Jim Chalmers flags public service consultant crackdown in wake of PwC scandal

As the fallout from the PricewaterhouseCoopers scandal continues, Dr Chalmers told ABC radio he was working on changes around the way the government consults with the private sector to ensure there is not a repeat of the PwC breach.

"We've taken some steps [and] there will be more steps to take. I'm working on them, almost literally right now. And I'll have more to say about it in due course," the Treasurer said.

"I will have more to say about how we crack down on this behavior, which is inexcusable."

But Dr Chalmers refused to be drawn on whether the government's crackdown would include referring the PwC's conduct for investigation by the Australian Federal Police, and the government has so far resisted calls to ban the use of PwC.

The government's Senate leader Penny Wong told a Senate estimates hearing the government was considering what action to take against PwC but the treasurer was "not in a position to articulate what that is".

The PwC scandal erupted when it was revealed a senior tax partner at the firm who had been consulted by Treasury about reforms to the taxation of offshore entities shared privileged information to other partners, enabling them to design tax arrangements to thwart the changes.

Greens senator Barbara Pocock grilled Department of Prime Minister and Cabinet officials in a Senate estimates hearing about why the government has not banned the use of PwC following revelations of its confidentiality breach.

PM&C Deputy Secretary David Williamson confirmed the department was yet to ban the consultancy but said "one of the criteria for value for money in contracts relates to ethical behaviour and certainly we would bring that to bear in contemplation of engaging PwC, or indeed any other consultant".

Mr Williamson said there was "no active consideration" being given by the department to hiring PwC.

Dr Chalmers said PwC's behaviour had been "deeply, deeply troubling".

He said the government had already initiated changes to the way the Tax Practitioners Board operates.

The board, which registers tax agents, slapped a two-year ban on former PwC tax partner Peter-John Collins after its investigation revealed he had disclosed confidential information about new laws to stop multinationals avoiding tax by shifting profits from Australia to offshore tax havens.

The board has announced an expanded compliance program targeting "high-risk" practitioners.

The board said it will use data from multiple sources including court hearings and media reports, to "better identify tax practitioners who engage in poor and unlawful tax advice".

The move comes after the government in February introduced legislation to strengthen the regulation of tax agents, including closing a loophole under which disqualified practitioners could work for registered agents, establishing financial independence for the Tax Practitioners Board, and make tax agents renew their registration annually.

Dr Chalmers said the PwC scandal had damaged the trust that underpinned consultation between government and the private sector.

"Part of the character of this government is consultation. But in order to do that, you've got to be able to trust the process. That trust has broken down here and we need to fix it," he said.

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The PwC scandal has highlighted some of the risks for government in engaging with and relying on consultants, contractors and other external sources of labour and expertise for advice and service delivery.

An audit commissioned by the government found that the use of consultants, contractors and labour hire workers had exploded under the Coalition, accounting for the equivalent of 53,900 full-time staff costing almost $21 billion in 2021-22.

The government committed to cutting down on the use of external labour and in its budget announced an additional 10,000 Australian Public Service positions, almost a third of which will be converted from labour hire and contractor arrangements.

Dr Chalmers said the enormous increase in the use of consultants and contractors under the previous government had been "troubling" and the government was "taking steps to wind back some of this spending when it comes to external consultants and and trying to rebuild the public service at the same time".

His comments came as the Centre for Public Integrity published a report showing the four largest consulting companies operating in Australia - PwC. KPMG, Ernst & Young and Deloitte - donated $4.2 million to the two main political parties in the past decade.

The report said over the same period, the volume of contracts going to the firms has soared 400 per cent from $282 million in 2012-13 to $1.4 billion in 2021-22.

The centre's spokesperson Han Aulby said the donations were just one aspect of the relationship between the consulting industry and government, which included a "revolving door" of former politicians and senior public servants going to work in the sector.

Mr Aulby said the government should impose a cap on the use of consultants by departments and set strict criteria for engaging them.