Hard realities of public job cuts

Recent commentary about the public service job cuts now under consideration has suggested that the magnitude of change being mooted has not been seen since the mid to late 1980s, and will result in an increase in consultant and contractor numbers. Both assertions can be challenged.

The reduction in public service staffing in the 1980s was continued in the early to mid-1990s. A Cabinet expenditure committee applied cuts through removal of discrete departmental functions, and a “sinking lid” approach to staffing quotas.

By 2000 staff in the core public service had reduced to 30,000. The core public service excludes front-line health, defence, police and education workforces.

From late 2000, the Clark government took the view that the public service had been cut back too far, and that its capacity needed to be strengthened. Staff numbers grew over subsequent years, and this trend has continued so that there were 65,669 staff at December 2023, according to recent Public Service Commission data.

The comparable figure in June 2018 was 49,730, a 32% increase in the last five plus years. New Zealand’s population increased 12.1% in the five years to September 2023.

At the same time, the outsourcing of work to contractors and consultants has continued at pace, showing that both staff numbers and consultancy activity have increased together.

The Public Service Commission has published consolidated consultant expenditure data since 2018. Operational expenditure on consultants (comparable to personnel costs for full time staff) totalled $911.9 million in the year to the end of June 2023, compared to $588m as at June 2018. This is a 55% nominal increase.

What has led to this growth in both staff numbers and consultancy expenditure?

First, the number of government departments and departmental agencies has grown. There are now 39 departments and departmental agencies in our public service. But that increase is unlikely to have contributed much to the growth in staff numbers as recently established agencies are small ones.

A second factor to consider is the number and complexity of issues facing modern government, here and in other countries: “wicked policy issues” that require considerable skill to untangle, analyse and resolve.

Policy complexity is not a new problem: the role of the public service has always been to provide expert advice to the Government on difficult policy questions and to implement Government decisions.

But it would seem from the consultancy numbers that public service leadership is increasingly turning to external sources for the expertise that they require in terms of policy analysis and implementation. These matters were once sacrosanct business for the departments themselves.

A challenge for the public service is to explain why so much consultancy resource needs to be purchased and to justify its effectiveness.

Indeed, what demonstrable gains or more effective outcomes have been secured from additional staff and consultancy spending on core public service policy and implementation planning in recent years? Has it made a difference?

A third factor for consideration is demographic change: there will undoubtedly have been an impact on staffing and consultant hiring from changing work/life balance preferences, the growth of part-time work, and cultural changes such as more movement between roles and employers for staff.

Long-term tenure with one or two employers as part of an individual’s public service career is becoming rare.

So, is the public service recruiting, developing and retaining the necessary talent to ensure it has a critical mass of policy and implementation expertise that can assist governments to pursue their intended objectives and carry out their programmes?

Past governments of different political hues have had to adjust to the effects of economic downturns, and to reduce the size of the public service accordingly. It does not have to result in further growth in consultant and contractor numbers. Previous departmental chief executives have often had to make savings, and shift resources to new priorities. That goes with the job.

What might be done by public service leadership to adjust to new realities? First, there is a need to build up a critical mass of policy advice within departments through internal challenge, quality management and hard-nosed evaluation, such as the social impact approaches developed under the leadership of Bill English. Some departments should be designated as centres of excellence for key areas of weakness, with new emphasis on building the scientific and technological capability of the public service as a whole, including understanding of artificial intelligence developments.

Second, we should reinvigorate exchange programmes for emerging talent between the public and private, and also possibly the voluntary sectors. Such exchanges were encouraged in the 1980s and 1990s but seem less common now.

Third, risk-averse influences that stifle innovation and responsiveness need to be addressed, to encourage bright young talent inside the public service to develop and implement their ideas for change.

It remains to be seen what impact the current expenditure reduction programme will have on consulting and contractor budgets. But to opine that the consultant bill is likely to increase further may be premature.