Politics of the public service as more than 1000 job cuts tipped
Crunch time is coming in the public service as the 2024 Budget approaches next month. We look at the political environment leading up to the public service cost saving targets, and what is next.
To paint a recent picture, the public service was plagued with high turnover and issues with hiring staff. That was put down by some in part, alongside workforce issues postCovid, due to the public service pay freeze, or pay restraint – a hangover from belt-tightening during the Covid pandemic.
The restraint aimed to slow wage growth for higher earners in the midst of Covid-19. It was introduced in 2020 – with the intention most public servants would receive nil or minimal increases, with an aim to target pay rises at those earning under $60,000.
The Government softened its stance in 2021 following a backlash, but gave it a threeyear extension for those earning more than $100,000, with those on $60,000 and above needing certain circumstances to justify any increase.
In early 2023, ACT found as of April 2022, 2670 of those earning over $100,000 “received a pay rise anyway, since then another 427 have also been given a pay increase”. From there, criticism mounted around the increased spend on contractors and consultants, as well as reports of extravagant farewell parties and welcomes, during a cost of living crisis.
Before the election, National and ACT made no secret of their concerns around the size and pay packet of the public service.
ACT leader David Seymour said it was “perfectly functional” in 2017 when it had 15,000 fewer people. He said it should be taken back to 47,000 fulltime workers; as of June 2022 the Public Service Commission counted more than 60,000 roles.
In August last year, National made it clear it wanted to rip a major chunk out from public service spending, promising to target “back-office” bureaucracy while cracking down on high-paid office contractors.
Now-Finance Minister Nicola Willis promised Labour’s public service 2023 slash would stay under a National government, which saw a permanent requirement to tighten belts by cutting 1% or 2% to baselines.
Adding to that, it would expect 6.5% savingsfrom across the public service, with agencies with high levels of growth, such as the Ministry for Business, Innovation and Employment, expected to cough up more than others.
What’s happening now?
Since the election, the Government rolled out its promise, directing public services to save 6.5-7.5% at least in time for Budget 2024. It was largely up to public service bosses how to go about the savings, with an expectation from Willis not to cut into the frontline. The ministries or departments would present a plan and go back and forth with their ministers. Travel, perks such as plunger coffee and new recruitment was largely the first to go in many ministries.
Next were the jobs. The various job losses across departments and agencies – confirmed, already gone or proposed – and redundancy rounds that we know know of at this stage, have surpassed 1000, which includes vacancies that now won’t be filled.
It is still early days, with a potential for that number to rise.
Is this new? No.
Significant reforms were launched in the 1980s by the then Labour government, restructuring and dividing large departments – against the backdrop of a recession.
“It’s a cyclical thing, and it will happen again in another decade or so’s time,” Former United Future leader Peter Dunne previously told The Post, recalling that now-familiar vernacular like, “back office”: “None of these phrases are new.”
What next?
Aside from potential employment, business and property market flow-on effects in Wellington, there was thought the cuts could see an increase in consultants and contractors used.
“It’s very clear that there is a merry-goround,” Dr Barbara Allen, an associate professor in public management at Te Herenga Waka – Victoria University said previously. “Inevitably people go into consulting and consultant numbers go up. It’s well known around the world that this pendulum goes back and forth.”
The latest Public Service workforce data showed over the six months to December, $526 million was spent on contractors and consultants.
Willis described the spend as “coming down”.
In the year to June 2023, the overall spend on contractors and consultants increased by 2%, up to $1.27 billion overall.
It was comparable to the spend of the previous year, but the Covid-19 spend dropped significantly, “while Government priorities and backfill increased”, the Public Service Commission stated.