The Government expects to save $2.4 billion overhauling the public service, including reducing the number of departments, increasing artificial intelligence use, and cutting public servants by nearly 9000.
As the Herald reported last night, Finance Minister Nicola Willis is using a pre-Budget speech in Auckland today to outline three legs to the Government’s public service reforms, which she expects to improve services, lift productivity and deliver better value for money.
Over the next three to five years, the Government will “significantly reduce” the number of public service agencies, with the new Ministry of Cities, Environment, Regions and Transport (MCERT) being used as an example of “what is possible”, Willis said.
Customer-facing and back-office systems will be digitised, with artificial intelligence (AI) embedded “as a basic expectation for all public entities”.
The aim is to make services “easier and more affordable” for people to interact with.
At the same time, Willis said the Government will “pull the brakes on the increase in overall public servant numbers”, with a target of public servants being about 1% of the population.
She said this is what the historical norm was before an increase under Labour. The public service currently equates to about 1.2% of the population.
In numerical terms, it rose from about 48,000 people when Labour took office in 2017 to about 63,000 last December.
“We will be tracking progress towards a numerical target of no more than 55,000 fulltime-equivalent [FTE] public service employees by July 2029. That’s 8700 fewer than were employed in December last year,” Willis said.
“Let me stress that these targets apply to the core public service and do not include teachers, nurses, doctors, police or people employed by Crown entities.
“We fully expect that with good budgeting we will be hiring more nurses, police officers and others in critical frontline roles.”
Willis said a reduction in workers would be achieved by “doing the things your business considers routine: allowing for natural attrition, stopping duplication, streamlining back-office functions, accelerating uptake of digital tech and requiring government agencies to report every quarter on their progress towards the targets”.
She said that “to reflect and drive the efficiencies” expected from the reforms, the Budget will reduce most agencies’ operating budgets by 2% in the coming year, followed by a further 5% in each of the following two years.
The agencies excluded from the Government’s savings exercise include the Defence Force, Police, Oranga Tamariki, Corrections, the Ministry of Health, the Ministry of Justice, the Ministry of Education (excluding tertiary functions), the Government Communications Security Bureau, the New Zealand Security Intelligence Service, the Education Review Office, Crown Law, the Ministry of Defence, the Serious Fraud Office and parliamentary agencies.
“Those savings add up, and have created significant headroom for higher-priority investments, a total of $2.4 billion over the forecast period, averaging $597 million a year.
“These savings will now be deployed to better purposes – to delivering more services in our health system, to increasing educational resources for our schools, to building infrastructure and strengthening our Defence Force and police.”
In speaking about the reduction to Government departments, Willis highlighted that there are 39 departments and ministries administering Budget lines in New Zealand, compared to 16 in Australia, 24 in the United Kingdom and about 12 in Finland.
“Following today’s announcement, public service agencies will be asked to come up with proposals to logically merge their existing activities around citizen-facing functions, using common technology platforms. We expect to announce more detail in the coming months.”
Public Service Minister Paul Goldsmith said the public service growth rate between 2017 and 2023 was nearly three times faster than the overall labour force, while back-office and support functions grew significantly faster than frontline service delivery roles.
“Some of that growth was necessary during the Covid pandemic, but over the long-term New Zealand cannot sustain administrative growth outpacing the productive economy.
“This overhaul is about ensuring more resources reach frontline services and fewer are tied up in duplication and administration.”
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.
Seymour viewed the cuts as vindication of Act’s policies, given his party’s long-held belief the size of government should be reduced, something he has pushed for throughout this term.
While he welcomed the scale, Seymour said he would have returned the public headcount to 2017 levels, making it less than 1% of the population and in a quicker timeframe than Willis has suggested.
Seymour claimed New Zealand’s economic hardship had convinced his coalition partners of Act’s cost-saving policies, also pointing to the axing of pay equity funding in last year’s Budget.
“One of the things that I said, even before the election, is sooner or later, the need to save money will drive people towards the positions that has advocated and I think that’s happening.”
Willis hadn’t yet specified how many ministries would be merged or cut through the Government’s changes.
Act had campaigned on reducing the number to 30 ministries or departments. Pressed for a number, Seymour acknowledged it was “close” to Act’s policy but wouldn’t confirm how many.
Seymour had also called for a reduction in the executive, trimming the number of ministers and ministerial portfolios.
He argued the election was the appropriate time to implement any changes as “most people are pretty committed to their positions”.
Foreign Affairs Minister Winston Peters said journalists asking about potential job losses at the Ministry of Foreign Affairs and Trade (MFAT) were “getting ahead of yourself”.
“I am not concerned about it... I’ve got a record of making sure I stand up for foreign affairs and making sure that we have got the number of people we need offshore, and my intention remains the same for this election.”
Speaking to reporters this morning at Parliament, Prime Minister Christopher Luxon acknowledged people would lose their jobs as a result of public service cuts, which he was quick to defend.
“Yes, there will be job losses over time.
“The public service is not a make-work function, it’s not here just to maintain jobs and maintain a position of how it was always run since 1995, in the same way.
“We have to constantly evolve the public service to make sure it’s on point and it’s delivering for New Zealanders.”
Labour leader Chris Hipkins said the proposed public service job cuts weren’t “good news for New Zealanders”, noting that a large portion were based outside of Wellington.
He suggested that frontline workers could be caught up in the losses.
“They’re social workers working with vulnerable kids and families, people working in our prisons, people working at our border, people working in the conservation estate, they are frontline jobs.”
Hipkins said he had “no problem” with a “more integrated public service” and using technology, but he wasn’t keen on “setting arbitrary targets”.
“There is no way you could reduce that many people working for our public service without reducing frontline services.”
Asked if he would like a “more integrated service” that had the same headcount of workers, Hipkins acknowledged that may lead to job losses. He said a particular headcount shouldn’t be a measure of success.
“We should be focused on having the right number of people to do the jobs that we need.”