In this edition, I’m taking a closer look at the PwC scandal.

For me, it’s close to home – I used to work as a public servant, so I’ve long been interested in the growing use of private sector companies like PwC to outsource work that has historically been carried out by the public service.

What’s the scandal all about and what can we learn from it?

After bubbling away for months, the PwC scandal exploded in May. It has now claimed the company’s Australian CEO and nine of its partners, and it may not stop there – at least 50 partners are implicated in an Australian Federal Police investigation.

The consequences may also stretch beyond this investigation – Greens Senator Barbara Pocock plans to refer the company to the new National Anti-Corruption Commission.

As all of that suggests, the scandal has at its centre very serious (and possibly criminal) wrongdoing. But because it is cloaked in corporate and political language, it requires a little unpacking to understand why.

Why does the PwC scandal matter, and what can we learn from it?

First, let’s take a closer look at exactly what PwC does.

It’s one of the ‘big four’ global accounting firms (alongside Deloitte, EY and KPMG). But ‘accounting’ is an outdated description of their wide-ranging work – they are now more accurately called ‘professional services’ firms or ‘consulting’ firms.

These broader terms reflect the reality that the big four offer to help their clients with almost anything: they are professional (and expensive) advice-givers.

Of course, offering advice to anyone who will pay you can be fraught. The key word in making it work is ‘trust’. That word features in PwC’s own mission statement: “Our purpose is to build trust in society and solve important problems,” its website states.

The big four rely on their clients being able to trust that their own interests will come first – if you ran a business, you’d be unlikely to want someone’s advice if you knew they were also advising your rival and might be spilling your commercial secrets.

The same risk exists for governments: when governments hire a consulting firm to advise them on the design of a policy, they need to trust the firm won’t at the same time be undermining the same policy for the advantage of their other clients.

It’s that line PwC is accused of having crossed in 2014, when then-Head of International Tax Peter Collins allegedly passed on confidential information about the government’s new multinational tax rules to at least 50 PwC colleagues, to help multinationals get around those same rules.

PwC’s acting CEO Kristin Stubbins has acknowledged the problem was broader than Collins himself and reflected that PwC’s tax business’ “culture at the time… both allowed inappropriate behaviour and has not, until now, always properly held our leaders and those involved to account.”

Labor Senator Deborah O’Neill put it less mildly, calling it a “train-wreck” and a “cover-up… This is a company that has not been open and honest with the Australian people”.

As this strong comment by a Labor Senator suggests, this is likely to damage PwC’s relationship with the Government, which is one of its biggest clients. Finance Minister Katy Gallagher has rejected calls from the Greens to cancel its many existing contracts with the PwC, but has suggested it would be difficult for the company to win any new contracts in the short-term.

The scandal may also have broader implications for the use of private sector consultants, including the ‘big four’, to advise governments.

The use of consultants has grown enormously in recent decades. In 2021-22 alone, the Federal Government spent $20.8 billion on consultants – more than the entire budget for medicines, and equivalent to a third of the work done by independent, government-employed advisers in the public service.

The Albanese Government promised to reduce the use of consultants in the lead-up to last year’s election, and this may provide further encouragement to do so. However, the Opposition has warned this should not go too far: Shadow Finance Minister Jane Hume this week defended the use of private consultants, arguing the Government “can’t be expected to be an expert in everything”.

The debate about the appropriateness of using private firms to advise on the design of government policies, especially policies that regulate the very same businesses these firms often have as clients, will only heat up as the scandal deepens.

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This week, Ben Roberts-Smith lost his defamation case against the Nine newspapers after a judge found some of the claims which portrayed him as a war criminal were true.

It is a rare win for media companies defending defamation lawsuits in Australia, where the law is highly favourable towards people who make defamation claims.

Here’s a good and fairly readable overview of how those laws work by Denis Muller, a respected expert in media ethics. It was written in relation to a different defamation lawsuit brought by Lachlan Murdoch against Crikey, which was ultimately dropped.

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