John Armstong: It's time for another review

If in doubt, review it. If still in doubt, then restructure it. There is more than a smattering of truth in the suggestion that the "review" option has become the default option for the Labour-led Government as it grasps for a fresh sense of purpose after six years in power.

There hardly seems to be a ministerial portfolio where some aspect of policy or operational procedure is not subject to some review of some kind.

This week alone saw Annette King flag a review of the 48-year-old Police Act, while David Benson-Pope announced the "merger" of Child, Youth and Family with the Ministry of Social Development following a review conducted by the State Services Commission.

The latter exercise was driven by simple necessity. CYFS had become utterly dysfunctional. Responsible for overseeing public service performance, the commission used the opportunity of the early departure of the department's chief executive Paula Tyler to place the organisation under new management with an established track record of competence.

Other reviews have sprung from portfolios having new ministers following last year's sweeping post-election Cabinet reshuffle. Those now in charge inevitably view things differently from their predecessors. And the Prime Minister expects the new ministers to tackle problems the outgoing ones left to fester.

Some reviews pre-date the election. Some flow from the confidence and supply agreements that Labour signed afterwards with NZ First and United Future. Those documents are filled with intentions to "review" this and "investigate" that - the language of compromise.

The cynic might say reviews are what you do when you cannot carry out reforms because you do not have the numbers in Parliament or you have run out of reforms because you have run out of ideas.

On the first count, Labour is definitely constrained. On the second count, Labour desperately needs fresh ideas to help the party re-invent itself after two terms in the Beehive.

Getting the bureaucracy to undertake policy reviews is one way of coming up with those ideas. Witness the Prime Minister's bringing together some departmental chief executives for a brainstorming session late last year to progress her "economic transformation" agenda.

There was a further summons of chief executives last month. This time Helen Clark was delivering a warning that - with some exceptions - Government departments will get only as much money next financial year as they got this year in terms of baseline spending.

A slowing economy, a pre-election spend-up and post-election policy concessions to support partners means there is no longer spare cash to slosh around.

But implementing Labour's new ideas - when it comes up with some - will require money.

The fiscal pressures have forced the Government to heed Treasury advice and establish what might be termed "The Mother of all Reviews" - the so-called "razor gang" review of public spending unveiled late last month which is being overseen by the Cabinet committee on expenditure chaired by Associate Finance Minister Trevor Mallard.

The exercise is designed to be less razor and more scalpel. The items selected for dissection in the review's first year are an eclectic mix varying from the escalating costs of building new roads to the usefulness of Ministry of Economic Development business-help programmes to finding out why CYFS had not lifted its performance despite large injections of extra funding to the biggie of them all, the bottomless pit down which Labour has poured billions otherwise known as Vote Health.

These items have been selected because they are seen as yielding savings in short order. But the review is not a straight cost-cutting exercise. Ministers instead want departments to free up money budgeted on low-priority items and use it to fund things which have a higher priority - thereby slowing the public sector's voracious appetite for new spending.

The review - which will ultimately require chief executives to constantly review spending priorities - is something of a watershed for Labour which is now treating a previous favourite child in a far more detached fashion.

Labour's primary focus was on rebuilding core services that had suffered neglect under National. It had begun to focus on getting the state sector to lift its game. But - as the Treasury pondered in briefing papers last year - to what effect?

The Treasury noted the number of public servants had increased by 27 per cent under Labour, compared to a 20 per cent rise in employees in the private sector. Many of the extra staff had gone to work in expanded head offices rather than in front-line delivery of services. The increased staffing was supposed to stop Government departments using expensive consultants - a practice which had embarrassed National when consultants' fees became public. Yet, there had been no reduction in consultancy costs.

There was little information to indicate that New Zealanders were getting more services and better results - and what information that did exist was not encouraging. There was no real focus on performance - until a crisis happened.

That is something Labour discovered to its cost last year as it weathered such "crises" as the police response to 111 calls and the mess over NCEA results.

That experience has prompted Helen Clark to give fresh impetus to the combined efforts of her department, the Treasury and the State Services Commission to identify early on any "emerging performance problems" in state agencies.

It was all very well to make the Qualifications Authority the whipping boy for the NCEA debacle. But the Government still cops some of the blame. Better to pre-empt trouble before it arises - as ministers did this week in consigning Child, Youth and Family to history.

Labour's unsentimental implementation of a spending review is likewise a major step towards a far more performance-driven public service which the Treasury's critique is calling for.

However, the prime drivers of the review are more fiscally-based - and more political.

The review serves a useful purpose in making it more difficult for National to argue income tax cuts. Labour will be able to say it has trimmed all the supposed fat in the public sector and tax cuts can only mean substantial cuts to services.

But there is a more pressing reason why Labour is wielding the scalpel now. In last year's briefing papers, the Treasury warned that reallocating spending generally takes some time to happen. The sooner ministers made decisions, the more room for significant spending initiatives in the 2007 and 2008 Budgets.

Michael Cullen is making his usual noises about this year's Budget being boring. That matters little. It matters rather a lot to Labour that its finance minister has something more enticing on offer when the 2008 version rolls around.