For The Labourer is Worthy of His Hire
Local Government and Industrial Relations
'This is your last chance to ask yourselves the
laze and gems, positively your last chance; 'How
long could a
modern city function without the garbos,the sanos
and the pissos?'
Hardy's initial idea for the book from which this
quote came the 'Outcasts of Foolgarah' was conceived
from a strike of garbage workers in a Sydney suburb
circa 1956. The book is described as "the epic confrontation
of the lurk men versus the lurk detectors".
It depicts a culture where 'every job has its prerequisites---a politician has the VIP plane and the chauffeur
driven car to take his wife shopping, the business
executive has the expense account, the wharfie has
the busted crate of cigarettes, the jockey has the
percentage punter, the slaughterman has the odd lambs
fry and sweetbreads, the vice squad detective has the
occasional bit of vice, the investor has the tax free
quid.' Over the past 40 years or so we seem to have
built up a culture where it has been seen as legitimate
to take a bit on the side if you can get away with
Local Government has been no exception. By and large
Councils are a monopoly within their particular fief.
The services they provide and the facilities they
control are not subject to competition nor are they
subject to any formal comparative performance measurement.
This fief is protected by State Government Legislation---the Local Government Act---and confers autonomy for
each of Victoria's 210 Councils within their boundaries.
Professor Fels of the Trade Practices Commission was
recently quoted in 'The Age' as saying 'If there is
an artificial monopoly, it is likely to be associated
with high prices, inefficiencies and usually unjustifiable
cross subsidies'. His remarks were aimed at public
water and sewerage authorities, but could equally be
applied to local councils.
Evidence abounds about multiple failings in how local
councils are run.
The Melbourne City Council has been no exception.
In the five years prior to 1990/91 the following trends
could be identified.
- 1. There was no coherent financial strategy.
- 2. Recurrent income has increased by 2.1% in real terms,
but expenditure increased by 9.8%.
- 3. A surplus of $3.5m in 1986 deteriorated to a deficit
of $7m in 1990.
- 4. Major increases in expenditure in that time were
in labour on cost and corporate items (land tax).
- 5. Staff numbers increased by 12% from 1986-90.
- 6. Capital funds and recurrent expenditure was being
financed from borrowings and reserves which had become
- 7. Rate income had been increasing at a rate in excess
of 15% per annum.
- 8. The state of council infrastructure had deteriorated.
For example, roadway and footpaths required $23m for
reconstruction and the Town Hall $25m for renovations.
- 9. There were major management problems. For example,
the accounting system was set up to comply with the
Local Government Act which differed vastly from the
programme structure used to prepare the Council's Annual
Budget. Inconsistencies between the programme budget
structure and the financial accounting structure made
comparison between actual and budget meaningless.
In a public speech in July last year, the new Chief
Executive, Elizabeth Proust, said "I have never worked
in an organisation with such antiquated financial systems,
nor in an organisation with such fragmented information
systems..... We are in no position to know the cost
of our services, let alone to know when we bring down
a budget we can actually be confident we have included
all the costs that we need to include."
The accounting system being used defined types of
transactions by a combination of Workgroup, Costcode
and Dissection Codes. There were over 600 workgroups,
many of which duplicated one another. 25% had no budget
amount against them but had incurred expenditure.
There were 12,000 cost codes most of which were obsolete
or duplicated. The dissection codes had insufficient
breakdown for management to know how much the Council
had spent on a particular kind of goods or service.
With Capital Budget expenditure in excess of $30m
per annum there were no guidelines on the follow up
of outstanding projects, or projects with large cost
variations, nor was there any criteria for deciding
capital works priorities. In one case machinery was
purchased with 70% of its cost set aside for a provision.
Rate Income is by far the most important source of
revenue for the Melbourne City Council. This year
more than $108m will be raised. Annual property rates
are based on Council valuation as are also Land Tax
and Melbourne Water Rates.
In August 1990 the manager of the Valuations Department
reported as follows:
- a) An unidentified backlog of work within the Department
estimated to be in excess of 20 person years work.
