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The Andrews government is under mounting pressure to impose new rules on the big consulting firms to reduce conflict-of-interest risks as it increasingly relies on them to manage major projects and policies.
In the wake of the PwC tax leak scandal, Labor-linked lobbyists and integrity experts have warned the big four professional services firms – KPMG, PwC, Ernst & Young (EY) and Deloitte – face potential conflicts of interest because they have privileged access to sensitive government information while also advising private clients about government policies and work.
PwC’s misuse of confidential tax reform information has raised questions about risks at a state level. Credit: Alex Ellinghausen
Experts say the big four are not bound by rules that apply to lobbying firms, which require the declaration of their interests, clients or contracts on the state’s lobbyist register.
Prominent Labor-linked consultant Ken McAlpine said the temptation was almost “irresistible” for the consultancies to use information gleaned from their government work to market to private clients trying to secure government work or funding in the same policy areas.
“And there is no government accountability or oversight mechanism over this,” said McAlpine, who worked as an adviser to the Bracks and Brumby governments between 2002 and 2007 and now runs lobbying firm Spring St Advisory.
“If the consulting firms are working both sides, the government should make them choose a side.”
Labor-linked lobbying firm Hawker Britton wrote to the Department of Premier and Cabinet in 2020 – well before the PwC scandal came to light – saying it was “increasingly obvious” the big consultancies were lobbyists and should be bound by the state’s lobbying code of conduct.
“That these firms are allowed to be involved in the preparation of submissions for cabinet approvals gives the perception of a perceived conflict of interest whether true or not,” the letter said. “This perceived or actual conflict of interest would be removed if the firm was acting in accordance with the [lobbyists] code by listing their clients.”
Centre for Public Integrity research director Catherine Williams said that for all intents and purposes the big four should be considered lobbyists.
“If they have people working within them who are called government relations advisers, if in essence, they’re representing the interests of either that firm or another entity to the government, then they’re no different in reality from what is called a lobbyist,” Williams said.
The state government has been increasingly reliant on professional services consultants who are given privileged access to confidential details to work on policy, programs and projects, including contributing to cabinet submissions.
Recent examples include PwC’s work on plans for the contentious Suburban Rail Loop and KPMG’s involvement in many housing, planning and health projects. EY is a key player in the $11 billion North-East Link.
In March, The Age revealed that spending on consultancies had tripled since the Andrews government was first elected, with government departments paying almost $1 billion over eight years to a handful of private sector companies for advice, research and analysis.
None of the big four are listed on the Victorian lobbyist register and, therefore, do not have to declare their private clients and contracts to government or the wider public.
Catherine Williams, from the Centre for Public Integrity, says the big four consulting firms should be classified as lobbyists.
In responses to questions from The Age, three of the consultancies denied they were lobbyists. Deloitte would not comment.
However, documents obtained under freedom of information laws show that KPMG was listed on the lobbyist register but removed itself in 2017. The company did not respond directly to a question about why it registered and, then, deregistered itself.
A KPMG spokesperson said the company adhered to all “disclosure requirements” but was not on the lobbying register “as we do not provide lobbying services on behalf of third-party clients”.
“When working with the government, we recognise we have a duty to operate with the highest level of integrity, confidentiality and trust,” the spokesperson said.
Integrity experts have also raised concerns about the “revolving door” of public servants and senior staffers who move between senior government jobs and positions with companies seeking favourable government decisions.
Williams said public servants and staffers were attractive because of their access to, and insider knowledge of, government.
Under the lobbying code of conduct, a 12-month cooling-off period applies to public servants and staffers leaving to work for lobbying firms. The cooling-off period does not apply to bureaucrats and staffers who leave to work for firms like the big four consultancies.
Former senior bureaucrat Simon Phemister is now at PwC. Credit:
PwC has confirmed that former Jobs Department secretary Simon Phemister has recently become a partner after leaving the government in February. Treasurer Tim Pallas’ former chief of staff, Alison Currie, moved to PwC less than two months after leaving his office.
Between mid-2020 and September 2022, former Environment Department secretary Adam Fennessy was the Victorian public sector commissioner – whose responsibilities include overseeing the lobbyist register – after a three-year stint as an EY partner.
These are just a few of the many former MPs, staffers, public servants and party operatives who have worked for the big four.
The Age does not suggest that any of these people have engaged or will engage in conduct that is unlawful or amounts to a conflict of interest.
The calls for reform come as the federal-level scandal with PwC reverberates across the states and territories.
Credit:
The scandal was exposed in January by The Australian Financial Review, revealing the firm’s tax partner, Peter Collins, shared confidential government briefings about tax policy with partners and clients.
In response, the NSW government has moved to crack down on possible leaks of its information and is considering introducing multimillion-dollar fines under new betrayal-of-trust laws. On Wednesday, NSW also announced a parliamentary inquiry into the state government’s use of consultants.
But to date, the Victorian government has not taken any action. On Wednesday, Premier Daniel Andrews said his department had sought assurances from PwC and was confident the consultancy had not leaked confidential information from his government.
A Victorian government spokesperson said it was “obviously” concerned about the PwC saga and was “seeking advice from the Commonwealth and considering our response”.
The spokesperson reiterated that the government was considering the definition and regulation of lobbying, as part of its in-principle support of the recommendations of IBAC’s October special report on donations and lobbying.
McAlpine said any consultants advising the government should not be allowed to have clients in the same policy area or with interests in the same programs or project, and all lobbyists and consultants should be required to list clients and their contracts on a public register.
Williams called for a five-year cooling-off period for ministers and two-years for senior public servants.
In a one-sentence written statement on behalf of PwC and partners including Phemister and Currie, a spokesperson said: “We are not on any lobbyists registers in Australia.”
An EY spokesperson said the company did not lobby government and did not meet the definition of a lobbyist organisation.
The spokesperson said EY employees must adhere to a strict code of conduct and that all employees undergo rigorous training on issues such as conflict, ethics and acting with integrity at all times.
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