This article explores how organizational policy capacity can be developed, drawing on a study conducted in a large human services agency in Australia. Building policy capacity within government agencies is widely acknowledged as important for successfully responding to complex policy problems. The existing literature suggests a range of strategies for building organizational capacity. Findings from interviews with policy workers support the principles for building policy capacity identified in the literature but uncovered a surprising degree of scepticism pointing to significant barriers to their realization. These barriers are identified as emerging out of the tensions between policy capacity and two other domains of governing capacity: administrative capacity and state capacity. These tensions however are highly contingent and dynamic; managing them requires a degree of discretion and judgement, in brief, policy leadership. A focus on developing policy leadership at the level of policy units and teams may present a strategic approach to building organizational capacity for policy work.

Since the 1970s, Australian governments have sought to reduce regulatory burdens, particularly on business, subject regulation to rigorous cost-benefit analysis and constrain both the stock and flow of new regulation. Yet, however, measured, regulation continues to grow, frequently in response to community demand. In this article, we interrogate both the more extreme claims of the anti-regulation advocates and the alleged successes of anti-red tape initiatives, identifying a critical clash of values over the role of the state and the appropriate relationship between government, business and the community. We conclude by arguing that to deliver desirable societal, economic and democratic outcomes, we need to acknowledge regulation as an asset, professionalise its workforce and more actively assert its public value.