the failure and fix it. The Minister cannot have it both ways.

In his recent Wentworth lecture, the Secretary of DPMC Dr Martin Parkinson, was critical of the constant change in the Indigenous affairs machinery of government. He pointed to the opportunity costs of fractured relationships between government and communities, constraints on knowledge transfer and capability which arise from what he termed ‘constant churn’. He could as easily have been discussion the recent history of remote employment programs.

At the moment, the Minister seems to be trying to walk on both sides of a barbed wire fence. No wonder he appears uncomfortable defending his record.

Inside the Perpetual Motion Machine: Regulating Indigenous Corporations

I were better to be eaten to death with a rust than to be scoured to nothing with perpetual motion.

King Henry IV. Part II. Act i. Sc. 2.

The quality and robustness of Indigenous corporations are crucial contributors to the capacity of Indigenous interests to develop the sustained capability necessary to achieve their objectives whether it is to run successful business enterprises, deliver services, or meet the cultural and social objectives of their members. Perhaps most importantly, the capability of Indigenous corporations is crucial to their ability to ‘hold their own’ in the never-ending competitive struggle amongst the plethora of competing interests in Australian society to influence policy outcomes.

Not only do the members of individual corporations have an interest in ensuring their organisations are effective and well run, but for Indigenous citizens there is a more widely shared generic interest in Indigenous corporations both being, and being seen to be, effective and capable of effectively representing their members’ interests and executing their aspirations. While most analysis tends to focus on the quality of Indigenous political leadership, the strength of the Indigenous corporate sector will play an enormous and perhaps decisive role over coming decades in determining whether Australia is able to shift from exclusion to inclusion in relation to its Indigenous citizens.

The policy space encompassing the governance of Indigenous corporations has a forty year history. The policy case for the establishment of corporate entities to represent Indigenous community interests can be traced back to Charles Rowley’s work for the 1976 Coombs Royal Commission into Australian Government Administration. Rowley argued that incorporation might act as a protective ‘carapace’ to minimise the incursion of the wider society into the lives of Indigenous community members, and allow space for individual community members to continue to live their lives according to their own aspirations and values.

The extent to which the concept of incorporation has achieved Rowley’s aim is debateable, but there is no doubt that it has been enthusiastically taken up by Indigenous citizens, not least because it is one of the institutions in the wider society which most aligns with Indigenous communal values. Incorporation also happens to be a primary vehicle for pursuing commercial opportunities (see this link to a fact sheet on the growth of Indigenous businesses) and for accessing a wide range of facilitative government funding programs.

Thus the Office of the Registrar of Indigenous Corporations (ORIC), which oversights and regulates corporations established under the federal Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act) administers around 2800 corporations across Australia. There are probably another 2000 Indigenous corporations, many with significant commercial and/or social responsibilities established under the national Corporations Act and various state based associations legislation, often characterised as ‘tennis club’ legislation. The regulatory oversight of these latter corporations is often inadequate either due to the risk based management approach adopted by ASIC which allows smaller corporations to ‘fly under the radar’, or the low key regulatory approaches to community associations taken in most states.

In recent years, the Commonwealth has adopted a policy approach of requiring Indigenous organisations funded under the Indigenous Advancement strategy at levels above $500k to incorporate under the CATSI Act. There are I think good reasons for supporting such a policy given the importance of sustaining effective organisations in the Indigenous policy domain.

Given the number of Indigenous corporations oversighted by ORIC, and the importance of effective regulation in driving good corporate outcomes over time, it was pleasing to see the Government release a review report last month by KPMG titled “Regulating Indigenous Corporations’ which examined the operations of ORIC.

The review had been commissioned in September 2016, and finalised in December 2016. It was released by the Minister on 5 July 2017 along with an announcement of a one off allocation of an extra $4m for ORIC (link to media release is here). Here is the link to the report. The Minister’s media release headlined the funding, but made no mention of the review until paragraph ten of a fifteen paragraph text.

Here is the totality of his comments on the review:

Minister Scullion also released a review into ORIC by KPMG which found it was doing a good job in a challenging regulatory environment. The review can be found here.

“The review identified a need for more corporate governance training for those who want to do the right thing as well as additional investigatory resources to address wrongdoing. The Government has responded to this by providing ORIC with an additional $4 million,” Minister Scullion said.

The overarching conclusion of the review was not only that ORIC is doing a good job in a challenging environment, but that there are significant opportunities to enhance ORIC’s contribution to better governance into the future.

