Tribute to a great public sector reformer, Don Nicholls AM

Feb 24, 2024
A deep red rose in condolence

My late friend and mentor Don Nicholls was one of the great public servants of NSW where he was Chief Economist and then Deputy Secretary, NSW Treasury.

The Sydney Morning Herald recognised this on Monday when its Economics Editor, Ross Gittins, wrote a fitting tribute saying:

“Some people assume only second-class minds join the public service. They’re wrong, and never more so than in Don Nicholls’ case.

“Many public servants are intent on ensuring things are done the way they always have been, but Nicholls had a strategic mind and was always thinking of ways things could be improved.”

In 1982, Don implemented program budgeting in NSW after then then Treasurer Ken Booth, on my urging as his senior policy adviser, adopted the Wilenski Report’s recommendation. I should add the then Treasury executive had opposed program budgeting, but not Don.

Program budgeting (or outcomes budgeting as it is now called) was later adopted by all governments in Australia and replaced the previous line-item budgeting.

Government budget papers now show the cost of each policy program within public services such as health, education, police, and public transport, not just the costs of labour, materials, rent, etc used for producing those services.

That means the media can report on changes to government spending priorities between programs after each annual budget is delivered.

In 1988, the incoming Premier and Treasurer Nick Greiner commissioned Don to write a report on what else should be done to reform the state’s financial management and reporting.

Don later did similar reports for three other state governments.

These set the pathway for major changes to the way government is conducted today.

The big reforms that flowed from these reports included:

  • The introduction of Accrual Accounting to replace Cash Accounting so that we could know the true condition of the state’s finances.

This led to total asset management whereby every asset owned by the government was recorded and then depreciated to disclose how much money should be set aside each year for renewing assets that had reached the end of their useful life.

It also resulted in better maintenance of assets to ensure they did not breakdown and were safe. Accrual accounting had been an election promise of the Greiner government.

  • Annual Consolidate Financial Statements that showed for the first time the assets and liabilities of all general government agencies which are funded by taxpayers (such as Health, Education, Community Services, Police and Emergency Services) and government business enterprises (such as Electricity, Water, Railways, Buses, Ferries, Ports) which are largely funded by user charges.

Prior to then no one knew the total worth of what the government owned or what it owed in debt and other obligations.

  • The Corporatisation of government enterprises so they could be run as efficient commercial businesses generating a profit that would help to fund social purposes such as schools and hospitals rather than make losses at the expense of the taxpayer as several did.
  • The Full Funding of government Superannuation Liabilities so that public servants could retire with the assurance there was sufficient money to meet what was owing to them.
  • The reduction and containment of State Debt to a sustainable level so that NSW could keep its envied Triple-A Credit Rating which it did when every other state lost this gold standard in the great recession of 1991/92.

NSW maintained its Triple-A rating until the recent Covid pandemic when its debt blew out under intense revenue and expenditure pressures.

Don initiated other important reforms such as legislation requiring every government agency prepare an Annual Report to account for its performance…

…and the establishment of the NSW Internal Audit Bureau that helped chief executives to review how well their agencies were working and to fix any deficiencies.

In the year after he retired in 1990 Don wrote his magnum opus, the 336 pages book “Managing State Finance”, which became the bible on Treasury accounting and budgeting.

He was rightly awarded an Order of Australia for his life’s work.
Ross Gittins also wrote:

“Nicholls’ influence spread throughout Australia because he was asked to conduct separate independent audits of the finances of the NSW, Victorian, Tasmanian and South Australian governments. He was, for a time, Victoria’s Treasury secretary. A lot more Australians are indebted to his influence than they know.”

All of us who worked with Don dearly appreciate his help, advice, good humour, work ethic and reformist zeal which inspired us in our own careers.

He died last week at age 93.

Vale my good friend, Don Nicholls.

Professor Percy Allan AM FIPAA
Institute for Public Policy and Governance
University of Technology Sydney

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