Rt Hon Helen Clark Prime Minister - “Rebuilding Public Sector Capability”

Australia/New Zealand School of Government Paterson Oration 2004

Address to Executive Master of Public Administration Programme

Rutherford House Wellington

6.10 pm

Monday 28 June 2004

Over the past seventeen years, the New Zealand public sector has undergone enormous change. The late 1980s saw not only new legislation governing the core public service, but also the passage of the State Owned Enterprises Act which paved the way for corporatisation of state trading enterprises, and later the privatisation of many of them. The 1980s and 1990s also saw a great deal of restructuring of agencies within the entire sector.

So radical were the changes in New Zealand that they attracted a good deal of interest from others contemplating public sector reform. In some ways the New Zealand reforms have worked well; in others they limited the state’s capacity to perform critical functions.

Certainly a not inconsiderable part of my government’s time has been spent in rebuilding public sector capacity to deliver the results the public demands.

The total public sector in New Zealand comprises just under 300,000 people, working in local and central government, and across service, regulatory, and trading organisations. That number represents close to one in five filled jobs in our economy.

Our new government was elected in 1999. In opposition, we had identified a range of problems in the public sector. Close scrutiny from the vantage point of government confirmed both that these problems needed to be dealt with, and that there were others as well.

What was clear was that the earlier reforms had improved the management focus of public sector agencies. The extent of fragmentation in the sector, however, made it difficult to co-ordinate activities across agencies, and undoubtedly meant that the sector was less effective overall.

An illustration of this could be found in the poor organisation of the 1999 general election.

Elections used to be organised by the old Department of Justice, in which those responsible for electoral arrangements were based. An “all hands to the wheel” approach ensured that the personnel in the administration of the courts system, which also rested in the Department, were mobilised to help.

In the mid 1990s, the Department of Justice was broken up into a Ministry of Justice focused primarily on policy, a Department of Courts, and a Department of Corrections.

Those responsible for the conduct of elections were left stranded in the policy ministry without a large administrative and operational resource to call on.

What made it worse was that the new Department of Courts apparently did not regard helping with elections as part of its core business. Hence the electoral officials had to make do with many new recruits with little previous experience of electoral administration. This led to unsatisfactory arrangements, not least of them long delayed reporting of the election results.

This single incident epitomised for our new government what had gone wrong with public sector reform. A fragmented system had lost the capacity to mobilise around whole of government objectives, organised as it was for very specific tasks.

Yet clearly the efficient conduct of democratic elections is in the public interest. Ways needed to be found to ensure that the public sector could work across agencies to ensure that democracy was served.

It won’t come as a surprise to anyone hearing this saga to learn that in the past year the Department of Courts has been absorbed back into the Ministry of Justice ! That followed the work done by an advisory committee appointed to do a stocktake on the state of the public sector. Its report, “The Review of the Center” concluded that specific weaknesses had to be addressed.

They recommended:

a reduction of the disincentives in the system for collaboration and co-ordination, a reinvestment in skills, and, a focus on outcomes.

To those, I would add a number of other issues we have had to address, such as:

a need to rebuild capacity so that central government can give strategic leadership in economic and social policy, the need to abandon the hands off approach of neo-liberalism so that the state can engage effectively with other actors and with problem solving, the need to increase baseline funding so that agencies can carry out the functions a smart and proactive government expects of them.

Let me make these issues less abstract by giving examples of some of the rebuilding we have been engaged in.

Neoliberalism in economic policy assumes that with light handed regulation in place, the state can sit back and let the market work its wonders. Our government has not found that to be an adequate prescription, and we have embarked on change in a number of areas.

We have re-invented a role for the state in driving economic development, by rebuilding the capacity of government to provide leadership and strategies, and to be a partner with other actors. Our growth and innovation policy framework sets out our priorities for investment and action. We believe the state has a unique ability to lead and mobilise, and to work alongside other economic actors to get results. New Zealand’s economic and employment growth over these past four and a half years has exceeded that of most OECD countries, suggesting that the smart growth and strategic approaches we have adopted are helpful.

We have been improving regulatory structures in telecommunications and energy to get better results. The new Telecommunications Commissioner’s job is aimed at getting more competition and better services for consumers. The new Electricity Commission must act to ensure security of electricity supply and a level of certainty which an under-regulated market could not deliver.

