National OHS push may need shove

By Stephen Sedgwick

The Australian Financial Review,
29 May 2008, p. 79

History suggests reformers need not only arguments but also carrots and sticks to buttress their case, writes Stephen Sedgwick.

Someone once said that the road to hell is paved with good intentions. Perhaps they were thinking of Australias attempts to pursue regulatory reform across jurisdictional boundaries. History suggests that good intentions need to be supported by incentives and disciplines.

Reform of Australias multiple occupational health and safety (OHS) regimes is a case in point. In its 2004 Report, National Workers Compensation and Occupational Health and Safety Frameworks, the Productivity Commission catalogued many differences in legislative frameworks, interpretation and approach to enforcement adopted by the states and territories and the federal government. Nationally operating employers and mobile employees incur costs to understand and comply with these regimes.

It has long been debated whether such differences are justified. The National Occupational Health and Safety Commission was set up in 1985 to promote greater consistency. The Industry Commission (1995) and Productivity Commission (2004) have both argued that compliance and other costs are excessive and a national uniform approach is preferable.

More recently, the Council of Australian Governments in February 2006 identified OHS as one of six priority cross jurisdictional hot spot areas where overlapping and inconsistent regulatory regimes are impeding economic activity.

The relevant ministerial council was tasked to identify priority areas in principal OHS acts that should be harmonised. Regular reporting was mandated. COAG reaffirmed this at its post-election meeting and in March committed to national harmonisation of OHS laws, asking for an intergovernmental agreement by May and model legislation for consideration by September next year, with the chance this July to examine the scope for accelerated implementation.

But recent reports in this publication suggest that roadblocks are appearing in the path of progress. Some states reportedly want to preserve control over key elements of their regimes, retaining authority to alter them at will. They seek consistency across jurisdictions, not uniformity.

While no expert, I see no reason to dispute the Productivity Commissions 2004 finding that there are no compelling arguments against a single national OHS regime. Obviously reform proceeds smoothest when there is an alliance between key Ministers who are well informed champions of reform and are prepared to challenge inevitable vested interests - including within the bureaucracy - and build political constituencies. But what options does a reformist commonwealth have when other jurisdictions are unwilling collaborators? History suggests that reformers need not only arguments but also carrots and sticks to buttress their cases.

The most successful example of co-operative federalism has been the National Competition Policy, which provided incentive payments after delivery of specific reforms. The agenda was specified in advance and compliance assessed by an independent body. The payments were justified on the grounds that some benefits could not otherwise be captured within the reforming state, which would therefore have less incentive to incur the costs of reform. In contrast, expectations now seem high that commonwealth funding will be provided almost automatically to secure reform.

Sticks are harder to employ but can have their place. Conditions may be attached to payments that might otherwise be made and payments withheld if compliance is low. Specific-purpose payments are often made on this basis. But the politics of enforcing such conditionality in the face of complaints by powerful and vocal vested interests is not always easy. Threats to take over the funding of hospitals are arguably a special case of such an approach.

Resort to the bully pulpit is another approach. This requires champions of reform to make a compelling case direct to electors and mobilise public opinion. Arguably this approach was adopted by former education minister Dr Kemp in placing the testing of school students against agreed national standards for literacy and numeracy on the agenda late in the 1990s.

In some instances greater competition may be introduced as an alternative to - or to reinforce - collaborative federalism. Commonwealth-funded efforts to empower parents to choose the schools their children attend, as well as the development of providers of apprenticeships and other training services other than traditional TAFE colleges, are examples of this approach. One impediment to reform can be confusion of the ownership and regulator roles when states both supply services and regulate providers. Approaches that promote alternative suppliers and accountability arrangements that inform choice, can help to redress this balance.

Independent reporting of the performance of governments against benchmarks of best practice can support both the bully pulpit and introduce benchmark competition into public debate. Indeed, in many cases expert independent commentary is necessary to ensure that complex performance data is correctly interpreted and the policy implications understood. Assessments of the performance of hospital systems are a case in point. It is to be hoped the COAG Reform Council will exercise real independence in assessing performance against predetermined milestones and performance benchmarks; and promote informed debate.

Interestingly, in the case of OHS, the Productivity Commission identified a pro-competitive option in its 2004 report - that the commonwealth invoke the corporations power and allow eligible entities to opt out of state schemes for one established and administered by the commonwealth.

No doubt there is much talking going on behind doors to resolve the apparent impasse. But the commissions approach should be re-examined if the talking does not deliver a credible outcome.

Professor Stephen Sedgwick is director of the Melbourne Institute of Applied Economic and Social Research. He was secretary of several federal departments between 1992 and 2002, including Finance and Education.