A ministry facing a $10.4 million overspend; staff proposing BYO catering for meetings and staying with mates instead of hotels during work trips; a worker questioning whether their department will still exist after a change in government; and support sessions for stressed staff. Azaria Howell looks at the challenges facing our public sector as departments race to cut spending.
Government ministries are on a mission to cut spending by 6.5 to 7.5 per cent before the coalition Government’s first Budget in May.
Finance Minister Nicola Willis has asked all departments to look for savings to “restore discipline” to taxpayer spending.
Correspondence from 11 ministries about their cost-cutting plans has been released to NZME under the Official Information Act.
For some agencies, cutting costs means cutting jobs. For many it’s an “unsettling” and “challenging” time as staff wait to hear just how deep the cuts will go.
- Ministries not included below have extended the deadline to respond.
Te Manatū Waka - Ministry of Transport
The Ministry of Transport’s headcount in 2023 was 245 people. $23.6 million was spent on contractors and consultants in the year to June 2023.
Staying with friends when travelling for work and bringing your own plate of food to staff meetings are some of the ways staff at the Ministry of Transport have suggested costs can be cut.
A new year’s email titled “Welcome back!” from Ministry of Transport chief executive Audrey Sonerson outlined new steps to achieving cost-saving measures.
It was followed by an anonymous survey sent to all staff on January 18, asking workers for their ideas on how to improve efficiency and find cost savings.
On Tuesday January 23, further correspondence outlined how senior leadership would be developing options for achieving “baseline savings”.
Sonerson pointed out discussion of the savings exercise could be “unsettling”, but promised the ministry was well placed to deliver. A prior organisational change process in 2023 had positioned the ministry “well for the future”. A number of vacancies were removed last year, and functions were being brought in-house to save costs.
More details were revealed when the survey results were released on February 14, with key themes identified around efficiency and savings.
Related to the topic of sensitive expenditure, feedback showed many wanted virtual meetings to be the default going forward.
Many also called for clarity as to when catering would be required, with a proposal to reduce the catering budget and implement more “bring your own plate” meetings.
Staff asked the ministry for incentives to stay with friends during official travel, rather than using hotel rooms on the taxpayer’s dime. They also urged the ministry to look at finding a smaller, less expensive office space.
On the issue of workforce and headcount, workers agreed in the staff survey there needed to be “clear performance measures” in place. A “culture of entitlement” across the transport sector was identified that needed to be dealt with, and a proposal to slash five hours a week on contractors was floated.
Statistics New Zealand
Statistics New Zealand’s headcount in 2023 was 1729 people. $28.3 million was spent on contractors and consultants in the year to June 2023.
Stats NZ is facing a particularly challenging time with “unsustainably” high staffing levels and a forecast budget overspend of about $10.4 million.
A recruitment pause for non-essential roles is in force at the ministry, which claims it’s been undergoing a “well-publicised organisational change process” since last year.
In December 2023, Stats NZ predicted by the end of June 2024, its fulltime equivalent employee number would go down from 1700 to 1576 - a loss of 124 roles.
Back in August, Stats NZ workers were told of a proposal by the then-Government to trim 1 or 2 per cent off existing baselines, while protecting frontline services.
In correspondence, it’s noted the proposal “won’t be easy”. Now the agency is tasked with finding 7.5 per cent’s worth of savings.
The day before the October general election, Stats NZ chief executive Mark Sowden wrote to all staff informing them the agency was “not living within our budget”.
Sowden said the agency had already started to proactively look for ways to reduce spending, including sharing office spaces and considering the need to travel.
A recruitment pause was put in place the day before the election. The travel budget was halved for each cost centre, through to June 30, 2024. All air travel paid for by Stats NZ was paused between December 15, 2023 and February 12, 2024.
Sowden promised the agency was “not in this position because anyone has done anything wrong”.
A further message from Sowden, this time on November 13, noted changes would be difficult to implement but would help deliver better outcomes.
Staff were told travel restrictions, pausing recruitment, reducing leave liability, and sharing office space in Christchurch “wouldn’t be enough”.