- b) The base manual records system on properties and
valuations which have been neglected were erroneous
or had not been updated (up to 16 years in the most
- c) A computerised property assessment valuation system
which contained volumes of inaccurate data, an absence
of controls, a large volume of software errors and
an 'Open Access' ability which allowed staff members
to change any record without security control.
- d) An absence of management controls or analyses of
performance of either staff or contractors.
- e) A total lack of uniform quality controls on valuations.
- f) Large number of valuations (primarily within the
C.B.D) with no supporting documentation and which on
review had been unable to be substantiated.
- h) Staff losses in the 3 years up to June 1989 represented
a turnover equivalent to 56% per annum and 100% in
the 12 months to June 1989.
- i) A net loss of $2m revenue from the current financial
year 1989/90 and other past losses which amount to
Given the two above examples of inefficient management
it is not surprising that there have been difficulties
with labour management and work practices. Last year
a private consultant reported the following in relation
to the MCC refuse collection service.
In the Residential refuse collection current runs
require a staffing level of 50. Within the service
there are 50 assigned staff plus a pool of 18 to cover
absences. However, absenteeism is so endemic that
there are frequently insufficient refuse personnel
in attendance to make up a complete crew. In these
circumstances the refuse service is completed by ad
hoc transfer of staff from cleansing operations. As
a result streets are unswept or swept to a lower standard.
There are 217 working days in a year. The average
employee in the residential refuse collection area
has 12 RDO's, annual leave and is absent for a further
21 days. The average employee is therefore present
for 75.6% of normal working days. Weekend work which
attracts overtime and penalty rates, is well attended.
As the average refuse collector works a job finish
system a normal working day is 5½ hours. Under this
system they knock off on completion of their run.
On a rough calculation they were working less than
20 hours per week last year.
In January 1991 the MCC experienced a strike in the
refuse collection area. No garbage was collected for
10 days in the hottest month of the year. The issue
was the dismissal of an employee who had taken the
day off to work a second job.
The opening negotiating position of the trade union
was an offer that if the Council re-employed the man
he would not claim sick leave for the day absent.
The report gave details of comparative production
levels on a tonne shifted per employee per annum, as
|| 979.00 Direct
|| 338.00 Labour
The MCC has a twice weekly collection compared to
the other municipalities which have only one and the
residential service is largely unmechanised using cans
rather than bins which most other municipalities now
use. Previous attempts to improve productivity have
been unsuccessful. Even when the Union agreed the staff
have rejected solutions.
The Council needs to spend $1m on the purchase of
WorkCare claims have been especially bad in the garbage
collection area. Indeed WorkCare claims have been
bad for the whole of the MCC workforce. In a 2 year
period for 1988 and 1989 on average every employee
made a WorkCare claim. The WorkCare premium rose to
$5.2m or about 7½% of wage costs. This being for both
blue and white collar staff. Actions taken to rectify
this problem have this year resulted in the premium
falling to $3.6m. It is expected to fall further
September 1991 has become a watershed for employment
conditions of all municipal employees in Victoria.
All of the 387 pay scales were abolished and a new
broad band classification structure introduced. This
reduces the number of pay scales to 30:
Under the old scales most employees received automatic
pay increases each year. These have been abolished
and replaced with a new system which absorbs all allowances
previously paid. The new scales have 8 bands and 4
levels. Generally speaking the Municipal Employees
Union or Outdoor Employees will be in bands 1-5, Australian
Services Union (old MOA) or indoor employees 3-8 and
engineers 5-8. In the Victorian classification those
on minimum rates of pay and over-award payments can
be negotiated. However progress between bands must
be agreed with the Councils on the basis of gaining
agreed skills or by attaining satisfactory performance
The MCC has a different arrangement which does not
allow for over-award payments.
Workplace Restructuring provides for a system of work
and job redesign. The MCC began this process over
12 months ago and is about 50% through. It anticipates
completion by the end of the calendar year 1992. However,
300 positions have now been eliminated.
