Public service cuts: The big stretch

The Government says its plans to chop thousands of state sector jobs. Photo / Thinstock

More from less. It sounds suspiciously like the political equivalent of alchemy. Three years on from its first directive that government departments start looking for savings, National still believes it can turn lead into gold simply by squeezing the core state sector ever harder and - at the same time - provide New Zealanders with better public services.

What began as a modest line-by-line review of spending has become a freeze on any extra spending for the foreseeable future.

With Bill English now requiring departments to dig deep for such things as contributions to super schemes, which were previously centrally funded, things are certainly "tight" to use the Minister of Finance's oft-quoted view on the state of the Government's books.

The chief executives of the 30-plus departments and ministries who have head offices in Wellington are under huge pressure to produce what the Treasury calls "efficiency dividends".

There are working parties, advisory groups and various consultants crawling all over the public sector, charged with finding new and better ways of doing things, from ministries sharing back-office functions to savings in IT.

The task of getting more from less has also seen the concoction of a plethora of devices to measure department performance against various standards - and against one another.

Inevitably departmental mergers and restructuring grab the headines in this top-to-bottom overhaul of state services, with job losses now totalling more than 3500, according to figures collected by the Public Service Association.

Under Labour, the number of core public servants was close to 39,000. National has now capped the core at a maximum of 36,527 full-time equivalents. The actual figure will this year start trending below 36,000. But that is still 6000 or so above the level when National was last in power in the 1990s. That comparison gives some credence to English's confidence that there is still plenty of fat left to trim.

Those numbers do not answer the crucial question: have cuts in budgets brought some departments to breaking point when it comes to delivering services?

Some elements are now just skin and bone, the prime example being the Department of Conservation, which has suffered savage budget cuts, but which still seems able to fulfil the Government's requirements.

A list of service cuts compiled by the PSA cites a number of items, such as the closure of Inland Revenue's regional offices, the likely impact on border security from cuts at MAF and the recent establishment of an 0800 number for tenants of Housing New Zealand.

There is nothing - yet - on the list of sufficient magnitude for English, who has driven the reform agenda from day one, to cause him to lose any sleep.

Asked if he can guarantee there will be no cuts in front-line services, English replies: "You can't guarantee they will stay the same. That's for sure because some of those front-line services are not efficiently run. They need to tidy their act up."

He repeats his mantra about finding "better ways of doing things".

"Now sometimes there will be disputes as to whether it is [better] or it isn't."

He says there will always be a "bit of noise" around change - a reference to criticism of the impact on the diplomatic corps as a result of the current restructuring of the Ministry of Foreign Affairs and Trade.

This exercise, which will see the axing of 305 positions, is shaping as one of the most rugged, unpopular and - opponents claim - misguided departmental shake-ups in the 100-year history of the public service.

The PSA's national secretary, Brenda Pilott, says the attention now focused on Foreign Affairs, alongside the equally controversial revamp of Te Puni Kokiri, the Maori Development Ministry, looks like finally kick-starting a national debate.

That debate will be stoked by the Prime Minister delivering a major speech on state sector reform this month. It has been hailed as the next step in the overhaul of the public service, including adapting to new technology.

However, there may be more interest in what Key has to say about contracting out the delivery of services and the potential privatisation of back-office and other functions. However, English says expectations of the speech's content are starting to get a "bit high".

"It isn't as if there is some big bow wave of change ahead. It is more about the momentum of current change picking up," he told the Weekend Herald

Even so, English says the public will see "significant" change in the public service in the next three to five years.

However, that would not necessarily entail a big shift to outsourcing and the Government was not into contestability "for the sake of it".

National's political opponents, however, contend that the reforms are as ideologically-driven as they are fiscally and efficiency-driven.

They have watched the scale of the reform increase in magnitude and will see English's remarks as trying not to scare the horses.

English also wants to keep Labour isolated on an issue which could yet get very messy for National if the cuts start to really bite into services. The reforms have been tricky for Labour to handle. The party does not want to be seen as blocking the modernisation of the public service. It agrees with National that digital technology will be a major factor in changing the way services are delivered.

On the other hand, it cannot ignore such a key constituency as the Wellington-based staff who work in the core public service.

There seems to be little sympathy outside Wellington for the new job insecurity of public servants after decades of guaranteed lifetime employment.

However, the botched handling of the restructuring at Foreign Affairs may be a turning point.

Phil Goff's ambush of Foreign Minister Murray McCully over the $903,000 upgrade of the swimming pool at the New Zealand Embassy in Tokyo painted a picture of profligacy and waste on the part of senior management at the very moment they were planning to sacrifice more than 300 jobs.

By the time McCully had explained there would be no such upgrade, it was too late.

Another "pool" his ministry has on its drawing board may be worrying him a lot more.

The "surge pool" - a classic piece of human resources management jargon - is a key element of the ministry's new "business model".

Staff classed as diplomats who return to New Zealand on completion of their fixed-term overseas posting and who have not been offered another position will go into the surge pool while the ministry identifies "suitable reassignment or redeployment opportunities".

If someone has been in the pool for an "extended period", the ministry will consult on "redundancy options".

Staff reaction was swift and predictable. A survey conducted by the Foreign Service Association - the trade union representing some 600 ministry staff - found nearly 75 per cent of respondents currently working overseas were either considering resigning or returning to New Zealand before the proposed changes took effect next January. More than 65 per cent of respondents based at head office said they were now less likely to consider a posting abroad.

Labour is predicting that the ministry's restructuring, though still at the consultation phase, effectively heralds the end of the country's diplomatic corps. Job insecurity, allied with the slashing of allowances, will remove any incentive for staff to serve abroad.

Labour is also warning that the job cuts will inevitably reduce the ministry's ability to provide assistance to New Zealanders who get into strife while overseas.

Goff cites the mysterious death of 23-year-old New Zealand student Sarah Carter in a hotel in Chiang Mai in northern Thailand as an example of how families can suddenly find themselves needing the ministry's help. National's tactic has been to delegate the task of finding savings and undertaking staff cuts to chief executives. That allows Cabinet ministers to keep a healthy distance from the bloodletting.

But it might have backfired. McCully indicated he would say little about the new business model until the consultation period was over.

The reaction, however, to the consultation document - which is under the name of the ministry's chief executive John Allen - suddenly had McCully describing some of the proposed changes as "ambitious" and saying the ministry's "talent base" had to be protected.

Despite that, McCully and English remain adamant that the ministry can find the required $45 million in savings.

McCully points out the ministry was granted an additional $212 million a year by Labour in 2008.

National had trimmed back $115 million, but that still left $97 million. Though the ministry would lose 63 diplomatic staff, 16 of those positions were currently vacant.

Moreover, those numbers had to be put alongside 114 new staff recruited following the 2008 funding injection.

Given the ministry has been relatively unchanged for more than 20 years and enjoyed large increases in spending, English says it would be odd if Government departments could not do better.

"Because they are monopolies they don't have to change anything. When change comes it can seem big and scary."