Plans to slash policy jobs in the creation of a economic "super ministry'' shows there is a cost-cutting motivation behind the merger, the Public Service Association says.

The Government today confirmed plans to create a Ministry of Business, Innovation and Employment, which is to be established on July 1.

It will merge the functions of the Ministry of Economic Development and Ministry of Science and Innovation, as well as the Department of Building and Housing and Department of Labour.

Economic Development Minister Steven Joyce, who will be responsible for the new ministry, said the merger would save up to $11 million a year through the consolidation of corporate services and policy capability.


While the actual number of job positions that would be lost in the merger was not yet known, Mr Joyce today agreed it would be around 140.

Between 50 and 55 were likely to be cut, while 84 vacant positions across the four agencies would not be replaced.

"But these are very rough numbers,'' Mr Joyce told reporters.

"Until you've done the design of each individual part of the agency you don't actually know how many positions you need, and in what area.''

PSA national secretary Brenda Pilott said the move to cut policy jobs was misguided.

"The Government has said it wants to strengthen the public sector's ability to think strategically across issues. Instead it seems to be cutting staff numbers based on a one-size-fits-all model that says all departments should have the same proportion of policy staff - even though the needs of each department will be different,'' Ms Pilott said.

The ministry is expected to be up and running completely within two years, and Ms Pilott said the lengthy process risked creating disruption that would affect the delivery of public services.

Labour also criticised the merger, with deputy leader Grant Robertson saying that "shuffling around the public sector'' would not guarantee better services.


The party also expressed concerns that aspects of the four agencies not concerned with business might fall by the wayside.

Mr Robertson noted a particular concern about where social housing would fit in.

Economic development spokesman David Cunliffe questioned whether the Department of Labour's health and safety work, as well as its work around upholding employment law, might fall down the priority list when four departments with separate jobs came together.

"That's a bit like combining a butcher's shop, a toy shop, a candy store and a childcare centre. It may sound great to an accountant but there are likely to be serious practical difficulties in the real world,'' he said.

Today's announcement followed a due diligence report from the State Services Commission, which the Government said had confirmed the benefits of the new ministry.

Labour has called for the report to be released so the costs associated with the merger can be made clear.