Finance Minister Nicola Willis, pictured with Prime Minister Christopher Luxon, faces immense challenges with her first Budget. Photo / Mark Mitchell
OPINION
There’s a new theme emerging in the comments coming from members of the Government and others in positions of authority. It’s quite refreshing to hear them saying it.
I’ve heard a few of them interviewed this week, and they’ve been making comments along the lines of “we don’t have the money” or “we can’t afford it”. Finally! I must admit, I wondered if they would ever notice. But Grant Robertson’s borrowing blitz has ultimately run its course and it’s having an effect on the attitudes of those in power when it comes to spending our money. Our politicians are finally owning up to the situation we’re in.
It should be obvious really. While it’s too easy and probably premature to suggest the country is in a state of collapse, it will be soon if we don’t do something about the recklessness we’ve seen with the government chequebook.
There have been plenty of warnings. Most recently the state of Premier House, the supposed official residence of the Prime Minister, and the Defence Force planes that are used to transport our VIPs have provided the metaphor for the state of the country. But they are minor problems in the scheme of things.
We’re no longer fit for purpose. Our infrastructure and our services are at breaking point. We need investment, but don’t have the money.
The reality is that, irrespective of your political views, this Government needs to be successful. However you might define success in the light of our situation, we should be prepared to accept whatever progress we can make.
Most of us will have noticed that everything is a bit run down. The house and the plane are not the only things that are no longer fit for purpose. The big three — education, healthcare and policing — have been in decline for years and are now at breaking point. The problems started long before the last Labour Government. However, that Government, with its propensity to spend borrowed money on non-core issues, accelerated the decline.
And so we watch as GP clinics are closing and even the fourth estate is crumbling. Any thinking New Zealander will have noticed the state of our roads. Our largest city is gridlocked for hours a day. Our immigration policies are a shambles. Last year we had 40,000 Kiwis leave our shores.
They were replaced by 208,000 new arrivals, predominantly less skilled than those we lost. If you wonder about the impact of that, check out the wait times at the medical centres and the shortage of accommodation.
Our universities, too, are run down. They’re struggling for money and relevance as many of the academics they employ have become distracted by a new world order that most of us would agree is woke and undesirable. To further frustrate our under-resourced police force, our judiciary appears to have lost its way and possibly its independence.
It might be too early to say we’re a society on the edge of collapse, but we’re not far away. And we need to stem the bleeding pretty darn quickly.
So as we wait patiently for Nicola Willis’ first Budget, the challenges she faces are immense. Key services are in decline. Property and infrastructure require major maintenance. And the financial picture doesn’t allow for the required investment.
To their credit the new coalition Government has recognised the issues and talked about the required actions to turn the ship around. They’ve talked about the need for Government departments to cut their cost base by 7.5 per cent. At the risk of offending, such cuts are nowhere near enough.
Because the problems are made worse by the state of our most valuable workforces. Our healthcare workers, teachers and police are all underpaid. They’re all highly regarded internationally too. The result is the international recruiters are all over them. The offers are attractive. More pay. Better conditions. Better weather.
The trouble with such a scenario is we will lose only our best and brightest. Those who have the get up and go to try something new are also those who other countries want the most.
The police are negotiating their collective agreements now. The offers on the table from the new Government are only slightly more attractive than the failed offers from the last. I heard the Police Minister say we don’t have the money. He’s right. But we have to find it, because like the teachers and the nurses, we have to keep them.
That’s right. If we don’t have the money, we have to find it. And in the short term, we are not going to find it by increasing revenue. That will take the time that finding new trading partners, developing more overseas markets, creating new products and growing our tax base inevitably takes.
While we’re waiting for that to happen, we need to cut the daylights out of our cost base.
Last week I heard the debate within one government department that had announced savings of $70,000 a year by taking plunger coffee out of their lunchrooms around the country. Others are encouraging employees to stay at one another’s houses when travelling for work. Elsewhere there’s an admirable CEO paying his own way to travel around the country holding talks with his employees about cost-reduction measures.
While we have to admire the intent, we’re not going to save the country by taking the cookies out of the tea room.
First, we have to determine what we need to achieve. So, what does the aftermath of a recovery look like? To me, it means being able to invest the money in our government services to gradually bring them back from the brink and make them fit for purpose. It means hospitals that are well staffed and fully functional and operating out of properties that are fit for purpose.
It means water services that don’t leak, and our children experiencing one of the best learning environments in the world. It means a well-paid police force delivering law and order to our communities and a judiciary that supports their efforts. It means our people coming home for the money rather than leaving because of it. And it means a strong, independent media propped up by advertisers and viewers rather than the Government.
And, given the impacts of the past few years, success means our debt burden starts going down rather than up.
In order to start working towards such goals, and without an immediate ability to increase revenue, the reality is that the quickest way to get there is to instigate a major attack on all forms of government spending. But we’re not talking about cuts of 7.5 per cent. It’s probably more like 20 per cent. Maybe more. If this were a business we’d get out of the things that don’t add value. New Zealand has more than 70 ministries. That’s not a bad place to start.
Our government bureaucracies have become so large, they’re inefficient and unreliable. A recent NZ Herald article outlined the numbers of people working in government departments. When you get 1700 people in the statistics department you have to wonder what they all do. That potentially means salaries alone of $140 million a year. And then ask the question, how much of what they do, do we really need? What would we lose if they had 800 people? Could they get by with 800? If so, we can have 800 more cops.
We have 2660 people in the Department of Conservation and another 1050 in the Ministry for the Environment. Surely there’s some overlap. How much of what they do is necessary right now?
Do we really need more bureaucrats in the Ministry of Education than teachers?
This writer has spent plenty of time in and around big organisations, including those under a government umbrella. From experience, I can say big organisations are typically clumsy, inefficient and slow. Much of their activity falls under the heading of “doing business with themselves”. Meetings for meetings’ sake, without agendas or outcomes, are often a feature.
Big government organisations are worse. There is often little in the way of output that affects or improves the lives of those outside the organisation. Government organisations typically have armies of people in non-productive sectors such as communications and human resources. I recall Spark once having 6000 employees and eight people in HR. Such ratios are not unusual in the corporate world where you have to pay your own way. Yet, I’ve seen a government department of 500 people with 25 HR practitioners.
The starting point is to ask what we want from our government departments. What are we trying to achieve and what are those departments doing that we don’t really need? And if we dropped another 10 per cent of the bureaucracy, what would we stop doing? My guess is, not much.
I’m not saying we should kick people out on the street and leave them there. Perhaps we could keep paying them briefly while they retrain. They might not all be suitable for the police, but we know we need teachers, nurses, hospital receptionists, aged care workers, and more.
We need to cut the bureaucracy and pay the front line. I’d rather pay police, teachers and nurses more, and get the roads and water pipes fixed, while creating less bureaucracy and a better support structure for our government ministries.
In the meantime, the rest of us need to front up for the good of the country.
That means hanging in. It means reducing our expectations for a few tough years. Working a bit harder for a bit longer and for a bit less. Because if the survival of the enterprise is at stake, and it is with the good ship Kiwi, then tough measures are essential.
We’ve run out of time. This Government really does need to be successful.
Bruce Cotterill is a professional director and adviser to business leaders. He is the author of the book, The Best Leaders Don’t Shout, and host of the podcast, Leaders Getting Coffee. www.brucecotterill.com
Du Val reportedly owes $306m to investors and creditors, according to PwC.