The review was oversighted by a Steering Committee comprised of representatives of PMC, ASIC, the Department of Health, and a former Tax Commissioner. It is well argued and makes persuasive arguments for its recommendations. KPMG made 47 detailed recommendations and listed a number of further options for consideration.

This post aims to analyse the review and its handling and make a number of policy related observations. I recommend interested readers have a closer look at the KPMG report as I don’t have the space to comprehensively discuss each issue raised.

The first point to note is that the Minister’s media release also included an announcement by the Registrar that he was undertaking a further technical review of the CATSI Act to consider potential legislative changes, many of which appear to have already been canvassed by KPMG:

“To complement this process I will be conducting a review of the CATSI Act with the intent of providing advice to the Government on improving and strengthening the Act.”

Terms of reference for the review are available at oric.gov.au.

Complementing the terms of reference for the technical review is a 13 page Discussion Paper (link here) canvassing a range of specific issues / potential changes. The ORIC website indicates that the law firm DLA Piper has been contracted to undertake the technical review, and outlines some limited consultations planned in the NT and North Queensland.

While most of the proposals outlined in the Discussion Paper appear sensible and worth considering, there is a sense that we are in a perpetual motion machine where issues are reviewed to death without any guarantee of a final resolution. One senses that PMC have lost the capacity to assess and develop legislation, and may not have retained the grounded expertise to independently craft a well-considered amendment package in this area which is of central importance to the quality of outcomes in Indigenous affairs.

The second point worth noting is that by establishing this further process of technical review, the Minister has neatly attempted to sidestep any pressure to respond formally to the KPMG report. Yet the potential amendments to the CATSI Act relate to just one of the many KPMG review recommendations. The comments below will focus attention on some of the issues which in my view require a response from the Minister or his Department. 

Third, in section 2.2 on ORIC’s objectives, the review notes that ORIC continues to work off a Statement of Expectations issued by the previous Minister in 2008. While the Registrar had been provided with a draft Statement of Expectations in 2015, it had not been finalised. The suggestion (refer footnote 16) that the reason for this lack of follow through was because the KPMG review was pending strains credulity, not least because of the approximate 18 months between ‘early 2015’ when the draft Statement of Expectations was issued and September 2016 when the KPMG review was commissioned. The Minister appears not to support the use of Statements of Expectations, I suspect because they potentially constrain his capacity to more informally and ‘flexibly’ influence statutory bodies within his portfolio.

A fourth and related point in the same section relates to the KPMG review assessment that the working relationship between the Department and ORIC was less effective than with other agencies, and that this relationship had declined since PMC took responsibility for Indigenous policy (ie after the 2013 election). Later in the report (page 51) the review notes that the PMC actively excluded ORIC from key departmental processes. The losers from this absence of effective collaboration will necessarily be the Indigenous corporations who are served by the Registrar’s work. A core role of PMC as a central agency is to promote collaborative working arrangements across government, yet here is a public review identifying clear instances of the Department acting narcissistically rather than collaboratively. The lack of a formal response to the review means that these observations by the review sail blithely into the ether, without any formal explanation, accountability or cognisance that this requires remediation and should not occur into the future.

A fifth point made by the review in this same section was to canvass the possibility that the Registrar might utilise a small advisory panel to assist in stress-testing the more contentious policy issues. This is to my mind an excellent idea, and worth pursuing. It also provides a mechanism for greater Indigenous input into the role of ORIC and is potentially a better mechanism that the Minister’s announced approach of finding an Indigenous Registrar at some point in the next 12 months (refer page 52). The review’s suggestion that an existing group (presumably the Prime Minister’s Advisory Council) might fulfil the role appears less fit for purpose, but may be worth trying. Again, we have no response from the Registrar or the Minister to this idea.

A sixth point emerging from the review is that significant reductions in funding to ORIC have had severe impacts on its capacity to undertake its core functions. The tables on page 20 (which shows a significant reduction in examinations over the past nine years) and page 59 (which documents a 42 percent reduction in real terms in ORIC funding over the past ten years) tell the story. At the same time, as the Minister’s media release points out, the revenues of CATSI corporations have increased by 74 percent over the past nine years to $1.88bn and the assets under management have grown by 105 percent to $2.22 bn. The funding announced by the Minister of $4m appears to be one-off and not recurrent, so while it will go some way to address the funding pressure, it does not appear to address the ongoing structural issues identified by the review.

