Government agencies warned plans to hike the fees that Crown board members could be paid may have “significant financial implications”, impact the delivery of public services, and exacerbate cost pressures.
Those entities raising the fiscal consequences of the hikes were only a small number in proportion to the total number of agencies consulted with, but they highlight issues of affordability in the context of a tight fiscal environment.
The Greens’ Francisco Hernandez says it is a “staggering” revelation that he says shows the Government knew its increases would impact front-line services but proceeded anyway.
But when asked if he had any concerns agencies could reduce services to pay for the fees, Prime Minister Christopher Luxon dismissed it with a flat “no”.
The Herald revealed earlier this year that the Government had quietly agreed to increase the range of fees board members of Crown bodies could be paid, in some cases by 80%.
This wasn’t supported by an increase in agencies’ budgets, meaning any pay hikes would need to be paid from their existing baselines.
In August, Public Service Minister Judith Collins said it was her expectation agencies should not cut “essential services to accommodate governance costs”, but she acknowledged some may need to “reprioritise” funds.
However, correspondence seen by the Herald shows various agencies warned the Public Service Commission (PSC) in May of the financial impact changes to the fees framework may have.
A large number of agencies – about 50 – were consulted about a draft Cabinet paper on the proposal to increase fee ranges, which was done with the intent of attracting and retaining talent on governance boards.
An Official Information Act (OIA) response captured feedback from a number of agencies that highlighted the impact of having to meet the cost of the additional fees from existing baselines.
Not every agency the PSC consulted with raised the financial consequences, while some welcomed the move to increase the recommended fees.
There was also support for not automatically adjusting current board members’ fees to the new ranges. Instead, the changes may be implemented when a new board member is appointed or after a review.
The Department of Conservation told the PSC that while it supported the proposed increases, “there will be significant financial implications that will need to be considered given the general environment of fiscal constraint and expectation of savings”.
It said it had two boards in the category that would be subject to an 80% increase in fee ranges and nearly 40 boards with fee ranges expected to rise by 30%.
The Ministry for Culture and Heritage said there would be “considerable issues with the affordability of these increases for Crown entities without an increase in baseline funding”.
Even trying to reach the minimum amount proposed in the new fee brackets would “require reprioritisation within current baselines”.
“There will be considerable financial implications for Crown entities across the public service,” the ministry said.
“Without an increase in baseline funding, this could have implications for the delivery of front-line public services (involving reprioritisation) and may not be possible for some smaller Crown entities.”
Any “significant increase” in fees would “likely exacerbate” cost pressures and could lead to less investment into a sector as the funding goes to the board fees.
The Department of Corrections said the proposal was “likely to have a reasonable impact” due to it being responsible for Parole Board members. If their fees were to increase 30%, that would cost the department about $1 million per annum.
The Ministry of Health said the fee changes “could add financial pressures for entities and agencies already experiencing funding constraints and cost pressures” but acknowledged this had been accounted for by not automatically applying the increases.
The Ministry for the Environment asked whether the Cabinet paper should point out “that some Crown entities may not be able to afford the proposed fee increases without additional funding”.
“The fees increase may not have its intended impact if entities cannot afford to implement it.”
The NZ Transport Agency said that like other Crown entities, it was “managing budgets tightly and may need to revise budgets to reflect any Board member fee increases (depending on the size of the increase)”.
New Zealand Trade And Enterprise said the Cabinet paper should be clear that “if Crown entities are to fund the increase in costs from their baselines, it will mean needing to reduce activity elsewhere”.
The Green Party’s Hernandez said this “reveals that the Government’s core priorities are for the boss and director class, not ordinary New Zealanders who might potentially face even longer wait-times than they already face to get critical medical treatment while money meant for doctors and nurses gets redirected to board directors”.
He said the Greens were focused on “what actually makes for effective public services”.
“Fair pay and safe staffing for public servants like teachers, firefighters and nurses - not more handouts to those already doing well like bosses and corporate directors.”
A spokesman for the PSC told the Herald it carefully considered all feedback received.
“A small number of agencies provided feedback about the fiscal environment and potential service delivery impacts. These views were balanced against the need to attract and retain high quality boards to govern entities delivering critical services to New Zealanders.”
The commission said market data and benchmarking was used to inform the fee ranges, which came into effect in July. They were also adjusted to provide a discount to reflect the public sector context.
“Fee increases for Crown boards and governance bodies must factor in affordability. Fees for Crown boards and governance bodies have not been substantially moved in over a decade.
“Since the new fee ranges came into effect, we have not had feedback from any agencies about their concerns with implementing higher fees and any impact this is having on their services.”
Prime Minister Luxon said a good board “can save the New Zealand taxpayer and New Zealand Government hundreds of millions of dollars by making good decisions”.
“We acknowledge fully it’s nowhere near the market rates you get in the private sector, but we’re just trying to make sure that it’s in a format that actually makes it attractive.”
He emphasised the current Government was wanting agencies to get more value out of every dollar.
Jamie Ensor is a senior political reporter in the NZ Herald press gallery team based at Parliament. He was previously a TV reporter and digital producer in the Newshub press gallery office. He was a finalist this year for Political Journalist of the Year at the Voyager Media Awards.