The Government will dump the cap on public servant numbers in a bid to reduce the half a billion dollars a year being spent on consultants and contractors.

"The Government has made a decision to lift the 'cap' on core public servant numbers put in place by the previous government," State Services Minister Chris Hipkins said today.

"The cap was introduced at the height of the global financial crisis but it created perverse incentives and in the following years its arbitrary nature forced the previous government to find creative ways to get around it."

The estimated cost of contractors and consultants in the year to June 2017 was more than $550 million, nearly double the $272m spent in 2008/09 before the cap was introduced.


"In removing the cap, this Government wants to see the public service rebuild their in-house capability and invest in permanent and long-term staff rather than spend millions on temporary contractors," Hipkins said.

The most effective way to manage the public service was fiscal discipline and accountability.

"Lifting the cap creates incentives for agencies to find efficiency savings. It's up to agency chief executives to demonstrate why they can no longer manage within existing budgets."

National's State Services spokesman Nick Smith said the move risked a blowout of the public service.

"Between 2003 and 2008 under Labour, public service expenditure grew by 50 per cent with no improvement in outcomes for New Zealanders.

"Today's announcement carries the risk that we'll see another blowout of the public service and taxpayers' money will again be frittered away on pointless bureaucracy," he said.

"The previous National government introduced the cap on the number of core public service staff so that public sector agencies would have to work smarter and more efficiently, and ensure that taxpayers' dollars were spent more wisely."