A seventh point to emerge from the review was a call for changes to ORIC’s regulatory strategy, in particular to increase the sharpness of its risk management in determining resource allocations (pages 35-37) and improving its stakeholder management to include peak bodies representing corporations established under the CATSI Act (pages 21-2). Both these suggestions deserve to be taken up, but we have no advice as to whether this will now be the case.

An eighth point relates to the abolition of the Indigenous Litigation Fund following the change of government in 2013 (see pages 47-8 and 58) which provided an assurance that the award of costs against the regulator following an unsuccessful prosecution would not have a significant impact on ORICs recurrent budget. The absence of the fund introduces greater risk aversion into decisions to initiate prosecutions by the Registrar. The Minister has made no response to this issue.

A ninth point to emerge is an implied critique from the review that ORIC and PMC have not been as transparent as is desirable. In relation to funding, the review recommends that consideration be given to ORIC’s annual funding being separately identified in the budget papers (page 59). Similarly, there is an indirect inference that ORIC has not managed its FOI processes as well as might be expected (see page 54). Given the contention that can emerge when regulators make decisions which directly affect corporations and their stakeholders there is a need for ORIC’s FOI and decision processes to be both efficient and beyond reproach.

The tenth point noted by the review (page 54-5) is that there are a range of technical issues relating to native title bodies (which are required to incorporate under the CATSI Act) where the Registrar’s powers might be strengthened. These seem sensible and are likely to emerge from the technical review of the CATSI Act being undertaken by the Registrar. Given the salience of native title in the future of Indigenous policy, it is of concern that the Minister’s (non) response to the review was entirely silent on these issues.

Finally, the review noted in its final observations (page 66) that there appeared to be merit for the greater use of independent directors on the boards of larger or more corporations. The review refrained from suggesting this be mandated, deferring to the widespread view that directors ought to be Indigenous. In my view, there is an overriding benefit in many corporations utilising independent directors, (who will normally be in the minority) and increasingly, there will be individuals with appropriate skills who are also Indigenous. Indigeneity should not be used as an argument against the use of independent directors, especially where corporations are operating in highly complex fields such as native title or delivery of complex human services. We ought not to confuse the two issues.

In conclusion, I would observe that my short summary identifying eleven key issues is not necessarily comprehensive. There is much else in the report for those interested in the issue of Indigenous corporate governance.

It will be apparent that I consider that the Minister and his Department have dropped the ball in the way they have handled this report. The strategy appears to be to hide behind a funding announcement to avoid addressing the raft of substantive issues which will be of crucial importance to the quality of Indigenous corporate governance over coming decades, and to gloss over the criticisms which go to the heart of the way the Department of Prime Minister and Cabinet operates. This is not good public policy and not good public administration. The public, and particularly Indigenous citizens, deserve better.

Given that Senate Estimates hearings are scheduled for October, here are a number of questions related to these issues which interested Senators might ask the Minister:

What was the cost of the KPMG review? Which program funded this review?

What is the projected cost of the DLA Piper technical review of the CATSI Act?

Is the $4m in funding one off, or recurrent? Will it be paid in a single year or over the forward estimates? What is the source of the funding: is it from the PMC departmental cost allocation, or is it from the IAS or some other program funding source?

What does the Minister intend to do to remedy the ongoing structural funding shortfall currently experienced by ORIC?

Will the Minister ensure that ORIC’s funding is separately identified within the PMC budget papers going forward?

Will the Minister reinstate the Indigenous Litigation Fund abolished in 2013?

Why has the Government not provided a comprehensive formal response to the KPMG review? When will a final response be made available?

Why did it take so long to release the KPMG review?

Why has the Minister not finalised a Statement of Expectations for the Registrar of Indigenous Corporations since coming to Office in 2013?

Has the Minister finalised Statements of Expectations for other portfolio bodies for which he is responsible? Please list the entities and bodies in your portfolio and the dates statements of Expectations were issued?

What level of responsibility does the Government take for any future regulatory lapses by ORIC given its failure to date to address the substantive issues raised by the KPMG review?

Answers to these questions will go a long way to highlighting just how serious the Government is about improving the governance of the thousands of Indigenous corporations which form the backbone of the Indigenous sector in Australian public policy.

The approach adopted to date in relation to this report is the antithesis of substantive transparency, and in my view fundamentally disrespects Indigenous citizens (and taxpayers generally) who have a right to understand what the Government is doing in areas which will play a crucial part in shaping the nation’s relationship with its Indigenous citizens into the future.