The agency’s annual close-down period was extended to three weeks.
“All this means that our current staffing levels are unsustainably high,” Sowden told workers.
A further document sent just a day later proposed each layer of supervision would need a 25 to 30 per cent difference in job size. A review of functions showed 135 roles could be considered “duplicates”.
A number of roles have been proposed for disestablishment, and workers in marketing, communications, and engagement have been told “there are no comparable roles available for redeployment at the current time”.
The agency is forecast to overspend by about $10.4 million. It told staff on November 16 “we need to make changes now because Stats NZ cannot be over budget by the end of the financial year”.
Staff were again told personnel expenses were “unsustainable in the long term” on November 21.
A further document in early December which was “not to be provided externally” came with what appeared to be a back-track on some previous proposals.
Sowden noted, following feedback, “proposals to disestablish roles have been withdrawn”.
Sowden’s letter said staff had raised concerns the process was “rushed, poorly implemented, inequitable, and did not recognise te ao Māori”. Workers feared the proposed changes would impact Stats NZ’s ability to deliver core services.
The document confirmed 34 roles had been confirmed as disestablished.
Ministry of Justice
The Ministry of Justice’s headcount in 2023 was 4641 people. $42.4 million was spent on contractors and consultants in the year to June 2023.
Two weeks after the election and roughly a month before the coalition Government was formally announced, the Ministry of Justice was taking a careful look at its spending.
On October 27, strategic communications business partner Nick Drakeford wrote to all MOJ workers on the staff intranet page, informing them the ministry’s senior management team would be taking a “deep dive” into its finances.
Drakeford added workers mentioned “feeling stretched” and urged the ministry to better prioritise its work “so it can be delivered within the current fiscal restraints without asking unreasonable things of our people”.
The ministry would be looking to work more efficiently, and staff were told work could be combined, paused or stopped to streamline its budget.
Ministry communications detailed different “saving initiatives” that had been going on since June.
On December 1, chief executive Andrew Kibblewhite informed staff about their potential fate, saying: “I do not expect to have to take any sort of large-scale staffing reduction programme. I do not think that would make sense or be necessary.”
In the all-staff email, Kibblewhite added the ministry’s senior leadership team would be taking a “more conservative approach to recruitment”, which he said would lead to a “modest decrease” in staff headcount.
Workers were told when roles became vacant, the ministry would be “having a good rethink” about whether the position needed to be replaced.
Then came February 2, more than a month after Finance and Public Service Minister Nicola Willis unveiled her mini-budget.
More staff communications were sent out from MOJ’s chief executive, this time with the announcement it wouldn’t be replacing its high-profile position of deputy secretary of strategy, governance, and finance (SGF). Kibblewhite told workers the decision was “only right, given the current financial situation across government”.
The ministry boss warned SGF staff the time had come to “realign and consolidate our back-office functions”, with a proposal to shift teams from SGF into other aspects of the ministry.
The ministry was directed to find cost savings of 6.5 per cent.
A further email from Kibblewhite to all staff on February 2 warned the ministry would need to carefully manage its headcount, in its push for financial sustainability. A cap had been put on the number of roles needed at the ministry, and each business group was directed to work towards reaching it “by June”.
Jobs across the whole ministry were being looked at, and tough decisions would be made over whether or not to replace staff.
“We will make that decision with a very clear view of the needs of the business in mind,” Kibblewhite told workers.
Ministry of Defence
The Ministry of Defence headcount in 2023 was 194 people. $9.1 million was spent on contractors and consultants in the year to June 2023.
The Ministry of Defence had already been directed to find cost savings by the previous Government. The current Government has directed the agency to find a further 7.5 per cent in savings.
An all-staff email on August 29 from chief executive and secretary of defence Andrew Bridgman says the ministry needs to save $300,000 permanently from its baseline operational funding.
Just a day before, the then-Labour Government had directed agencies to cut spending on consultants and contractors to pre-Covid levels.