In the opinion of the Industrial Officer at the Victorian
Employers Chamber, Metropolitan Councils will have
the ability to achieve cost neutrality. In other words
the improvement in work practices will offset 100%
of the wage increases. The MCC is anticipating a 4%
reduction in wage costs after 5 years by which time
it will have been able to shed 20% of its workforce.
In the case of rural councils where workplace inefficiencies
are less the cost is likely to be substantial as savings
will be much less achievable. Also rural councils
have always had much more multi-skilling.
There is a training clause in the award which provides
for improvement of skills through training programmes.
The MCC claims it has in-house training programmes
in place and is providing for employees to attend TAFE
courses. It appears that not much is being done in
this area by most councils as yet and it will probably
be another 12 months before staff appraisal and improvement
systems are in place.
The MCC has its own superannuation scheme. Currently
every employee has the option to contribute 6% of their
salary to the fund. For those employees who contribute
the 6% the Council is contributing 15½% making a total
of 21½% going into the fund. An employee doing this
would have to contribute 20% of their salary to a private
fund to retire with the same benefits, according to
public comments made by the Fund Executive Officer.
The Council plans to have the benefits from the fund
'fully funded' by the year 2000. The 15½% contribution
is assessed as being necessary to achieve this.
The investments of the MCC Fund are professionally
managed by Rothchilds and NatWest. I was elected a
Councillor in August 1988 and appointed by the Council
as a Trustee of the Fund. The other Trustees were,
another Councillor, the Town Clerk, and three employee
representatives, a welder, a gardener and a union organiser.
At the first meeting I attended a report was tabled
on the Investment Performance of the fund then managed
by ANZCAP, a fully owned subsidiary of the ANZ Bank.
The Report indicated 25% of the Fund had been lost
during the year with no contribution from income on
the investments, roughly $12.5m had been lost.
The Trustees employed a consultant to examine the
investments by ANZCAP over the previous 4 years. ANZCAP
was replaced as investment manager.
The investments in the fund over these 4 years had
been rolled over on average twice per year incurring
commissions for ANZCAP of in excess of $1m per year.
The Consultant described the investment management
in gambling terms---'punting'. Very little had been
invested in 'blue ribbon' stocks in the top 50 or 100
stocks of the All Ords. At one stage about 15% of
the fund (over $5m) had been invested in Quintex.
Subsequently $2m was lost in this stock. Investments
had been switched from one continent to another frequently
($2m lost in the UK) and large punts had been taken
in narrow areas like developers and gold at various
During the first 3 years leading to October 1987 they
had been quite successful, but after this everything
went wrong when Second Board Stocks became unwanted.
Legal advice on the possibility of a negligence suit
resulted in rejection along the lines of 'caveat emptor'.
That is the Trustees should have been aware what had
been occurring from the regular reports being received.
Some meetings of the Trustees became tactical battles
between the three worker representatives on one side
and the two Councillors and Town Clerk on the other.
Of particularly sensitivity were decisions relating
to Disability Benefits available from the Fund. These
are available for anyone judged to be Totally or Permanently
Disabled. Sometimes some very sad stories of workers
unable to move because of a bad back were found to
be not quite true when the doctor at the Industrial
Clinic found dirt from gardening under their finger
There was one case of a former street sweeper, a batchelor
resident at Macgilles Hotel for many years, who consumed
over 40 beers per day. His physical systems were in
such a poor state he was for all intents and purposes
useless. However, although his state of health was
certainly self inflicted he qualified for the extra
Work practices in this area have been the bane of
Councillors for some years particularly since 1985
when parking enforcement officers adopted the practice
of 'pairing' to defend themselves from irate motorists.
This caused a loss of 22% in productivity. Other
practices include all officers returning to their Elizabeth
Street Office near Victoria Market for lunch breaks,
certain areas not being attended to as they should,
lost productivity in wet and hot weather. Coin collectors
had substantial down time for occupational health and
safety reasons. There has been considerable difficulty
introducing shift work in lieu of overtime.
