Finance Minister Grant Robertson says it is time to bring the Public Finance Act into the 21st century and that could mean government agencies being less risk averse than they are.

It could also mean them ditching waffly strategic plans that sit on shelves, in favour of setting clearer plans and progress information for ministers.

"We need to maintain the strengths of the current system, while recognising that there are significant improvements we can make," Robertson told a conference in Wellington hosted by the Victoria University Business School to mark the 30th anniversary of the act.

The act had been a revolution in New Zealand's public finance system at the time it was introduced by the fourth Labour Government in 1989, Robertson said.


He had been in his final year of high school, supermarkets had just started selling wine (but not beer), Dennis Conner walked out of the interview with Paul Holmes about the America's Cup, TV3 started up, and the Rose Noelle crew were found alive after 119 days missing at sea.

"Since the Public Finance Act took effect in 1989, our public finance system has taken control of its fiscal position, has high levels of transparency and accountability, and is renowned internationally."

'Electric fences'

It was a system focused on management, outputs and performance, accountability and greater transparency of government spending.

However, he said the way the rules had been operationalised sometimes had the effect of putting an "electric fence" around parts of the fiscal management system and created silos.

It made it harder to help people who had problems across agencies.

Settings around annual Budget votes could be rigid and too tightly controlled.

Accountability conventions and strategic planning requirement had led to a focus on compliance and an aversion to risk, which had become a barrier to innovation.


"Our current system has a very high degree of regulation, which means we spend far too much time and resource on authorising, managing and keeping track of a large number of small funding pools rather than focusing on the strategic issues and value of spending – the areas where we can make a difference."

There were currently 840 appropriations (separate areas of expenditure), and 50 per cent of the money was in just 2 per cent of those appropriations; 45 per cent of those appropriations had less than $5 million in them.

"This is what we need to change," he said.

Strategic planning

This year's Budget contained a joint venture of eight government agencies to address domestic violence but if you went looking for it in the accounts you would not find it.

"We need appropriation structures that allow this kind of work to be considered and accounted for together."

Robertson also foreshadowed changes to strategic planning for government agencies that could involve input to their directions from peers and partners outside the public sector.

Agency leaders would be asked to invite peers and partners into their work, to strengthen the range and quality of thinking, present scenarios and choices and milestones, and continue work with partners over a couple of years.

"What this means is that we are stepping away from a prescriptive approach to one with much more flexibility," said Robertson.

"As with any innovation, it may or may not work, but we have to be bold, and be prepared to try."

Baseline reviews

About 98 per cent of Government expenditure at present – or $89 billion – sat outside the Budget process, Robertson said, "and yet we spend most of our time assessing how to allocate the next 2 per cent or so located at the margin through each Budget.

"This mean having to be reactive through the Budget process when it is already too late to make the big strategic moves."

It was better to look at marginal expenditure and baselines together to better prioritise what would improve wellbeing for New Zealanders.

Earlier this year the Ministry of Social Development underwent a major baseline review and he had initiated the next baseline review, of the Defence sector.

"I am intending to scale up this work as soon as possible so larger agencies can start looking forward to their baseline review soon."

He said the Public Finance Act had started a kind of revolution in the public service and was ahead of its time in many ways.

"But now it's 2019."

It was important to keep principles of transparency, accountability and responsibility to the forefront. And it was important to make it easier for agencies to plan, deliver and account for their work programme collaboratively.

"It is time, 30 years on, to bring the Public Finance Act into the 21st century and to put wellbeing and collaborative government at the centre of our approach."