Treasury head denies speech a call for job cuts

John Whitehead said 'tough decisions' were needed. Photo / Mark Mitchell

Treasury boss John Whitehead says his speech yesterday calling for a shake-up in the public service should not be read as a call for wholesale job cuts.

Mr Whitehead warned government department chief executives if they did not face up to a "fundamental rethink" to trim fat out of their departments, they would have change forced upon them.

He said "tough decisions" were needed. Staff numbers working in the core bureaucracy had grown by 44 per cent since 1999 - a far greater number than those affected by recent redundancies.

Labour Party state services spokesman Grant Robertson today said the sector was being prepared for culling.

"The groundwork is being laid here for privatisation and further deeper job cuts," he told NZPA.

Mr Robertson said: "Everyone recognises we would want the most efficient possible public services that we can get and I know public servants are well aware that we are in a recession and it's important to tighten the belt where they can.

"But I think this exercise of coming in and essentially signalling the cuts is the wrong way."

But Mr Whitehead told Radio New Zealand he was not saying the public service should be slashed - there have already been about 1500 redundancies following reviews to tighten spending.

"What I was actually saying was looking forward...the public sector has to grow more slowly than the export and the private and competitive sector.

"And I guess ultimately the point I was making is you can't freeze jobs, you've got to be able change as circumstances change so we are doing the most important things for the people of New Zealand."

Mr Whitehead defended calling for greater use of the private sector.

"I wasn't fundamentally talking about privatisation, I was talking about lifting our management game in the public service, and one of the ways of doing that is looking for private sector alternatives and learning from them."

Contracting out some services should be done if it made sense.

"Sometimes, you may well find contracting out gives a better service for less and we should be prepared to face up to that if that is the case."

In yesterday's speech, Mr Whitehead said the public service needed to move out of its traditional comfort zone and take some risks to ensure it delivered services as cost-effectively as possible.

"There is a stark alternative to mobilising ourselves as public servants. If we don't rise to the challenge and make real progress, change will occur - but it will be done to us rather than by us."

The public sector employs nearly 250,000 workers - and Mr Whitehead's speech has angered the union representing public servants, the Public Service Association. Its national secretary Brenda Pilott said she rejected the suggestion within the speech that privatising government services could increase productivity.

"We're amazed Mr Whitehead says we should be privatising public services when bad management in the private sector has created the worst global recession since the Great Depression.

"The effective way to lift productivity in the public sector is for the staff and employers to work together on this issue, not by privatising public services in the false hope that this will automatically lift productivity."

Mr Whitehead told the government departments more savings would be sought through the "line-by-line" reviews of spending that have become a regular part of the Budget process.

Mr Whitehead said no formal target was set for savings in the reviews "but I don't know if any departmental or agency chief executive would argue they couldn't think hard about better utilising 5 or even 10 per cent of their baseline. I know I have."

While the initial round of reviews early this year had resulted in $2 billion in savings over the next four years, Mr Whitehead said that only isolated the "low-hanging fruit".

He said the fiscal outlook and economic downturn meant it was now of particular importance to "up our game".

"Without a very firm focus on growing the economy and controlling government spending, New Zealanders will be looking at more public debt, more money on interest payments, less room for government to move - and higher taxes."

Since National came into power, chief executives and ministers have had to negotiate "performance improvement actions" to ensure they monitored the success of their departments and costs.

- With NZPA