Of 197 employees in the Parking and Enforcement Section,
50 are involved in Administration and prosecutions.
However, Council reports indicate it takes up to 3
months to respond to correspondence and there are high
rates of errors in the issue of Infringement Notices.
Even a 10% improvement in productivity would result
in savings of $1m in costs and additional income of
up to $2.5m.
In one incident about 18 months ago, Parking Officers
refused to collect fees from a Council car park incurring
lost income of over $100,000. The Parking Officers
had sued a motorist over an incident on their own initiative
incurring costs of $7,000. They asked the Council
to pay the bill. The Council refused---legally it
is unable to pay someone else's legal expenses. The
matter was eventually settled in the Arbitration Court,
the Council agreeing to an unusual settlement to avoid
No doubt a large percentage of the responsibility
for the mess the MCC has been in was caused by inefficient
management and worker and union participation in poor
work practices. However, the picture would not be
complete without an examination of the role of the
The Central Melbourne region which comprises the municipalities
of Melbourne, Port Melbourne, South Melbourne, St Kilda,
Prahran, Fitzroy, Richmond and Collingwood, in 1905
had a population of 321,000. In 1989 the population
was 227,000. Residential occupation has declined while
commercial, industrial and retail has increased. In
the Municipality of Melbourne (see Table A) 90% of
the rates for 1991-92 will be paid by Commercial, Industrial
and Retail Ratepayers while 18 of the 21 Councillors
are elected by residential voters. In Port Melbourne
where 80% of the rate base is commercial (see Table
B) only 9% of enrolments are non residential. Port
Melbourne has for many years had a council entirely
of ALP endorsed Councillors elected by the residents.
The Central Melbourne Region as a whole has a dominance
of residential interests even though non-residential
interests have the major presence.
At the last election for the MCC in August 1991 in
Central Ward which this year will pay 77.5% of the
total council rate income that is over $80m, 80% of
corporations either did not vote or did not enrol.
Enrolment and voting is compulsory for residents but
not for non-residents.
In the Melbourne City Council the make up of the elected
membership is further skewed by the social and occupational
make up. Two groups dominate---Public Service employees
and own account professionals (Doctors, Lawyers and
Shopkeepers). Private sector employees and employees
in the corporate sector are almost totally absent.
Table C indicates the situation is much the same in
the Central Melbourne Region as a whole. In addition,
there are 225,000 people employed in the Municipality
of Melbourne who are excluded from voting. Less than
1 in 20 of the employees live in the municipality.
The business sector appears to have a perception that
local government is unimportant. The consequence from
this is that there is less emphasis on cost and efficiency
issues and more emphasis on issues relating to local
residential matters. Health, Welfare and Recreation
facilities are more prominent. The level of rates
is relatively unimportant. In the recent Discussion
Paper Central Melbourne---Options for Effective City
Government, the author said 'The inevitable outcome
is a labyrinth of administration around key strategic
issues---to such an extent that a failure to adequately
prioritise, a tendency to talk rather than act, and
a frittering away of public resources is almost predetermined.'
The Melbourne City Council along with other municipalities
in Victoria is struggling with the award restructuring
process to improve productivity. A new management
team commenced at the MCC in mid 1990. It claims that
over the past 18 months management improvement has
included a range of techniques such as commercialisation
of internal services, reorganisation, work and job
redesign and contracting out. The Council has recently
agreed to contract out coin collection services. The
contracting out issue is complicated by the social
responsibilities of the Council, it has said.
Over the past 2 years MCC rate income has increased
by 41% (see Table A---Total Rate Collections). Since
1982 average annual rate collections have increased
by over 20% per annum. The jury must be still out
as the benefits of management improvement have not
yet been seen by ratepayers.
The Award Restructuring process has emphasis on simplified
classifications, multi-skilling, career paths and training.
All fine objectives but as yet it has failed to deliver.
