The proposed restructuring at the Ministry of Foreign Affairs and Trade is arguably the most significant restructuring of a major public sector agency since the revolutionary reforms of the 1980s.
The overall staffing levels at MFAT will be reduced by around 20%, if the proposal proceeds, and around 40% of MFAT staff will have to reapply for their jobs. This is unprecedented in a department which generally has been seen as a job for life by many.
The MFAT restructuring may set a benchmark for other public sector chief executives, in terms of how ambitious they are with their own agencies.
The ongoing public sector restructuring provides both potential benefits and risks to the Government. The risks are around if the cuts go to deep.
There are two related, but not identical, aspects to public sector reform. The first aspect is cutting expenses and the second is cutting services. The ideal aim of the Government is to cut expenses to the maximum degree, without cutting services (both quantity and quality).
There is no doubt you can cut public sector expenses to some degree, without impacting services. In fact we saw this in National's first term. Savings from back room functions were put into frontline areas resulting in more doctors, more nurses, more Police, and more teachers.
However there comes a point when cutting expenses will have an impact on services. It is hard for a Government to know for sure in advance where that line will be. Normally a Government will make sure it stops wielding the scalpel before it gets close to that line, to make sure they don't go over. But in this fiscal climate, the Government has obviously decided to run the risk.
It is not all risk for the Government. In many parts of New Zealand, people will (somewhat unfairly) cheer at every Wellington based public sector job that gets chopped. In Carterton and Te Puke and Oamaru, many would regard a 20% reduction as merely a good start.
The MFAT restructuring has come under fire from the usual suspects - Labour, the PSA and Winston Peters. The PSA opposition is understandable and expected. The problem for them is that having to some degree claimed the sky would fall in with the very modest reductions in National's first term, they risk being seen like "the boy who cried wolf". Labour has this problem also.
Phil Goff has run a line that the reduction in MFAT staff will endanger Kiwis travelling abroad. However the proposal that MFAT have a 24/7 staffed hotline back in New Zealand appears to me (as a regular traveller) to be a far more helpful resource than trying to find the number of the local embassy. In fact MFAT could be truly innovative in this area and look at producing a smartphone application which Kiwi travellers can install before they leave, and can use if they need assistance. It could even come with a built in live chat facility to their 24/7 hotline in New Zealand. More and more companies are providing support via online live chat facilities, so why not Government agencies? Imagine if the IRD had such a service! This could be the public service of the future.
Winston Peters has said that reducing the number of MFAT staff will hurt our ability to export goods and services. I generally find it difficult to take Peters seriously on exports as he fought against the free trade agreement with China which has seen exports to China grow by over a billion dollars a year, and helped reduce our current account and balance of trade deficits.
But Peters may have a point that reducing capability in areas such as trade negotiations could prove counter-productive. A MFAT staffer made the following comment on my Kiwiblog:
"For what it's worth as an MFATer I agree that some people do excessively well out of the system. Typically those people have been round since the eighties and have had their kids educated offshore etc etc. The rest of us cannot really be considered troughers by any stretch; you're not going to believe me of course but I work my bollocks off for about 2/3 of the average POAL stevedore's salary trying to advance NZ interests in my part of the world. I do it because I enjoy working on behalf of kiwi business and I can say with certainty that my work has contributed to millions of dollars of additional revenue for them."
Many of the younger and newer staff at MFAT have been those agitating for change. They have seen how resistant some senior staff have been to change. Hopefully the restructuring will not greatly impact those in the trade area especially. Maybe with fewer staff, MFAT will end up being able to pay some of its staff more than a POAL stevedore!
The staffer concluded:
Also it's important to note that you need far more than people engaged in trade work to do trade work effectively. Think we would have got the China FTA without an in depth understanding of Chinese politics and culture? My feeling is that overall the changes proposed endanger our ability to reach that understanding globally, and in order to save an amount of money equivalent to a few hours' worth of the annual social welfare spend...
The Government is pretty keen to reduce the social welfare spend also. The MFAT restructuring proposal is draft, and being consulted on. We won't know for a month its final form, and whether or not it does impact useful services in a negative way will not be evident for probably a year or two. Hopefully the MFAT staffer's fears will not be realised.
*David Farrar is a centre-right blogger and affiliated with the National Party. A disclosure statement on his political views can be found here.