Bridgman stated the ministry had always required fiscal discipline but warned “now is the time to be even more prudent”. He added it would be “tricky”, but vowed he was confident the savings could be made without materially impacting the ministry’s work.
After the election and during lengthy coalition talks, on October 26, the ministry prepared a Budget document, warning lower tax revenue was forecast, and showcasing figures that Government debt was increasing.
Ministry staff were told the Government would not get to surplus until the 2026/27 financial year.
Workers were warned additional savings might be required once the Government was formed - though official communications surrounding the ministry’s most recent cost-cutting plans were withheld under the Official Information Act, citing confidentiality around Crown advice.
Here are highlights from the other departments NZME has received replies from, in alphabetical order (based on English language names)
MBIE – Ministry of Business, Innovation and Employment
The Ministry of Business, Innovation, and Employment’s headcount in 2023 was 6396 people. $104.4 million was spent on contractors and consultants in the year to June 2023.
Previous internal communications, revealed by NZME, detail MBIE boss Carolyn Tremain looking to slash discretionary spending by 15 per cent.
The ministry introduced a voluntary redundancy scheme earlier this year and did not have a set headcount target. Staff who applied were informed last week of their fate.
Before the election, MBIE staff were reminded of the importance of political neutrality. As far back as July staff were directed not to provide MBIE contact details to political parties, not to wear T-shirts with political party branding at the office, and to not use MBIE printers to print off party material.
Three days before the general election, Tremain told workers then Minister of Finance Grant Robertson had given a directive savings target of $110 million. In this memo, Tremain noted regardless of the election results the ministry would be working to tighter budgets.
Four days after the election, on October 18, a further memo was sent out to all MBIE staff, updating people on the fact special votes were being counted and the Port Waikato by-election was under way. Despite any official direction at the time, Tremain wanted the ministry to prepare itself “based on the proposals in the party manifestos”.
She added “it can be difficult waiting for certainty and that change can be unsettling”.
On November 9, Tremain emailed all staff under the heading “Readying for a change in government”.
She revealed a decision had been made to slash discretionary spending by 15 per cent, and informed staff the reduction was something they could all work towards by using on-site meeting rooms and not booking off-site venues at a cost to the ministry.
Staff were also told MBIE’s end-of-year function would not be funded. Workers were told the decision was “difficult” and not in any way a reflection on their work.
Tremain added the ministry was not recruiting “for all vacancies”, once again adding “I know some of this may be unsettling”.
Department of Conservation
The Department of Conservation’s headcount in 2023 was 2663 people. $35 million was spent on contractors and consultants in the year to June 2023.
Communications from the Department of Conservation were fully withheld.
Deputy director-general of organisation support Mike Tully confirmed it has a “programme of work in place to address cost pressures and identify where savings can be found,” yet no final decisions had been made.
Ministry for the Environment
The Ministry for the Environment’s headcount in 2023 was 1047 people. $37.2 million was spent on contractors and consultants in the year to June 2023.
The Ministry for the Environment (MFE) withheld 39 email communications between MFE and Minister Penny Simmonds on the topic of cost-cutting.
Forty-five roles were disestablished at MFE following an Operating Model Review, unrelated to the Government’s cost-cutting directive.
Ministerial services team leader Lachlan Brown confirmed no final decisions on Minister Willis’ most recent cost-cutting request have been made.
Education Review Office
The Education Review Office’s headcount in 2023 was 226 people. $2.3 million was spent on contractors and consultants in the year to June 2023.
On January 17, workers at the Education Review Office were informed Education Minister Erica Stanford would be “discussing options” with the Office’s chief review officer around cost savings, and how it meets the Government’s overall goal to achieve $1.5 billion in savings across the board.
The ERO has a savings target of 6.5 per cent.
Kāinga Ora – Homes and Communities
Kāinga Ora’s headcount and total costs spent on contractors and consultants is not available.
A recruitment pause was put in place at Kāinga Ora on November 10, two weeks before the official announcement of the coalition Government.