Renewing the National Partnership on Remote Housing: seasons such as these

Poor naked wretches, whereso'er you are,
That bide the pelting of this pitiless storm,
How shall your houseless heads and unfed sides,
Your loop'd and window'd raggedness, defend you
From seasons such as these?

King Lear Act 3, Scene 4

A number of recent developments make it timely to provide further commentary on the hugely important policy issues around remote Indigenous housing which will be determined by the Government over the coming few months. Previous blog posts (link here and link here) are relevant and provide crucial contextual background to the issues confronting the Government in the remote housing policy space.

In mid-2016, the Government revised and rebadged the National Partnership on Remote Indigenous Housing as a new National Partnership on Remote Housing (sometimes referred to as the new Remote Housing Strategy). (There is a link to the NPA and associated schedules here). According to the PMC website (link here):

The Government is working to refocus housing delivery in remote Indigenous housing. The new National Partnership on Remote Housing (NPRH) ensures local indigenous people have the opportunity to contribute to their housing through employment, Indigenous business engagement and better links with the Community Development Programme (CDP). The NPRH will also continue to address overcrowding by funding $774.131 million to the construction of new houses and refurbishments in larger, sustainable remote Indigenous communities.

While the Government has indicated that there will be $774m spent over these two years, this funding is essentially the funds which were originally allocated in the original NPARIH established in 2008. See the PMC website for the new targets for the period 2016-18. The webpage outlines national targets for three categories of expenditure: new builds, refurbishments and employment and education housing (EEH), and provides a breakdown by jurisdiction against each category. The national targets are 785 new builds, 207 refurbishments and 58 EEH units respectively.

The revised National Partnership Agreement provided for a review of the NPRH and its predecessor NPARIH to be undertaken. The Minister announced the review into remote housing in November 2016 (link here). During the most recent Senate Estimates hearings, and in answer to a Question on Notice (QoN) (number 186), the Minister indicated that the review had been provided to the Government in May 2017, but that a decision on release had not been taken and was a matter for the Government. The Minister also indicated in answer to QoN 104 that ‘future arrangements for the expiring National Partnership Agreement will be considered in the Mid-Year Economic and Fiscal Outlook in the year preceding expiry of funding’ That is, in the late 2017/early 2018 MYEFO.

The Indigenous Advisory Council met on 10-11 May 2017, and in their communique dated 19 May (link here) made a number of comments on Indigenous housing and the recent (as yet unreleased) review of remote housing.  On housing, they noted:

Council acknowledged the findings of the Remote Housing Review and expressed concern that despite significant reductions in overcrowding investment is required to meet unmet need and maintenance of housing stock. Council emphasised adequate housing is critical to ensure positive outcomes are maintained in health, education, employment and community safety. While acknowledging the challenges highlighted through the Review Council indicated there are opportunities to develop innovative housing solutions. It was recommended Government explore options for local governance and community management of housing, international best practice and ongoing investment and flexible shared funding arrangements between the Commonwealth and states and territories to allow solutions at a local level.

The most recent developments were comments made by the Minister in an ABC Q&A program at Garma (link here), where in response to a question about overcrowding and the impact on peoples’ lives, he foreshadowed a number of likely policy directions:

We’re deadly serious about this. We’ve invested $5.4 billion over the last decade, and I think everybody would agree we could have done a lot better. We have reduced overcrowding from 52% to 37% – it’s still in the margins, and that took a fair while to do. So, the next rollout, which we are now negotiating with the states and territories about the National Partnership on Remote Indigenous Housing, we’ll be negotiating on the basis of what the communities have asked us to negotiate on.

So, Indigenous employment is non-negotiable. Indigenous procurement is non-negotiable. And we’ll be asking the states to match those funds. Because we need a pulse. Sometimes we can just trickle along and we’ll be just catching up, just getting ahead, but we actually need a significant injection of funds. So, that’ll be the basis of our negotiation with the states. But those houses cannot be built by whitefellas getting off planes with nail bags. Those times have to go.

Local Indigenous people maintaining their own houses, local Indigenous people building their own houses and actually managing the tenancy of their own houses is the only way this is gonna work, and I assure you, those are the changes I intend to make.

So, in terms of the policy architecture for remote Indigenous housing, where does all that leave us?

First to the positives:

The commitment of $5.4bn for remote social housing over the ten years to 2018 has delivered a step change in the quantum and quality of housing in remote communities. In round figures, NPARIH/NPRH will have delivered around 4000 new houses and at least 10,000 refurbished houses over the decade, off a low and worsening base. That is a good thing.

