The National Government's economic tsar Steven Joyce will take the controls at his new "super ministry'' in July but 3200 employees will not know until much later how secure their jobs are.

Prime Minster John Key has confirmed plans to merge four Government departments into a single "dedicated, business-facing '' ministry under the control of Mr Joyce.

The Ministry of Economic Development and Ministry of Science and Innovation, which Mr Joyce already oversees, are to merge with the Department of Building and Housing and Department of Labour as the Ministry of Business, Innovation and Employment, effective from July this year.

The four current departments will form the initial functional business units of the new ministry but a new acting chief executive will begin integrating them from July onwards.


Mr Joyce said the new ministry "will ensure we have clear co-ordinated and focused government policy leadership with a commitment to economic growth and innovation''.

It will reduce complexity for agencies working with each other and for businesses engaging with the Government.

'''A more efficient and effective ministry focused on lifting overall productivity and supporting the growth of competitive businesses is a crucial element in creating more jobs and higher wages, and boosting our standard of living.''

Cabinet expects a "due diligence'' report on the plan next month which will provide detailed advice on how the merger will managed along with plans for the Department of Building and Housing's social housing policy and the Tenancy Service.

While the key motivation for the merger was better co-ordination and a more integrated policy approach, "efficiencies will be sought over time where they are appropriate'' said Mr Joyce.

However, it was too early to say how many jobs would be lost over time.

Between them the four departments have a headcount of about 3200 or just over 3025 full time equivalent employees.

State sector union the Public Service Association questioned the thinking behind the merger.

"The Prime Minister promised that any mergers would need to meet a high hurdle, it's questionable whether this new Ministry of Business, Innovation and Employment meets that,'' national secretary Brenda Pilott said.

"There is no obvious logic to the combination of functions.''

She warned that should the merger simply be an exercise in job and cost cutting, "it could do more harm than good''.

"If the Government is sincere about a more joined-up, responsive public service it must consider the workforce in its plan. Staff need certainty to be innovative.''

Business NZ's chief executive Phil O'Reilly was quick to welcome confirmation of the new ministry, saying pooling and coordinating services and policy relevant to business within a single ministry made a lot of sense.

"A single, dedicated business-facing government department, focused on delivering results, will be a great improvement on the current situation.

"A results focus where managers will be held accountable for achieving specific objectives, rather than just managing a department or agency, will better align the public sector with private sector practice.''

'More collaborative' public sector sought

Meanwhile, a group of public and private sector leaders is pushing for a more collaborative public sector with shared resources, greater use of outsourcing and a new focus on specific results-driven goals.

And the Better Public Services Advisory Group report called for looking into disestablishing some functions, but not for a "sharp reduction of agencies across the board'', which would be disruptive.

The report, from November 2011, was released today as Mr Key outlined his vision for the future of the public sector.

The group is chaired by Maarten Wevers, head of the Department of the Prime Minister and Cabinet, and includes academics and public and private sector chief executives.

The report said the public sector performed well overall, but made a series of recommendations including law changes to the State Services Act and the Public Finance Act to bring about a strong focus on results, cross-agency collaboration, and value for money including more use of outsourcing services.

The report said the goal was, in short, to "do more and better with less''.

"Against most international benchmarks New Zealand has well-regarded state services ... but maintaining reasonable standards is no longer good enough.

"New Zealand's state services are some way from being the best in the class. We can and must do better.''

The report's recommendations include:

* Ministers set priorities and achievable targets for chief executives, who set up action plans to meet them, identifying new organisational arrangements as necessary

* Chief executives have to formally, publicly and regularly report progress.

* Change the State Sector Act to move away from independent operations and require collaboration where it makes sense

* Change the Public Finance Act to make departments more accountable for financial management, adopting four-year budget plans for sectors as well as departments, and strengthening incentives for collaboration and a results focus

* Reducing duplication, sharing back office services and property

* Market-test all roles and services and outsource where it is appropriate

* Standardisation of information across all state services, to accelerate the shift to online channels

* More use of interactive web-based information

The report pointed to the justice sector as a model, which accounting, human resources and pay-roll services are being aligned across police, the Corrections Department and the Justice Ministry.

"In this case, it may make sense to go further and hard-wire these arrangements by, for example, bringing the balance sheets of all three agencies together under one sector-wide chief financial officer, or having a justice sector-wide policy framework.

"Similar opportunities undoubtedly exist in other sectors.''

But the group did not call for broad restructuring of the public sector.

"Disestablishing some functions is also worth exploring. The Advisory Group do not, however, consider that a sharp reduction of agencies across the board would necessarily deliver better performance.

"Restructuring is expensive and disruptive and can be counter-productive, at least in the short term.''

State Services Minister Jonathan Coleman said some of the recommendations were already progressing, and flagged future changes to the State Services Act and Public Finance Act to allow greater flexibility.

He noted the report's backing for outsourcing services where appropriate.

"The report sets a clear direction for change. It looks at how the public sector can provide value for money and be innovative in delivering high quality services.''