The update, from chief executive Andrew McKenzie, noted during the election period there was a “clear direction” for government agencies to be constrained in their spending. McKenzie warned the agency “must be very careful” about recruiting.
The same staff memo said the organisation was no longer in a “growth phase”.
Another document was sent out to staff on November 30 by strategy, finance and policy general manager Gareth Stiven. The agency noted it was “yet to receive direction from the incoming Government” but noted reducing spending would have to be a key focus.
In August last year, Kāinga Ora was requested to reduce spending on activities by $20 million in the 2023/24 financial year.
Inland Revenue
Inland Revenue’s headcount in 2023 was 4130 people. $48.7 million was spent on contractors and consultants in the year to June 2023.
The previous Government’s push for public sector savings meant Inland Revenue (IRD) would have roughly $14 million less in its upcoming budget. Staff were told on August 31 the ministry was “already looking at how to become more efficient”.
An update was sent to staff on January 19, stating the Finance Minister and Minister of Revenue were being told to provide options for departmental savings. At the same time, staff were informed that one of the new Government’s coalition agreements referred to additional funding for IRD to support a greater focus on compliance.
Inland Revenue was given a savings target of 6.5 per cent. Staff were told on January 26 it was “too soon” to tell the outcome of these decisions.
All other IRD communications were withheld, citing the upcoming May Budget.
Department of Internal Affairs
The Department of Internal Affairs headcount in 2023 was 2740 people. $122.7 million was spent on contractors and consultants in the year to June 2023.
The Department of Internal Affairs (DIA) has established a team of nine to oversee cost-cutting efforts in what it calls a “challenging fiscal and economic environment”.
The team has been staffed internally at no added cost to the department.
A leaked memo sent to staff on February 12 outlines there would be a greater focus on restraint and reprioritisation “over coming years”.
Staff were told specific initiatives were still “Budget-sensitive” and could not be shared. DIA has been tasked with finding 6.5 per cent in savings.
Te Puni Kōkiri - Ministry of Maōri Development
Te Puni Kōkiri, the Ministry of Maōri Development’s headcount in 2023 was 450 people. $10 million was spent on contractors and consultants in the year to June 2023.
Staff at Te Puni Kōkiri, the Ministry of Maōri Development, were informed on September 6 the election, which was held roughly a month later on October 14, was “likely to bring further change”.
An official post from the ministry’s staff intranet outlined answers to staff pātai (questions). A concerned worker asked if the ministry will exist if there’s a change in Government, to which Māori Development secretary Dave Tokohau Samuels outlined it was “not going anywhere”.
Before the election, Te Puni Kōkiri was urged to find immediate savings of 2 per cent, equating to $11 million.
An official ministry newsletter from the end of September, from Tokohau Samuels, detailed immediate changes would be taking place around “financial delegations, travel, vehicle use, contractor spend, tighter recruitment decisions and remuneration”. Staff were informed the ministry would likely need to find further cost savings beyond what was already outlined.
In the same update, the Māori Development secretary told staff change could be “unsettling” for some.
A recruitment pause was implemented for all roles not being actively recruited and staff were told all international travel would require endorsement and approval from the chief executive.
Any event where total costs were likely to exceed $10,000 had to be signed off by two deputy secretaries.
New contractors or consultants would need to be signed off by two ministerial leaders.
Five days after the election, but before the Government’s formation, staff were told on October 19 there was an expectation the public sector would be asked to “find additional savings”.
Tokohau Samuels anticipated the ministry would be asked to find “a further 6.5 to 8 per cent additional savings”, warning “unfortunately, this is likely to have an impact on staff numbers”.
He vowed to focus on vacancies and attrition first, and noted not everyone would be pleased with the cost-slashing directive, saying “these are challenging times, and can bring angst”.
On October 19, staff were told “there is no new money, so we may be expected to deliver the same with less, or deliver things differently”.
Azaria Howell is a Wellington-based multimedia reporter with an eye across the region. She joined NZME in 2022 and has a keen interest in city council decisions, social housing and transport.