John Armstrong: A case of the cart before the horse

Rarely, if ever, has a speech by a senior public servant been as politically loaded as the one delivered last Monday by the head of the Treasury, John Whitehead.

Whitehead is the model public servant. But he is just that - a public servant. He is not a politician. He is an unelected official against whom the public has no comeback.

At best, his speech has further blurred the dividing line between bureaucrat and politician. At worst, he has breached the guidelines on political neutrality promulgated by the State Services Commission.

Little wonder State Services Commissioner Iain Rennie refused to say outright whether he agreed with Whitehead's radical prescription for reform of the state sector when repeatedly asked by Radio New Zealand's Kathryn Ryan.

If Rennie was nervous about the kind of public service Whitehead was forecasting, he may have been more worried about the very public and ardent advocacy for change on Whitehead's part.

Whitehead's sugar-coated prosletyzing for what is clearly intended to be holus-bolus privatising of services delivered by state agencies went way beyond a chief executive's brief.

It was a case of the cart before the horse. Finance Minister Bill English should have been the one making the speech. Instead, he weighed in behind Whitehead, reinforcing the latter's message that tightening fiscal circumstances demanded the public service lift its game, otherwise its game would have to be lifted for it.

Whitehead needed no prodding. But there is now a disturbing pattern emerging of ministers hiding behind bureaucrats and leaving them with the expectation that they front and do the Government's bidding, especially when it comes to restructuring of government departments and consequent job cuts.

If anyone doubts this, they need only look at the contrasting treatment of Whitehead and the Chief Justice, Dame Sian Elias, who got into trouble the previous week for her remarks about prison numbers. She was rebuked by Justice Minister Simon Power for breaching the convention that the judiciary not interfere in the business of Parliament. Governments determined sentencing policy, judges were appointed to apply it, he said pointedly.

So much for consistency. Politicians determine policy; public servants are employed to implement it.

State Services Commission guidelines on political neutrality do say it is legitimate for chief executives "to increase public awareness and improve the quality of public debate about the political and policy choices facing the country".

However, the commission says it is only appropriate for such a contribution to be made in a fashion which presents the pros and cons of a particular issue in a "factual and neutral" way.

If Elias was out of order, then the guidelines would suggest Whitehead's mouthings were a constitutional outrage. That would still be so had he been arguing for an expansion of the state sector, rather than a drastic slimming of it.

The constitutional implications of Whitehead's intervention seem to have gone unnoticed. That is because everyone is hardened to the Treasury playing such an overt political role. This has been going on for years, be it through the Treasury's post-election briefing papers to the incoming finance minister every three years or its Budget-related documents released or, increasingly, in its chief executive's speeches.

No one bats an eyelid. However, were the Chief of the Defence Force to call publicly for the purchase of new strike aircraft or the director-general of health to push for fish and chips to be banned, they would be castigated by their political masters for trying to write policy.

To be fair, alongside the Prime Minister's Department and the State Services Commission, the Treasury is a "lead agency" in monitoring how the public service performs. The Treasury's responsibilities for fiscal management and economic policy also means its influence stretches way beyond that of any other government department.

The Treasury's actions are also more transparent than most. It voluntarily releases more material under the Official Information Act than other departments.

It has not tried to hide its free market-based recipe for improving New Zealand's economic performance. However, since the mid-1990s, governments have largely ignored that recipe as being too stringent for the electorate.

Now, amid a recession and a slump in government revenue, National is being forced to turn (though willingly so) towards the Treasury's solutions, particularly regarding state sector performance.

English is giving government departments a year to ready themselves for a new era of far tighter budgets. Then the fiscal "lid" will come down and departments will have to live within their means, rather than rely on annual increases in funding.

If services are not to be correspondingly cut - and National is insisting they improve - then departments are going to have to find alternative and cheaper means of delivering those services. Thus all the talk about contracting services out to the private sector. This is being painted by the Government as something that already occurs and people should not get fussed about it.

Clearly, however, both the Treasury and English - who this week revealingly said he wanted the reforms in the state sector to "stick" so that no future government can unravel them - are using the recession as cover to reduce the role of the state and strip back the public service to some kind of skeletal level that will make it difficult to rebuild.

National is punting it can do this because there is little sympathy outside Wellington towards the 38,000 or so staff in the core public service. By stressing it will help state workers elsewhere by bolstering the frontline of delivery of government services, National hopes to keep onside with the 200,000 or so teachers, nurses, police, defence personnel and other state employees outside Wellington.

Crucially, National is also gambling on the wider electorate now having less of a Pavlov's dog mentality towards privatisation whenever it is mentioned than it once did.

This week has certainly provided the test of that. There has been the Prime Minister saying he is not philosophically opposed to privatising state enterprises.

There has been speculation that Meridian Energy is being readied for sale. There has been talk (since denied) of a letter from ministers to state-owned enterprises asking them to justify why they should remain in state ownership.

There are new rules on investment in New Zealand by overseas interests which could make it easier for strategic assets like Auckland International Airport to fall into foreign ownership.

Meanwhile, Don Brash, market advocate and economic liberal, will head the 2025 taskforce charged with finding ways of bringing New Zealanders' standard of living back to parity with that enjoyed by Australians. Incidentally, that such a task force is deemed necessary is evidence of the bankruptcy of the Treasury's thinking when it comes to fresh ideas.

Lastly, of course, there has been Whitehead's speech. His warm fuzzies about the "challenges" and "opportunity" facing the public service should send cold shivers down the spines of the left and centre-left.

If the left's anti-privatisation mantra is found to be no longer working, however, then Labour and the other Opposition parties have some serious cause for concern.