For example; with the MCC garbage collection service
the Council has decided to allow 2 years for the service
to be brought up to 'best practice' industry standard.
With the description of the service previously described
the methods of improvement being employed appear to
be painfully slow and certainly unacceptable to private
What could be done?
There are now many examples where similar situations
to those experienced by Councils in Victoria have existed
in other countries. These have been resolved resulting
in enormous savings and improvements to services.
Wandsworth Council in inner London had been experiencing
similar problems to MCC with refuse collection. Management
had succeeded in reducing the number of collection
rounds by 7 out of 35 rounds and had informed the Council
this was the maximum attainable. At Christmas 1981
there was a rash of complaints about the service.
No work was being done because of icy conditions---
up to 4 weeks with no collections in some areas. Householders
were being intimidated if they failed to pay a Christmas
tip. The Council decided to put the service out to
competitive public tender. The workers went on strike
on the eve of the Council Election. The Council was
returned and the strike collapsed. The workers were
offered generous redundancy terms (3 times normal).
Half of this was withheld as a 'Good Behaviour Bond'.
The takeover was painless---the successful tenderer
purchased the Council fleet and leased the existing
depots. The savings generated over 5 years were 45%
after allowance for severance costs.
Wandsworth Council has privatised a large number of
its activities with average savings of 30% over 5 years.
The remainder of its services have been put through
a system of competitive tendering against the private
sector. These services have remained in-house but
the average savings have been 22%. Wandsworth Council
now has about half the staff of neighbouring Councils.
Total savings over 5 years was 25m Pounds out of expenditure
In the United States a recent survey of 85 municipalities
in Los Angeles County revealed the following services
were more costly in-house by the following:
|Asphalt Paving & Repair
Another report in the United States covering 1400
cities and countries showed that with refuse collection
there were 50-60% cost savings with contracting out.
The report said most municipalities don't know their
cost. They don't put in all direct costs and don't
include overheads. There were also more fringe benefits
paid in the public sector.
In New Zealand all Councils are going through a system
of privatisation. For example Wanganui Council, a
city of 40,000 people has set up a Service Delivery
Working Party. It has two outside business representatives,
one wages staff, one salaried staff, three councillors
and three executive staff---a total of 10. This Committee
is progressively going through each service the council
provides and forming it into a Business Unit. The
Working Party has a framework for determining the best
method of service delivery. Each service is formed
into a Business Unit for this purpose. The impetus
for this initiative came from Central Government pressure
to see that road subsidy funds were being efficiently
The main advantage of the adoption of the 'competitive
tendering' approach to Council Service delivery is
that it puts the emphasis on the efficiency and effectiveness
of the function being carried out. Most attempts at
reform in Victoria over the past 30 years have emphasised
boundary change in the 210 Council structure to reduce
administrative cost and provide more equity where the
users of one Council area may be obtaining benefits
from services of another municipality without paying.
While there certainly would be benefits from merging
Council Administrations there is much greater scope
for cost savings in reforming the functions of services
being delivered through the 'competitive tendering'
process. In the past functions carried out by Victorian
Councils have been largely confined to within their
own particular boundaries. There is absolutely no
reason why economies of scale cannot be obtained by
competitive tendering across boundaries. There is
also no reason why administrations cannot form themselves
into business units and tender for the administration
of another municipality. Through competition Councils
could move into a natural merging process.
In South Melbourne, for example, at the present time,
the rates are only two thirds the level of Melbourne
City Council. South Melbourne has claimed they are
an efficient and effective Council and should not have
to share the burden of Melbourne City Council's inefficiencies
through any forced merger. If they can prove their
point they should be able to make a takeover bid for
Melbourne City Council administration.
It seems to be now long past the time when ratepayers
such as in the City of Melbourne should have to put
up with the bad work practices, inefficient management,
minority groups and Councillor control of local Government
which is now persisting.
