Suddenly, and unusually, there’s been some commentary about the costs of running our Government. Ironically, many of the commentators are those same parties who stood by and watched the last Government run economic riot over the country’s finances.
But it’s about time we had the conversation. First, the Inland Revenue Department came out and said that government spending meant tax increases would be necessary to sustain government spending levels between now and 2060.
To be fair to the IRD, it is only accountable for tax generated and collected. But there is another solution. We could stop spending so much money.
That was the theme of the other piece of advice. That came from the New Zealand Treasury.
It is not backing away from its earlier suggestion that core Crown expenses need to track back towards 30% of GDP over time.
It also wants us to get the net core Crown debt on a downward trajectory, aiming to keep it below 40% of GDP in the longer term.
And yet, this year’s Budget papers talked of net core Crown debt rising to 45.5% of GDP at the end of June 2029.
With respect to the IRD, we don’t need to increase taxes if we can stop spending money. Unfortunately, like any bureaucracy, ours is difficult to move. But it strikes me that there are some obvious things we can do.
At last count, we had 41 government departments and 78 ministerial portfolios spread across 28 ministers. That’s a lot.
If they were working well, you would live with it. But the state of the country suggests they’re not. So let’s change it.
Norway is a similar size to us in population terms and is probably a more complex society. And yet it has just 17 government departments and 20 portfolios.
When one minister is handling one portfolio, it has to be easier to stay abreast of what’s going on. That’s how Singapore works, too. Its massive economy has just 16 government ministries.
Ministerial knowledge of what’s really going on would be something of a luxury in our country at present. The recent events around Whānau Ora funding allegedly being diverted to election-related advertising and Super Rugby sponsorships are a case in point.
Ministers asking for investigations to see if the allegations are true are only having to do so because they are not across the details.
When government ministers don’t know where the money lands, there are too many layers to the bureaucracy. And when you’re losing money daily and borrowing every month to top up, you need to be across the details.
Elsewhere, we’ve learned that we have given the Cook Islands $194.2 million over the past three years. We’ve only learned that because they’ve done a deal with the Chinese without telling us, and we’re rightly holding some of the money back while we find out what’s going on.
With their population at just over 13,000 people, that’s almost $5000 per person per year. If we’re going to spend that sort of money every year, how about we invest in their self-reliance, instead of spending, so that sooner or later they don’t need our money?
We don’t want to pick on the Cook Islands or, for that matter, Whānau Ora. But what these public relations bloopers on the tip of the iceberg tell us is that a hell of a lot of wasted money is going out of our coffers that we are not doing anything about.
Government spending has gone from $87.3 billion 10 years ago to $162b today. It’s gone from 27% of GDP to 38% of an increased GDP. Today, core public sector employees number 63,000 people, compared with just 41,000 in 2015.
If we’re serious about getting our costs down, we have to focus on the size of the Government and, unfortunately, that means people numbers. Most of us would rather not see people lose their jobs.
But here’s the problem. It’s people who generate cost. Aside from our massive salary bill, it’s people who occupy office space and car parks and use laptops and phones.
It’s people who catch aeroplanes and stay in hotels. It’s people who attend meetings and order coffee. Step on a Monday morning flight from Auckland to Wellington. You can see the cost. Take away the people, and the cost will follow.
I’d like to see us commission a major exercise on cost reduction. Set some lowball targets and have a crack at achieving them. As I’ve said in this column before, it’s no good growing our economy if we just keep wasting the proceeds.
The statistics tell a story that our bureaucracy is bigger than it’s ever been. We have more government service personnel than we’ve ever had. And that doesn’t count the councils, the regional councils, the plethora of middlemen. We’re overburdened by an unfit bureaucracy.
I’m always amused at how politicians talk about the savings they are making while the total expenditure budget goes up. If savings don’t reflect in the total spend, they are not savings. They are reprioritisation. We don’t need reprioritisation. We need savings.
I’ve been in positions where major cost reduction projects have been necessary. There is nothing glamorous about taking costs out. Perhaps that’s a part of the problem.
Politicians like the glamour, whereas this is tough work. As much as people say they like change, they don’t. The bureaucrats will fight for the status quo. They will defend their spot.
And if you care about people, which you should, it’s even harder. But those same politicians will love the glow of a low-cost base after the job is done. Just ask any homeowner after the mortgage is paid off. Everything gets easier when the costs are down and the debt is manageable.
But we don’t want to throw people on the scrap heap. So how about we make the changes we need over time in a manner that enhances the opportunity for affected people rather than negatively impacting them?
I’m guessing there are plenty of people working in Government, at every salary level, who would prefer to be somewhere else. It might be 10% of the government workforce. Possibly more.
In the interests of getting our costs down permanently, we can afford to make those people an offer they can’t refuse. How about they resign at the end of the year, and we pay them in full for up to three years. No redundancy, just full pay.
And we must not replace them. Their part of the bargain is to retrain. Go to university or tech, or learn a trade. Perhaps nursing or teaching. The fact is that our growing population needs more people in all of these roles.
At the end of their training, they come off the core government payroll, and we include a proviso that they can’t go on the dole. They become a contributor.
But what about the work they were doing? We should be able to cope without those people if we stop doing the things we don’t need to be doing.
Across the country, countless millions of dollars are wasted by the Government, councils and business, as we try to comply with over-reaching government regulations in places where little value is created as a result.
I wonder how much fraud has been detected and stopped by the anti-money-laundering legislation that is costing the Government and business tens of millions of dollars.
Businesses now have pages of climate reporting and environmental compliance to deal with and, in some cases, report on. Consumer protection machinery is watching over our grocery and banking sectors. As reported this week, the banks are paying their fair share of tax, and, to my knowledge, the grocery commission hasn’t and won’t deliver lower prices.
That over-reach is equally evident in our response to health and safety.
Mayor Wayne Brown is on a mission to get rid of traffic cones. Auckland’s Watercare spent $17 million on traffic management in 2017. It spent $130m in 2024.
Now, extrapolate those numbers across the entire country. The extent of our health and safety management madness, and the accompanying road cone obsession, is probably costing the country over $1b in unnecessary expenditure every single year.
We all want a safe workplace. But it has become ridiculous.
And let’s not forget that behind every one of these legislative requirements lies a government department that’s costing a lot and delivering little.
While we’re at it, we seem to be continuing to advocate for more immigrants. Law changes are being announced almost weekly to make it easier for immigrants, and now their parents, to come here to live.
I’m not sure if that’s necessary or not, but I’m usually in favour of immigration. However, we need to understand that more people put more pressure on our already under-resourced services infrastructure.
If we need them, let’s have them. But they should not come here and expect to work for the Government, or for that matter, the council. That just doubles the burden. We can’t afford that. So, let’s cut out that option.
These conversations are not easy ones to have. For some unknown reason, this little country at the bottom of the world fell victim to the illness of political correctness a generation or so ago. That infection has stopped us from having proper conversations about difficult topics.
But we have economic straitjackets wrapped around us that need to be broken. Our cost of government is a knot around our neck. We need to break the mould. If there’s a government minister reading this, please feel free to call.