The National Partnership also drove policy reform on a range of fronts: Indigenous employment, clearer tenure arrangements to lock in landlord responsibilities, and a stronger focus on managing the existing and new asset base through sustained Property and Tenancy Management (PTM).

The level of overcrowding will have reduced considerably over the ten years, using the Minister’s figures, from 52 to 37 percent, a reduction of 15 percent.

The Minister appears committed to continuing some level of funding by the Commonwealth for remote housing, and is keen to strengthen further Indigenous employment, Indigenous procurement, and local involvement.

Notwithstanding these achievements, substantial policy challenges remain, and it is far from clear that the Government is prepared to address them. Listed below are six issues of most serious concern.

First, notwithstanding the progress on overcrowding, a situation where 37 percent of Indigenous citizens resident in remote Australia live in overcrowded condition is on any objective assessment a national crisis. It feeds disadvantage, and demands an open and transparent public debate. It would be useful if the general public were advised what the cost of reducing these levels of overcrowding to levels comparable to the Australian norm would be. This would help to build support for the necessary funding.

Second, a key contributor to the low level of public discussion around these issues is the lack of transparency in relation to key metrics about the situation in remote communities and the key metrics about the program. While there are myriad ‘data points’ available to a diligent researcher, compiling them into a coherent whole which is both accurate and understandable to the wider community (including the Indigenous community) is almost impossible, and constitutes a serious impediment to community discussion and understanding. There is in my view an onus on government to lay out in a clear and succinct way the current state of play in relation to this issue, particularly a government which argues that there is a need for more evaluation of government programs.

The Department obtains six monthly reports from each of the funded jurisdictions, and the agreements specify that the Commonwealth may release data and information in relation to the operation of the program, yet it doesn’t happen in any coherent form.

The level of information available on the Department’s website in relation to what is one of the three major government programs for Indigenous Australians is extremely poor, reinforced by the rebadging of the program in 2016. The decision to withhold the recent review, without offering any reason, merely serves to reinforce the Government’s tactic of micro-managing and constraining public discussion and debate on this issue rather than encouraging greater understanding in the wider community.

Third, if the Government is interested in pursuing the PM’s Advisory Council recommendation for improved local governance and community management of housing, a good place to start would be in the provision of a much more robust program management data set in a format which is automatically updated and publically accessible. In addition, careful design of local arrangements based on both upward and downward accountability, a focus on capability and continuous improvement, and default arrangements for when local structures break down or are subject to a crisis will be required. In other words, there is considerable devil in the detail in the Advisory Council’s advice which requires upfront attention fi the Government intends to take it seriously.

Fourth, my major concern relates to the Minister’s call for matching funding from the states and the NT. In particular, I am concerned that the Government may be using this argument as a ploy to reduce investment levels in the remote housing sector. While I have no in principle objection to jurisdictions being required to invest in the remote housing sector, there are a series of practical constraints which will constrain their capacity to commit.

The new NT Labor Government went to the last election committing to spend $1bn over ten years, but I am sceptical that it will manage to meet this commitment. The NT carries a huge debt burden in Commonwealth borrowings (which went to building their social housing system in the 1960s and 1970s) and has a large number of ‘locked in’ financial commitments relating to metropolitan based infrastructure developments.

In addition, in Indigenous policy contexts, it has major financial pressures in relation to expanding serviced lots in most remote communities; many remote communities have met the limits of their essential service infrastructure (thus limiting new housing investment until it is expanded); and the National Partnership Agreement does not cover smaller communities and outstations nor essential services in remote communities (which the Commonwealth has offloaded to the states in recent years).

These are all pressures the Commonwealth does not co-invest in, so why should the states and the NT be required to suddenly co-invest in the remote housing program when the Commonwealth refuses to meet them half way on other key remote community investment needs.

The stark reality hidden by debates about financial burden sharing with the states is that remote communities continue to face a deep-seated and structurally serious crisis in terms of housing quantum and conditions. Any solution will require both robust and innovative policy design and significant ongoing investment. In this context, the fiscal capacity of the Commonwealth far exceeds that of the states and the NT. By all means incentivise the states to do more, but the bottom line ought to be that the Commonwealth does not reduce its overall funding commitment of around $550m per annum. Indeed, in a world where comparative need rather than political powerlessness determined funding allocations, the case for taking the opportunity of this second ten year National Partnership Agreement to increase funding levels over what was allocated in 2008 would be irrefutable.

