Big 4 ‘revolving door’ drawing ire around the world
The idea of a ‘revolving door’ between the big four consultancies and the public sector is neither new nor limited to Australia – as evidenced by an explosive letter from a US policymaker.
Last week, US Senator Elizabeth Warren wrote to the acting Inspector General of the US Treasury saying its investigation into conflicts of interest between the nation’s largest accounting firms and the US government had been an “irresponsible whitewash.”
Having requested the investigation two years ago after The New York Times reported that the US big four had “perfected a remarkably effective behind-the-scenes system to promote their interests in Washington,” the review failed to hold any one company or individual accountable.
According to Senator Warren’s letter, at least 24 big four employees had quit their jobs to take senior tax-policy positions in the federal government since 2001, “often receiving massive promotions and raises.”
The Inspector General’s report concluded that the department had policies and practices in place to prevent potentially conflicted employees from exerting any undue influence.
“Absurd” is how Senator Warren described the conclusion and the reasoning behind it.
“In simple terms, you concluded that because many department officials are involved in developing important tax rules, there can be no meaningful conflicts of interest,” Senator Warren said.
“This fails a basic test of logic and common sense: in reality, the more Treasury or IRS Department officials that are working on a key tax rule – particularly in the absence of key rules and regulations to address revolving door conflicts of interest – the more likely these rules are to be affected by conflicts of interest.”
“You failed to conduct a serious inquiry, and you should retract this report and start over in order to conduct a meaningful review of the scope and significance of this revolving door problem at the Treasury Department,” she wrote.
Senator Warren implored the department to “do better” and requested that the report and its conclusions be set aside in favour of a fresh review.
Claims of a big four government revolving door will sound familiar to an Australian reader, given the flurry of inquiries and investigations into PwC Australia and the sector more broadly.
The topic was once again brought front of mind when, last month, ex-McKinsey & Company consultant Simon Kennedy was elected as the new member for Cook. While not technically big four, the firm is considered a big three strategic consulting presence, alongside Boston Consulting Group and Bain & Company.
Kennedy was sworn into federal parliament last week, taking the seat of former prime minister Scott Morrison. While he may be the freshest McKinsey alum to grace Parliament House, he is certainly not the only one – alongside Greg Hunt, Angus Taylor, and Claire O’Neill.
Crikey and The Mandarin last month updated their ‘revolving door list,’ which tracks all sitting politicians and senior public servants who were once big four consultants, as well as politicians who are now big four consultants.
The Centre for Public Integrity (CPI) in June last year wrote that the revolving door raised conflict-of-interest concerns and called for tougher post-separation transparency measures and employment provisions.
It is part of the same problem as the government’s perceived over-reliance on external labour and consulting.
Last year, The Centre for Public Integrity calculated that taxpayers had funded $1.4 billion in big four contracts over the preceding financial year: a 400 per cent increase over the decade.
The term “shadow workforce” entered common parlance after a series of government insiders used it to colour the ‘quasi-APS’ roles performed by large consulting groups.
Senator Deborah O’Neill told ABC’s 7.30 that the big four “have spread so far across society and into government, their tentacles are everywhere, they now consider themselves the power with a government beneath it, a government that they control and have power over.”
To fight the spread, and as part of a broader push to “rebuild the APS”, the Labor government has lifted the former Coalition government’s “arbitrary” public service staffing cap and forecasted an additional 10,000 employees over the 2023–2024 period.
On top of this, government departments will be incentivised to cut their reliance on external providers under a new outsourcing levy and mandated targets.
Compared with a comparable period in 2021–2022, the federal government will spend $624 million less on engagements with the country’s largest consulting firms, according to Finance Minister Katy Gallagher.
The federal budget is expected to save $1 billion on external labour, adding to the $3 billion saved on these engagements in the 2022–2023 October budget.
“While the Liberals talked tough about capping public service numbers when they were in government, in reality, they were spending billions outsourcing the work to keep the public service headcount artificially low,” said Minister Gallagher.
“The former Government spent approximately one in every $4 on external labour in 2021-22. At the same time as reducing the services Australians rely on, the Liberals employed a shadow workforce of tens of thousands of private consultants and contractors to keep the size of public service artificially low,” she added.