- 1) City of Melbourne 1991-90 Budget
- 2) A Strategy for Melbourne's Development Proposed
by Melbourne City Chamber of Commerce 1991
- 3) Wandsworth Council---United Kingdom Centre for Policy
- 4) Wanganui Council, New Zealand, Framework for Determining
Best Service Delivery 1991
- 5) Melbourne City Council Reports 1988---1991
- 6) Limits of Privatisation---Robert W Pool, Jnr.
- From Privatization Tactics and Techniques, Proceedings
for an International Symposium; edited by Michael A
- 7) Victorian Local Government in 1990 and 1991Results of MAV Survey of Municipal Finances and Efficiencies
- 8) The Restructure of Local Government in Victoria,
Principles and Programme Local Government Commission
- 9) City of Melbourne, Annual Accounts 1991
- 10) Central Melbourne: Options for Effective City Government,
A Discussion Paper 1992
- 11) 'The Outcasts of Foolgarah', Frank Hardy, Panther
"Context Definition Advantage"
One party dominates the debate by setting out the terms
under which the discussion will take place or by defining
the subject to be discussed.
Swedish Child Care Centres cost $A12,000 per term to
run. Sweden has same level of social security as the
EC but has 30-35% higher taxes.
||Tonnes per Employee
VICTORIAN LOCAL GOVERNING AUTHORITIES INTERIM AWARD
As an example---a tradesman painter is, under the old
award, paid $391.90 and will translate to $417.20.
This will occur as follows:-
|EFFECTIVE DATES OF PHASING IN|
|Pre 1st September 91
||1 Sept 91
||1 March 92
The wage rates for a painter newly appointed on the
following dates are:
|Post 1st September 91, pre 1st March 92
|Post 1st March 92, pre 1st September 92
|Post 1st September 92
Authorities must maintain a record of their employees
old award rate and add to that rate, appropriate increases
until the salary for these positions are equal to the
new award rate.
Please note that all such increases must be absorbed
into overaward benefits made by Council. For further
information on translation see Appendix "A" to this
award entitled "Classification and Translation".
RATES OF PAY
Note these rates are subject to the phasing in process.
CLAUSE 8. CLASSIFICATION AND MINIMUM RATES OF PAY---EMPLOYEES
1. Classifications formerly covered by the Local Governing
Authorities Officers (Victoria) Award 1984 and the
Professional Engineers (Local Governing Authorities)
Award 1966, except where elsewhere specified in this
award, shall be covered by Bands 3 to 8 inclusive.
Victorian Employers' Chamber of Commerce and Industry,
50 Burwood Road, Hawthorn 3122
MCC PROPERTY VALUATION BASE
APPROXIMATE WARD COMPARISONS
TABLE B: COMMERCIAL & RESIDENTIAL RATES
||NAV AS %
||RATE BILL ($)
*Derived from MAV Comparative Data and 1989/90 Statements
*Column B of the above table shows the percentage rate
or tax levy applied to the valuations of residential
properties after taking into account income derived
from separate garbage charges and minimum rates where
they are applied.
*Column C shows the effective average rate bill for
residential properties in each municipality.
TABLE C: COMMERCIAL COMPONENT OF RATEBASE AND
ELECTORAL ROLL, CENTRAL MELBOURNE REGION
||NAV AS %
STAFFING LEVELS IN INNER LONDON BOROUGHS
per 1000 pop.
5-YEAR SAVINGS FROM COMPETITIVE TENDERING
(1) Services Privatised|
|Mobile maintenance unit
|Battersea Arts Centre
|Estate management (contractors)
|Cleaning/Attending at public halls
|Libraries---cleaning and attending
|(2) Savings through competitive testing against private sector where work remained in-house|
|Latchmere Leisure Centre
|Estate Management schemes
| (building works maintenance)
|Social Services transport
|Skips and abandoned vehicles
NOTE: The mechanical workshop correctly appears
twice. In 1981, a tendering exercise produced 29%
savings and the work was kept in-house. In 1984, a
re-tendering produced further savings of 42%.
(the union, incidentally, was claiming that the pre-1981
service was efficient!)