My fifth concern follows on from, and in a sense mirrors the fourth. The Minister’s rhetoric on Indigenous employment and local involvement in housing management contracts plays to deep seated Indigenous community concerns about ‘owning’ what happens in their communities: ‘But those houses cannot be built by whitefellas getting off planes with nail bags. Those times have to go’. I wholeheartedly agree that maximising Indigenous employment is an important policy objective, but it must not be pursued to the point where it places housing outcomes at risk.

Yet what the Minister’s stated approach implicitly requires is the rejection of the reality that fixing the structural and systemic issues in remote housing in a timely and cost effective way across scores of major communities requires major system wide investments managed as a very small number of major infrastructure projects rather than a disaggregated program funding hundreds of micro projects. To be blunt, the capability for major project implementation does not exist in remote communities. It probably doesn’t even exist in the Minister’s Department. 

Major projects involving complex legal, engineering, survey, hydrological, commercial and technical issues require specialist capabilities. This is not about some ‘whitefella with a nailbag’. The risk Indigenous remote residents face is that the Minister will regress the program into a pre-NPARIH form, where available funds are split into hundreds of project splinters, involving a myriad of players, contractors, architects, builders and the like, all of variable quality, and where effective regulatory oversight is virtually impossible. In this scenario, effective outcomes would be fundamentally compromised.

Of course, in a hypothetical world where a Government decided to strip substantial levels of funding out of the remote housing program, one way to manage the politics of that would be to develop and give prominence to the rhetoric of Indigenous employment and business engagement, and actively reshape the program as a myriad of locally managed micro projects with only lose regulatory oversight.  

My sixth and final concern relates to maintaining investment in both the current and additional asset base. Property and tenancy management is an essential component of the remote housing system. It was an essential element in the reform design of the original NPARIH. Without effective PTM, the remote housing system will run down, asset life spans will shorten, and the cost of necessary repairs will rise exponentially. What has become clear in recent years is that the quality of tenancy management by the states and the NT continues to fall far short of what is required to protect the asset base, and what is required by the relevant tenancy legislation in the various jurisdictions. A major shortcoming of NPARIH and potentially of the current NPRH is that there was no effective line of sight by the Commonwealth to implementation of PTM by the states and the NT. This needs to be fixed urgently.

There are encouraging signs that the 2016 NPRH Agreement recognises this in principle, but in practice, the Minister’s 2013 decision (described in more detail here) to cut $95m from PTM under NPARIH continues to reverberate. The Minister should ensure in any refinancing of the remote housing program that in addition to continuing the current levels of Commonwealth funding under the National Partnership, that the PTM funds of $95m he cut are reinstated.

Alcohol policy reform: addressing the underlying economic incentives

In the previous post on the recent Australian Law Reform Commission Discussion Paper, I pointed to the failure of the Discussion Paper to canvass options to address the taxation of alcohol, notwithstanding the underlying incentives to consume some forms of alcohol over others, and the potential to constrain overall consumption of alcohol through use of price based incentives which might be imposed through increased taxation of alcohol.

More generally, the ALRC had in my view ignored the economic costs of high rates of imprisonment which were in turn a product of high rates of alcohol abuse by the minority of Indigenous people who drink.

I was pleased therefore to come across the recently released report from the Foundation for Alcohol Research and Education (FARE): ‘The Price is Right: Setting a Minimum Unit Price on Alcohol in the Northern Territory’ (link here).

The core argument is summed up in the first paragraph:

Relative to wages, the cost of alcohol has reduced considerably in the Northern Territory (NT) over the past 20 years. Lower prices and the resulting increase in demand has contributed to unacceptable levels of harm in the community. With rates arguably among the highest in the world, the harm caused by alcohol is more prominent in the NT than in any other Australian jurisdiction. While the Commonwealth Government remains uncommitted to reforming a defective alcohol tax system, which has driven the proliferation of cheap alcohol, it is incumbent on the NT government to explore options to stem alcohol’s harm. A minimum unit price, which would set a price per unit below which alcohol cannot be sold, is one such measure.

This report is short, succinct, well researched, outlines the harm caused by alcohol abuse, explores options for utilising the tax system to address the issue, and is admirably focussed on arguing for a practical and achievable policy change which will drive myriad benefits across the NT if implemented.

I strongly recommend readers to have a look at it. You will almost certainly learn something new.

I want to note just two points in relation to the report.

