Government departments which have spent millions in laying off staff are responsible for nearly $1 billion in consultants' fees.

Figures provided by the Labour Party showed ten agencies have spent $910.5 million on contractors since 2008 while also spending $114.1 million on redundancies.

The restructuring of the Inland Revenue Department (IRD) had seen departing staff collect $31.3 million in redundancy payments before contractors were hired at a cost of $125 million.

Labour's State Services spokesman Chris Hipkins said the figures made a mockery of National's claim that it was moving resources from the back office to the frontline.


"The public service has already lost a huge amount of valuable expertise and experience and is simply plugging the gap by hiring consultants.

"This is short-term thinking and it doesn't make sense. We must invest in and value institutional knowledge."

While in Opposition, National was highly critical of Labour's failure to keep consultancy fees under control.

Finance Minister Bill English said the contractors had been employed for work which the public service had neither the funding nor the expertise to do.

He said specialist skills were needed for the rebuild of Christchurch, the design of the Deposit Guarantee Scheme, and on multi-billion dollar IT projects.

"We just don't have public servants sitting around who know how to redo the 25 year-old tax collection system," he said.

Mr English said the previous Government ran down the technological level of the public service to a "disgraceful level" and it had cost billions to rebuild it.

There were still many large-scale technological projects to be completed so the increased spending on contractors would continue for several years.

Departments which had undergone major restructures had incurred the largest contracting fees, such as Corrections and Defence Force.

The merging of several agencies into the Ministry of Business, Innovation and Employment (MoBIE) had cost $12.4 million in payouts and $104.5 million in contracting fees.