Budget 2026: Nicola Willis to announce major public service reforms, further cuts to roles

Finance Minister Nicola Willis says it is “time to double-down and make even more progress” on public sector reform. Photo / Mark Mitchell

Finance Minister Nicola Willis will unveil a plan to reform the public service tomorrow in a pre-Budget speech.

The Herald understands the speech will detail a three-legged plan of public sector reform, which will include continued gradual reduction in public sector headcount.

Willis teased the plan on Newstalk ZB’s Heather du Plessis-Allan Drive, saying it was “time to double-down and make even more progress” on reforms.

“One of the key things I will be announcing is to transform the public service. We think that just as every business and household in the country is working to get more value for money, we need to too,” she said.

The first leg of the plan will be to continue to pursue a reduction in public service departments, Willis confirmed.

Willis said there were “too many departments”.

“There’s around 42 [departments] and in a country like Finland there’s more like 12,” Willis said on Newstalk ZB.

The Government is currently creating a new Ministry for Cities, Environment, Regions and Transport (MCERT), which merges the Ministry for the Environment with the Ministry of Housing and Urban Development, the Ministry of Transport, and parts of the Department of Internal Affairs.

This merger will be a case study for further pubic sector mergers, which will be investigated. Specific mergers will not be announced tomorrow.

Deputy Prime Minister David Seymour in his capacity as Act leader has campaigned on reducing the number of departments. Earlier this year, he said he wanted the Ministry of Arts, Culture and Heritage to absorb the ministries of Ethnic Communities, Women, Pacific Peoples, Seniors, Youth, and Māori Development.

The second leg of the speech will be a push for the public service to join what Willis called “the AI revolution”.

The third leg of the speech will be an effort to continue reducing public service headcount.

The public service comprises what this Government likes to call “back office” roles in ministries and departments. It excludes roles like teachers, doctors and nurses, who are counted as part of the broader public sector.

However, it also includes some frontline roles like Police and Corrections officers.

These numbers have grown under the coalition, although unions have made the case that other roles which would be considered “frontline” have been cut under the coalition as part of its reforms to the public sector.

Willis said the public service comprised about 1% of the total population – at about 48,000 – when the last Labour Government took office in 2017, in coalition with NZ First for the first of its two terms.

In December last year, the workforce comprised 63,600, just shy of 1.2% of the population. Increasing public sector headcount by a third in six years had allowed the sector’s headcount to “get out of whack”, Willis said.

She told Newstalk ZB she would set a 2029 workforce reduction target.

If that workforce target is to reduce public service headcount to its earlier level of about 1% of the population, it would mean a workforce of about 55,000 in 2029.

This calculation uses population projections by Stats NZ, whose central forecast estimates the population is likely to be about 5.5 million that year.

If that is the target, the public service would lose roughly a net 8000 roles by 2029. So far, the public service has lost about 2000 roles on a net basis.

Willis would not give a figure for how many public servants she wanted to cut, but said the workforce needed to drop below 60,000.

“Well, it is up over 60,000 now and we need to get it down below 60,000 and I’ll be releasing figures tomorrow,” Willis said.

Some of the savings from the exercise will be redirected into the Budget.

The speech will be delivered at lunchtime on Auckland’s North Shore, which is a break from recent practice, in which Finance Ministers have delivered their main pre-Budget speech in the Wellington region.