New agencies are being proposed to take over services for New Zealand's 10,000 neediest people.

A final report released after a 14-month Productivity Commission inquiry says the 10,000 "highest-cost clients of the social services system" each cost at least $500,000 in lifetime services, costing taxpayers $6.5 billion in total.

It proposes handing control of services for those people either to a new national "Better Lives" agency or to expanded "district health and social boards" (DHSBs), which would buy services from mostly non-government "navigators" to coordinate help for needy clients in their regions.

Commission chairman Murray Sherwin said each needy family or individual would enrol with one of the new agencies, which would take over budgets for all health, education, justice-related and other social services for its clients.

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"The focus is not on managing up to ministers, but allowing skilled professionals at the front lines to command resource and acquire the services they need from different providers to meet the needs of those in front of them," he said.

"This could start quite small, I think, and build up.... The key feature is trying to get the energy and the professional decision-making right at the coal face."

The new report is part of a package of Government initiatives aimed at encouraging schools, doctors and other social services to work together to help families with complex issues such as family violence and addictions. Other initiatives include children's teams, which already allocate a "lead professional" to coordinate services for families with children, and Whanau Ora, which appoints "navigators" to help families develop whanau plans and bring in services to help them achieve those plans.

A review of Child, Youth and Family, due to be released this month, is expected to recommend similar changes to bring agencies together when people report concerns about children at risk.

The Productivity Commission's interim report in April suggested handing over funding directly through "vouchers" to the people who need services, allowing them to choose the services they want to buy.

Its final report recognises that vouchers are only suitable for some services - specifically home-based support of older people, respite services, family services, and drug and alcohol rehabilitation.

It divides New Zealanders into four quadrants:

• Low needs and high client capacity (the vast majority). These people would still be able to choose specific schools, doctors and other services when they need them, and state funding would follow their choices as it does now. The report says this is already a kind of "voucher" system.

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• Low needs and low client capacity (such as an older person with specific care needs). Services for these people would continue to be provided by state agencies or through contracts with non-government agencies.

• High needs and high client capacity (such as someone with a physical disability but full mental capacity). The report proposes handing budgets to these people so they can choose and buy their own services.

• High needs and low client capacity (people with complex needs). These are the "10,000 highest-cost clients" and would be helped by "navigators" working closely with the clients to get help from multiple agencies.

The report says this last group could be funded through a new "Better Lives" agency with a budget to fund "commissioning agencies" such as Whanau Ora commissioning entities and other non-profit groups, which in turn would fund "navigators" with budgets to buy services from multiple sources for each enrolled client.

Alternatively, district health boards could be given a wider mandate to buy social services for their neediest clients from multiple agencies.

Mr Sherwin says other options could also be possible, such as extending the role of the children's teams that are already being set up.

Council of Christian Social Services director Trevor McGlinchey says he supports the principle of handing control of budgets for needy clients to local communities, but he warns that focusing purely on the 10,000 needy individuals or nuclear families misses the need to build the strength of the wider whanau and community around them.

"If you are funding an organisation to deliver a series of outcomes [for a particular client], and at the same time that organisation makes a wider contribution to the community, that wider contribution should be valued," he says.

"This report rejects that, saying we are only interested in the outcomes. We would say that tends to open up the field to private providers, and we would say a good community-based social service organisation able to deliver the service and achieve community value and community cohesion and community development and empowerment should all be taken into account."

Auckland City Missioner Dame Diane Robertson says the report proposes new layers of bureaucracy and "navigators" to coordinate different services, when the best answer would be to provide a single integrated service for each client in need.

She says mission research with 100 needy families last year found that families did actually understand the system and did not need "navigators". They simply needed help with the basics of adequate food, housing and income so that they had time and energy to tackle other issues such as mental health or addictions.

"We need to rethink," she says.

"We have foodbanks. We give people six food parcels a year. It would be better for the foodbanks to get together and take so many families and provide a food parcel every two weeks for a year and at the same time look at other issues with them."

Finance Minister Bill English and State Services Minister Paula Bennett say they will consider the report's recommendations.

"It is clear that further ongoing change is needed," they said. "This report provides a useful road map to drive further improvement."