Murray McCully kept his officials in the dark over the contents of the Cabinet paper he presented ahead of Thursday's embarrassing back-down on plans to scuttle 304 jobs.

No one at the Ministry of Foreign Affairs and Trade (Mfat) - not even boss John Allen - was given a copy of the full paper "because it would have been leaked".

It's apparent from McCully's own frank admission that senior ministers are working around Allen rather than through him to ensure the ministry gets back on track fast after job losses were finally confirmed at just 79 (many of which are back-office roles rather than front-line diplomats).

This week, Allen explained away the ructions as just part of the feedback process which he claims had resulted in increased morale within the ministry. But no one buys that - let alone his own officials.


McCully still expresses confidence in his chief executive. But he also makes clear the changes Allen announced on Thursday were basically a response to the conditions he himself set out in a public letter to the Mfat boss some weeks ago.

The Prime Minister wants Allen to get around the overseas embassies to rebuild trust with his staff. It's not just the old stagers who have had their noses put seriously out of joint. Many bright, younger diplomats also became disenchanted after reading a 40-page document which spelled out that not only would many of them have to reapply for their jobs, but they would have no guarantee of a job in Wellington after returning home from a foreign posting.

Regardless, the Foreign Minister's revelation that he kept the Cabinet paper secret does underline the difficulties that still lie ahead of the Government as it also seeks to rebuild trust with the diplomats after an extraordinarily fractious period.

Realpolitik dictates that McCully had good reason to be distrustful given the avalanche of confidential Mfat papers that have landed in Phil Goff's lap in recent weeks. Goff has good links with Mfat. He has held the foreign affairs and trade portfolios and knows many officials personally.

But Mfat has been nothing less than a post-box for the Labour MP since Allen launched his big-bang restructuring programme back in February. Diplomats were so outraged at the planned attack on their career expectations that they ran a campaign to force a back-down.

The final straw for McCully came a fortnight ago, when Goff leaked Cabinet committee papers which he said showed the Government would axe 146 Mfat jobs and close the Stockholm embassy.

Only 20 people had access to the leaked papers, including senior officials at Mfat, the Department of Prime Minister and Cabinet, the State Services Commission and Treasury. The State Services Commission has since appointed Paula Rebstock to inquire into the leaks. But irrespective of Rebstock's big stick, the Foreign Minister was leaving nothing to chance.

Allen subsequently faced a grilling by Prime Minister John Key and Finance Minister Bill English at the next Cabinet committee. The upshot was that Key requested McCully to set out the strategic drivers behind the restructuring so that Cabinet colleagues could consider Allen's revised restructuring plan against a coherent framework.

That Key did not simply ask Allen to come up with the paper himself speaks volumes. It was Trade Minister Tim Groser, himself a former top diplomat , who wrote the five-page paper which cogently explained how the Asia-Pacific century has "vastly changed the market realities" that New Zealand needs to confront as a small trading nation. The Groser paper noted that significant opportunities lie in the Asia-Pacific and other growth regions - "yet the weighting of the ministry's footprint reflects the balance of New Zealand's interests last century".

The paper explains why McCully wants to see a greater focus on beefing up the Jakarta mission, putting new posts in China (Guangzhou and possibly Chongqing), increasing New Zealand's presence in the Middle East and ultimately placing a footprint in potential markets like Africa which holds half the world's underdeveloped agricultural land.

McCully retains Key's confidence. As does Groser.

But the country's chief diplomatic official has his work cut out to rebuild confidence in his management skills. He might find his own officials - and ministers - come around more quickly if he tries a little humble pie.

The biggest contribution Allen can make is to get Mfat refocused on the big picture.

It is volatile out there. Traditional markets are in flux. The capital markets face renewed turmoil.

New Zealand is still seen as a relative safe haven - but there needs to be much more concentration in our diplomatic effort, not management navel-gazing.