Billion-dollar NSW consultant spend lashed, cut pledged

The former NSW coalition government paid for consultants more than 10,000 times in five years and overly relied on the big four firms, an inquiry has found.

A state parliamentary committee on Wednesday handed down a scathing report and recommended changes to how and when consultants are engaged.

The Labor and Greens-dominated committee inquiry followed a report from the NSW auditor-general that found the coalition government spent more than $1 billion on external consultants between 2017/18 and 2021/22 and did not manage them effectively.

The Labor government has pledged to cut spending on consultants by $35 million a year, although the total outlay reached $193 million in 2022/23.

Finance Minister Courtney Houssos has promised careful consideration of the committee's report and flagged further action in the June budget.

Greens upper house MP Abigail Boyd, who chaired the committee, said the former government issued a consultant contract "at a rate of one engagement every hour for five years".

"For too long, highly paid consultants and consulting firms have enjoyed a rarefied privilege and prestige in the consciousness of the public and government decision-makers," she said.

Greens MLC Abigail Boyd
Greens MLC Abigail Boyd said the firms were "greedy for growth" in the government sector. (Dean Lewins/AAP PHOTOS)

"It's time to bring that relationship back down to earth.

"But responsibility for this dynamic cannot be placed at the feet of public servants - it has been cultivated by the big consulting firms, greedy for growth into an increasingly lucrative market for services to government, enabled by policy settings like labour expense caps and so-called efficiency dividends."

Recommendations included scrapping any disclosure exemptions for consulting spending, ensuring they are used in a last resort and not on core government work, and strengthening penalties for any consultant that behaves unethically.

It also suggested senior public servants should not be able to work for relevant private-sector clients within six months of leaving their previous post.

Ms Houssos recently suggested about 15 per cent of the contracts were for "generalist work", which could be done in-house by the public service.

"This is another important reminder about the former government's financial waste and its addiction to consultants," she said on Wednesday.

"Instead of ensuring the public sector has the capacity to deliver essential services, they wasted taxpayers' dollars."

But Opposition Leader Mark Speakman said the Labor government had an "ideological opposition" to using the private sector, even when it was more cost-effective to employ consultants.

"It's always a case of working out what is the best value for money," he said.

The committee found there had been an over-reliance on the big four consulting firms - PwC, KPMG, EY and Deloitte - as they received one quarter of the spending.

Further measures to curb a reliance on consultants were being considered in the lead-up to the budget, the government has said.

It is yet to formally respond to the committee's findings.

Peak body Chartered Accountants Australia and New Zealand welcomed the committee's recommendations around ethical behaviour, but criticised recommendations that would require big firms and the well-paid partners within them to pay more tax.

"Arbitrarily imposing payroll tax on accounting partnership profits needlessly adds increased complexity to a tax that is already difficult to apply," the organisation's senior tax advocate Susan Franks said in a statement.