The cuts may hurt in Wellington, but barely touch the sides
As the Government’s public sector cuts continue apace, a pause for some context is important. At The Post, we’ve been tallying up the various job losses across departments and agencies – confirmed, already gone or proposed – and redundancy rounds that we know know of at this stage. That number, while certainly incomplete and very rough, adds up to about 1054 roles, which includes vacancies that now won’t be filled.
“I'm very conscious as a Wellingtonian, that your readers are part of these savings and reprioritisation exercises themselves and I'm conscious of that impact,” Finance Minister Nicola Willis told The Post.
“But I also have this really positive experience, which I haven't had the opportunity to talk about, which is just to see up close how incredibly professional and conscientious our senior public servants have been about this.”
This is against the backdrop of significant growth in the public service. According to the Public Service Commission data, since the second quarter of 2018 to December 2023 headcount in the core public service grew from just under 50,000 full-time equivalent employees to just over 65,000, an increase of about 15,000 or 32%.
While the headcount of the pure public service (departments and ministries) has increased, the overall wage bill over the same period shot up by more than 71% in nominal terms. It grew from about $3.5 billion to over $6.1b.
Of that $6b, some $1.25b or about 20% was spent on employees classed as “managers”, and that cost has risen by more than 45% since 2019.
Add to that some $1.2b spent on consultants and contractors per year – which both major parties wanted to get down and which now appears to be reducing somewhat.
Since 2018, the core public service (which also includes ministers, ministerial staff, defence, police and all the public agencies) increased by about 44%.
The total Crown wage bill – which includes teachers, nurses, social workers, plus all of the above (literally everyone employed by Government in some form or other) – is over $36b, up from $23.6b, an increase of 52% since 2018.
In 2018 nearly 40% of the public service workforce earned under $60,000. That is now down to 9.1%. The average (mean) salary is $97,200, up from $75,400 in 2017 when Labour came to office.
Bottom line: there are more people in the core public service, in the broader public sector and they are paid better.
The other thing that is clear from the publicly available information is just how much the headcount continued to to rise through 2023 – as a a result of the previous government’s policies. While some more cynical types will accuse the public service of featherbedding in advance of an expected change of government, more likely is that the previous government tasked just about all of the service to do a phalanx of different tasks and they hired accordingly.
The public service can’t pull back just because a new government might come in – they must respond to the government of the day.
Willis says that many senior public servants have given significant thought to how to make their departments more efficient.
“They've given great advice. They have been prepared to ask good questions, provide us with options, and I think it’s been really impressive.”
The size of the public service, or indeed public sector, is not a goal in itself and there isn’t a “right” number. If the high headcount was delivering all sorts of value for taxpayers then no problem. But the very fast growth in both numbers and costs seems highly likely to have outstripped any benefit derived from it.
It is also the case that the size of the public service is simply a function of what the government of the day wants it to do.
Labour, for its part, argues that it was rebuilding the capacity of a public service starved of resource under the Key and English governments. Much of the wider public sector wage bill was bumped up by paying teachers and nurses more. Government does compete with both the private sector and the Australian health and education systems for these workers. But while Labour will defend that vociferously, there are plenty of Labour MPs and staffers who quietly admit that the growth of the core public service got out of control.
So in the context of that large growth, the current numbers of job losses are not particularly significant. Stepping back and having a look at the political map after the
Taken in total, Wellington is currently a left-wing region. Public service job cuts are unlikely to lose any of the governing parties any votes in Wellington, while all three parties reckon it might win them support outside of the capital.
For public servants and Wellingtonians who lose their jobs, however, this is undoubtedly a wrench.
Putting the numbers into context of other spending also gives comparisons in another way. So the National Party’s tax cuts promised prior to the election were expected to cost between $3b and $4b per year over the next four years – about $500 million per year more than the increase in the pure public sector wage bill over the past six years. That is not to say the Government should strip that bill back to where it was, but to illustrate exactly what that cash can buy.
This all lends heft to the Government’s more general point that while the public service was getting pay rises and more hires to roll out ever more programmes, the New Zealanders paying for it got their wages and salaries gobbled up by inflation and bracket creep.
This is the balance that the Government is constantly talking about correcting – with mixed success.
We don’t know what the Government’s final tax package will look like – but based on what National promised pre-election, only about a third of that bracket creep that has occurred since 2010 will be handed back. We will see next month, on Budget day.
There are some other interesting factors here also. The population of Wellington increased by about 5000 people in the same period. That suggests that far from Government creating more jobs in the capital, it was significantly substituting public sector jobs for private sector ones. The Labour market in Wellington is still quite tight and hopefully will benefit from talented people who find themselves in the job market.
Besides the daily job toll being reported in The Post, which ministries have been busying themselves with, the Government has been moving on a bunch of small things that are yet to make a coherent whole, but might do over a few years. So on Thursday Building and Construction Minister Chris Penk announced that building materials from “trusted” jurisdictions wouldn’t need to go through a lengthy process to be signed off in New Zealand too. Australia clearly will be first cab off the rank. This is designed to make building costs cheaper.
All this takes place in the shadow of the Budget and in the context of Christopher Luxon’s new quarterly action plan. The priorities themselves are, of course, arbitrary – a list of things that the Government thinks are achievable in the next three months.
From the Government’s point of view this is a useful discipline for the public service, chief executives of which can be under no illusion about what the priorities are until the end of June. However, it serves as probably a greater discipline for ministers. If anything isn’t done, it will be Luxon having to front to explain why not. Failure to deliver by any particular minister is unlikely to be good for their career progression (in the National Party at least).
The other interesting thing about a fair bit of the list was the promise to make decisions on various things – from increasing investment in renewable energy, to redefining the scope of the Covid-19 inquiry, to reforming the Holidays Act.
Again this is probably useful – as one of the things that clearly happened during the previous government was drift and decisions consistently being delayed. It may seem obvious, but often the difference between good and bad ministers is the ability and courage to take decisions.
The list does, however, risk creating perverse incentives and mistaking busyness for progress of broader strategic goals over time. The reduction of the public service headcount is a means to an end – getting the fiscal situation under control and having ministries focused on the Government’s priorities. Willis’s first Budget will be the first early indicator of how well that’s being achieved.
Luke Malpass is political editor.