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News from the colonies

Source: Public Sector Executive July/Aug 2012

Dr Andy Asquith, director of the Public Management Group at the School of Management at Massey University – Albany in Auckland, New Zealand, explores public sector issues there and in the UK.

New Zealand /Aotearoa – Land of the Long White Cloud, home of the All Blacks (and 40 million sheep) and the place where New Public Management demonstrated to the world the devastating effect of unleashing a theory to run its course in the real world. Now, almost 30 years on since the neo-liberal experiment of the fourth Labour Government elected in 1985 gave us Rogernomics – named after the then Finance Minister, Roger Douglas – this article offers some thoughts on the state of the public sector in New Zealand in 2012.

What we describe in NZ as the state sector, differs from what is known as the public sector in the UK. Essentially, the NZ state sectors refers to the core civil service in Wellington – the Sir Humphrey brigade. To a certain extent this is aided and abetted by the way in which NZ has embraced the idea of agencification and specialisation. Hence, at first glance, NZ can appear to have a very slim and small state sector. However, when you begin to add in the wider public sector – such as social housing, law and order, social services, health and local government, you find a state sector which actually accounts for somewhere in the region of 40% of all jobs in NZ.

This figure is further inflated by the number of, what are on paper NGOs, which operate as arms length contractors to government departments. Hence, one of the biggest NGOs in NZ – Barnado’s – is effectively an extension of the Ministry of Social Development in its role of providing numerous welfare and social services throughout the country. MSD is without a doubt, the most significant funding source of Barnado’s in NZ.

As Disraeli once said: “There are three kinds of lie: lies, damned lies and NZ government head count statistics!”

Whilst thinking about this article, it has been interesting to receive comments from the UK regarding the state of the public sector there, and the impact upon it of the policies being pursued by the Tory/Liberal coalition government.

One informant likened the experience as being caught up in a Thatcherite time warp. If only they and likeminded people were to visit NZ, then they would certainly experience déjà vu!

T h e a l a rm bells in my head began to ring recently when I saw that as part of his attempt to reform the UK civil service, David Cameron was seeking inspiration from NZ. The NZ model of central government policy making and delivery operates thus: departmental chief executives/permanent secretaries (who are employed on typically five-year fixed-term contracts) are contracted to deliver policy outcomes to their political master. Whilst, like many reforms this might sound sensible on paper – I would hazard caution. The major failing of the NZ system is that the issue of accountability is essentially fudged.

The buck does not stop anywhere. When you add in the extreme level of agencification which exists here – you often have a situation of policy failure whereby politicians blame their officials, who in turn pass the buck onto other agencies citing failure elsewhere. A further undermining of accountability appears to be the lack of effective Parliamentary scrutiny too.

In November 2011 the NZ electorate returned to power a formal centre-right government led by the National (in UK terms Conservative) Party. Prior to the election, there had been some speculation here that the National Party might be able to govern alone, without the need for minor party support in Parliament. Since 1996, all Parliamentary elections have been run under the Multi Member Party (MMP) system. Although it is technically feasible for a party to have an absolute majority in Parliament, no election since 1996 has left either of the two main parties – Labour or National – able to govern in its own right. Every post-1996 government has been formed by a coalition of one of the main parties supported by a number of smaller parties.

The outgoing Labour government, which lost the general election in 2008, had warned in its election campaignthat a National victory would lead to a return to the heady days of Rogernomics. Such was the success of this particular aspect of Labour’s campaign, the then National Party leader (and soon to be Prime Minister), John Key (a man who appears reminiscent of John Major) felt the need to repeat loudly and often, that under the first term of a National government there would be no sales of state assets (privatisation) and no wholesale reductions in the size of the state sector (job cuts). They key here (no pun intended) is the word first.

Upon re-election in 2011, the Government began to roll out a significant tranche of asset sales and began to focus on the size and scale of the core state sector. What is interesting to observe here is that the issue of asset sales appears to be universally unpopular – even amongst National Party voters – yet in spite of this, the Government is pressing ahead with its ‘mixed ownership’ model. Again, when you listen to the vocabulary used by government ministers, there appears to be a question as to how economical with the truth they are being. Whilst they are avoiding mention of a wholesale privatisation, there is a clear implication that in a third term National Government, this is a distinct possibility. They are slowly softening up the electorate for this event to happen.

Despite rumblings during the last Parliament about local government reform, other than the publication of a discussion paper in early 2011, little was done. However, earlier this year, the then Local Government Minister announced what is in effect a root and branch reform of local government with the publication of a snappily (and misleadingly) titled document called ‘Better Local Government’ – I am tempted to add a question mark after the word ‘government’. Central to this is the determination of the Government to remove from local authorities the power of general competency given in the Local Government Act 2002. Supporters of this reform argue that the 2002 Act gave licence to local government to broaden considerably their scope of activity. This led, they argued, to rapid increases in rates (the major source of local government funding) and councils widening their scope of activities. In reality, the increases in rates were essentially created by the need to fund infrastructure developments and inflation.

Any local government leader reading this may well be quite envious of the funding position enjoyed by their NZ counterparts. Here our local authorities are essentially self-financing via the rates system. Approximately 85% of all local government finance is raised this way, with the rest funded via charges – we are quite keen on the idea of ‘user pay’ – and a very small amount from central government. This financial autonomy, combined with the power of general competence, has placed NZ local government in a very advantageous position. However, like local democracy elsewhere, this is to a certain extent undermined by the declining level of interaction between the institutions of local government and the governed.

Despite a universal reform of local government elections to make them postal ballots only – the last four electoral rounds have seen election upon election decline in the number of Kiwis participating in local government elections. Unfortunately this trend is being covertly used to justify the need for central government action in the form of ‘Better Local Government’. The issue of local government finance here is one which is proving very tricky for national politicians of both major political parties. The previous Labour government established an inquiry into the rating system – our very own Lyons Inquiry. Here, the examination was led by a three person panel, chaired by David Shand.

The Shand Report concluded with 96 recommendations taken from established local government financial management best practice identified across NZ. If universally implemented, these recommendations would lead to considerable efficiency savings, and provide significant amounts of funds for both service delivery and improvement, as well as for investment in infrastructure.

Despite the Shand Report being presented to government in 2007 – to date not a single recommendation has been adopted by central government. What we are left with is a piecemeal patchwork of implementation as some local authorities cherry pick recommendations from the report.

The author for one, would argue that for the National Governments since 2008 the Shand Report presented a major dilemma. On the one hand the Key administrations have a philosophical belief that the state/public sector is by definition inefficient, uneconomic and wasteful.

Yet on the other hand, they are faced with a well-researched and thoughtful report which tells them the exact opposite of their core beliefs. Hence, the best option for the Government is to place the Shand Report in the ‘too hard’ basket and hope that it will simply go away. Unfortunately, this appears to be the case, with Local Government New Zealand – the Kiwi equivalent of the Local Government Association – seemingly doing little to promote the virtues of the Shand recommendations.

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