Meet your new clients

Expect some unexpected new clients, with troubling issues, over the next few months. That’s the situation many financial planners will face, as the Rudd government’s razor gang gets to work.

With a public service of almost 140,000, the government is one of the biggest direct employers in the country. It has also, at least until now, been the source of a fairly steady stream of lucrative consultancy contracts. The Howard government had been of spending about $360 million a year, on consultants.

But the new government is already between a rock and a hard place. It must reduce its spending, to curb inflation. But it must also keep its election promises, to preserve its credibility. That means that it will proceed with the $31 billion worth of staged tax cuts, which many believe might well be deferred. And it won’t cut excessive spending on private schools and middle class welfare, that should be prime targets, in any cost cutting program. These things are just too difficult, politically.

So what can it do? Look for soft targets, of course. Once again, we have a a new government with the public service in its sights. Just as the Howard government did when it first came to office, back in 1996.

There won’t be another bloodbath now, as there was then, when Howard slashed some 30,000 public service jobs.

But there will be severe trimming. The Finance Minister, Lindsay Tanner, already has two groups, particularly, in his sights. These are the Senior Executive Service and government contractors.

Both are soft targets. The SES, as it is known, has been one of the least accountable divisions of government, over the past decade or so.

Even the Treasury has resisted scrutiny in this area, arguing that would invade the privacy of its senior workers. So standard checks on the way public money is spent in this area has been weakened. But the SES is about to pay for its arrogance.

As Mr Tanner has noted, the SES has become bloated over recent years. He recalls that, just a few years ago,only 13 per cent of Australia’s Federal public servants were in this very privileged club. Now, though, that has blown out to 25 per cent. That growth was not accompanied by substantial signs of any matching improvement in the performance of the public service.

Governments of all persuasions are well aware that there is little public support for senior public servants. The old television comedy, Yes Minister, didn’t help them either.

The National Capital Authority, the Federal Department which manages key aspects of Canberra’s face to the world, has already been targeted. The Defence Department, which is a much harder target, has been exempted.

Mr Tanner has, all too apparently, decided that scattered targets are the easiest to deal with. That’s the pattern that can be expected, as his Razor Gang he heads, gets on with its work.

But there will, of course, be a human cost. The public servants who are “shaved” in this process, will be facing new realities. Their retirement plans will have to be revised. The contractors, hit by the government’s cuts, could well face even more severe problems. The smooth flow of work, to which they have become accustomed, will be interrupted. They will now face quite long waits, between projects.

With the private job market strong, at least for now, the issues arising from the dislocation these groups face, might well be less severe than they could have been, at other times.

They will, nevertheless, be both serious and complex. Financial advisers should prepare to meet these needs. Those who do, will find their clients grateful.