The first is that the report notes in passing the failure of the Commonwealth to reform the ‘defective alcohol tax system’. It doesn’t explore the reasons for this reluctance. Those who wish to understand the reasons for this reluctance would do well to look into the resources allocated towards advocacy, lobbying and political donations by the alcohol industry in Australia. Taxpayers are the losers. Rent-seeking is alive and well in Canberra, including by the alcohol industry, with terrible consequences for those affected by alcoholism, and insidious implications for our democracy (link here).

Second, nowhere does the report explicitly mention Indigenous people. This is clearly deliberate insofar as the report is arguing for a mainstream policy intervention which will impact all alcohol consumers. Yet the exceptional status of the NT as subject to the most disproportionate alcohol harm in the nation (see Figure One in the report) is due in very large measure to the high proportion of Indigenous people in the NT, and the high levels of alcohol abuse amongst those Indigenous people who drink.

Taking these two points together provides a clear example of how mainstream policy (or more accurately lack of policy) can operate to disadvantage Indigenous Australians economically, socially, health wise, and ultimately in terms of high mortality rates.

Of course, alcohol abuse is not solely an Indigenous issue. Nevertheless, the high levels of harm identified in the NT are also likely to be present in areas with high concentrations of Indigenous people in other jurisdictions. While the Northern Territory Government appears to have a greater incentive to adopt the policy approach advocated by FARE, other jurisdictions also face increasing costs in their health systems, their justice systems, their social housing systems, their welfare systems, and their child protections systems. These costs are all linked either directly or indirectly to alcohol and other substance abuse.

And of course, the highest costs fall on those directly affected by alcohol abuse, either as a drinker or as a family member of a drinker. The impact in terms of constrained and reduced life opportunities is enormous, and demands action. It is time for some national leadership.

ALRC Discussion Paper on Indigenous incarceration

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Thou shouldst perceive my passion, if these signes
Of prisonment were off me

The Two Noble Kinsmen, Act Three, Scene One

In a recent post (link here), I canvassed a small number of the complex issues contributing to the over-representation of Indigenous people in Australia’s prisons.

Last week, the Australian Law Reform Commission (ALRC) released a Discussion Paper as part of its review of the laws relating to Indigenous incarceration (link here).

The report is over 200 pages and full of interesting analysis, summaries of the key legal issues which influence incarceration rates of Indigenous people, and interesting insights into how the structure of laws and the overall justice system pipeline operates to influence incarceration rates.

The sheer volume of analysis and the complexity of the issues defies easy summary. So I won’t try. The report is structured to allow those interested in particular issues (eg the role of fine defaults in driving incarceration, or the role of alcohol laws) to focus on those particular interests. The report is also a source of interesting information about the approaches of various jurisdictions, both inside and beyond Australia. For example, there is an interesting analysis of the policy history of minimum prison terms in Western Australia, the only jurisdiction to explore this strategy. And an extensive discussion of the Canadian approach to sentencing which allows a much stronger focus on the impact of colonial policies on individuals in the justice system.

The Discussion Paper is structured to elicit feedback from the general community (submissions are due by 4 September) and thus it is not entirely clear what the Commission will ultimately recommend. Nevertheless, this is without doubt an important and highly useful source document for those interested in the issue of Indigenous incarceration rates, and reflects an enormous amount of detailed high quality research work by the Commission.

Notwithstanding this excellent work, I think there are some major shortfalls arising from the Commission‘s work on this topic. Some are specific to the terms of reference, others relate to the role of the ALRC more generally.

My major concerns are threefold:

First, the very volume and complexity of the issues raised in the Discussion Paper (and we can safely assume in the Final Report) work against their implementation. This issue is exacerbated by the reality (acknowledged in the Terms of Reference and the Discussion Paper) that the bulk of the laws under review belong to the states and territories. Of course, complexity is grist for the mill in the work of policymakers, and there is an argument for laying out in a comprehensive and succinct way the key issues which potentially impact on Indigenous incarceration. But there is a sense here that the Federal Government may have adopted a strategy of commissioning this inquiry as a substitute for focussed action. Indeed, it is clear from the detailed terms of reference that the policy experts in the Attorney General’s Department already have a pretty good idea of the key drivers of Indigenous incarceration. By commissioning this inquiry, the Government has bought space and time. When the report is finally delivered, it will likely point to the need for joint action by states and territories, and the very complexity of the issues raised will mean that the Commonwealth will be under minimal pressure to drive a coordinated and sustained law reform policy agenda through COAG.

Second, the record of Law Reform Commission Reports providing the basis for major reform processes in the Indigenous policy domain is poor. I have in mind the largely unimplemented 1986 Report on Aboriginal Customary Law (link here), which included a draft Bill which was never considered by the Parliament, and the more recent Commission report on native title, ‘Connection to country’ which to date appears to have been relegated to the ‘too hard’ basket (link here and here) This is not a criticism of the Commission, but of the commitment of Governments to follow through once they receive a report. In the light of this sorry history, (and I suspect it is an issue beyond the Indigenous policy domain), there is in my view a requirement on the Commission to structure and shape its advice in ways which make implementation more likely.

Accordingly, I was disappointed that nowhere in the Discussion Paper was there any   discussion of the economic cost of incarceration both on taxpayers and Indigenous people themselves. It may be that this is a matter which will be addressed in the Final Report, but it is in my view disappointing that while the Report manages to discuss issues such as whether the courts might take into account the impact of past dispossession on Indigenous people in the sentencing process, it makes no attempt to consider and discuss at any length measures to counter contemporary structural forces (such as mandatory sentencing laws and broader ‘tough on crime’ policy approaches) which operate to exacerbate Indigenous incarceration. The rapidly rising financial and social costs of incarceration generally and Indigenous incarceration in particular, is a potential countervailing factor. So too are doubts about the effectiveness of imprisonment in encouraging rehabilitation. A recent Victorian Ombudsman report into rehabilitation and reintegration of prisoners in Victorian prisons was critical of the inattention to this issue in the management of prisons generally, and pointed to the significant economic implications of short-sightedness for the state in this area. There is no a priori reason to believe that the Victorian system is any better or worse that other jurisdictions in Australia (link here).

The response to this critique may well be that I have misunderstood the nature and purpose of the ALRC, and that its Terms of Reference mean that it is narrowly focussed on identifying the technical changes to laws and justice processes which might reduce over-representation. My point however is that laws are not made nor administered in a vacuum, and it is underlying political and societal forces which shape them. An effective reform agenda needs to acknowledge, understand and ideally address these structural forces.

My third concern relates to the Chapter on alcohol in the Discussion paper, which fails to mention the potential for taxation law reform to address the supply of alcohol. It is clear that alcohol is a key driver of behaviours which lead to criminal behaviour, and thus to incarceration. The costs of alcohol abuse fall not only on individuals and their families, but also on taxpayers. The tax regime on alcohol is both complex and highly variable in terms of the volumetric incidence of taxation on different products, undermining the capacity of alcohol taxation to effectively drive reductions in consumption of alcohol, notwithstanding the significant health, social and economic costs of alcohol abuse (link here). There is a strong consensus amongst researchers concerned about the implications of alcohol abuse by Indigenous drinkers that tax reform is an underutilised policy lever (link here). It is somewhat surprising therefore that the ALRC chose to ignore completely this issue in its Discussion Paper.

So where does this leave us?

The ALRC will finalise its report to Government by December this year. The likelihood of an election in 2018 suggests that it will not be the ‘right time’ for the Commonwealth to enthusiastically pursue implementation of the report’s findings. Later this year the Commonwealth will likely gain COAG approval for the introduction of an Indigenous incarceration target as part of the Closing the Gap targets, which will be a step forward. The states and territories will continue to struggle to find political narratives and policy responses which effectively balance the contradictory forces at play in this area: increasing community concerns about the impact of crime, the apparently intractable and irresistible pressures towards incarceration once vulnerable individuals enter the justice system, the spiralling costs of prisons and the justice system across most jurisdictions, and the extraordinary statistics demonstrating extreme levels of incarceration for Indigenous people.

In such an environment there is much to be said in favour of incremental reforms driven by policy entrepreneurs in the various jurisdictions. The challenge however is to find the policy space in crowded policy agendas, and to find the political and policy commitment to sustain reform. More often than not, incrementalism degrades into policy stasis.

The argument against incrementalism is based on a growing sense of foreboding that incarceration is being normalised amongst many Indigenous citizens, and that it plays a key role in cementing the alienation and disempowerment of a significant proportion of the Indigenous community. The costs on individuals and their families are considerable. But perhaps just as significant, the existence of an alienated and disempowered segment of Australian society will eventually spill over into the mainstream. It has to be said however that the prospects of a full throated and sustained campaign to address extreme Indigenous incarceration rates seems highly unlikely.

The absence of strategic leadership by the nation’s political elites is the real gap which we need to close.