A new level of regulation has also had to be introduced to safeguard New Zealand’s reputation as a provider of international education services. This industry has developed from a negligible earner of foreign exchange fifteen years ago to a two billion dollar earner today. Yet in recent years the collapse of language schools, and inattention in some parts of the sector to quality and pastoral care of students, threatened to kill the goose which laid the golden egg. A laissez-faire approach from the state had become potentially ruinous.

A hands off approach to building industry standards from the early 1990s also had a poor outcome. By 2002 reports abounded of the leaky building syndrome, with affected home owners hard pressed to hold anyone accountable. New departmental responsibilities, new standards, and a mediation service for affected owners have had to be established.

Rebuilding the capacity of the public sector also meant addressing its excessive fragmentation. Reforms in the 1980s and 1990s had seen the old large and powerful departments split in a number of ways. In their place were established policy ministries, funding agencies, and a plethora of provider agencies, - some departmental, and others with independent boards.

As a result, the skills within the departments were dispersed. Policy ministries ran the risk of losing touch with operational agencies, and the latter were not always sufficiently informed by policy.

A number of sectoral reviews have been addressing these problems. I’ve already mentioned that in the justice area. Other areas have also seen action. For example:

the old Social Welfare Department had been split into a Ministry of Social Policy, a Department of Work and Income, and a social work and family services agency. Now a new and powerful Ministry of Social Development has been formed through a merger of the Ministry of Social Policy and the Department of Work and Income, and is able to give strong leadership on social policy issues. Another review saw the independent Special Education Service reintegrated with the Ministry of Education. A review just completed is leading to the emergence of a more powerful Ministry of Transport, by drawing back into it strategic policy functions which had been dispersed to transport funding and regulatory agencies in a 1990s carve up. It is our expectation that the changes will enable the Ministry to give better leadership to the range of state agencies in the transport sector.

There have also been a number of significant baseline funding reviews across the core state sector over the past four and a half years. It matters greatly to the public that agencies like the police, the prison and probation services, and the social work agencies are properly funded – or community safety is put at risk.

Long term funding problems in defence also had to be addressed as all arms of the force faced significant re-equipment challenges. A clear strategic framework was adopted, followed by a ten year funding plan to ensure that what was needed was funded.

We have been prepared to grow the size of the public service to get more continuity and quality in policy advice and in services. Since year 2000, the numbers in the public service are up by around ten per cent. In our view there was in some areas too much reliance on consultants and too little emphasis on building core expertise and corporate memory in ministries. Active governments need strong policy advice and resources. In other areas, more effective regulatory regimes have also added to staffing.

Rebuilding public sector capacity has also meant building partnerships between government and non-government stakeholders. For example:

a protocol was developed governing the relationship between central government, and community and voluntary agencies. The latter had long felt taken for granted by central government, and we were keen to encourage relationships based on mutual respect. a six-monthly forum between central and local government was established. It is jointly chaired by me as Prime Minister and by the chair of Local Government New Zealand. At the outset more than four years ago, it identified a heavy work programme, and the political leaders mandated officials to work together on policy solutions. central government also expects its agencies in the regions and districts to work collaboratively, both with each other and with local and regional government on economic development and employment creation, social services, and infrastructure issues.

We think that government in the 21st century needs to form partnerships beyond its ranks in order to succeed. While in many ways governments have fewer formal powers than ever before, only governments have the ability to lead at the national level. A large vacuum is left if governments fail to organise so that they can lead.

The public sector reform which went on in the 1980s and 1990s was aimed at making government agencies more efficient, but it was undoubtedly also aimed at ensuring that there was less government.

Our reforms have banked the efficiency gains, but have looked to build effectiveness as well. We are also not driven by a desire to minimise government. Rather, we ask, what does government need to do, and do well, to ensure that New Zealand has a strong economy, a fair society, a clean and green environment, and a good international reputation.

It is the public sector’s job to help governments translate their policies into action. With a proactive government, a high performance and highly skilled public sector is required.

Investing in public sector leadership

A number of initiatives are underway, aimed at developing a richer pool of senior public servants from which to choose future public sector leaders. These include:

the work going on at the VUW School of Government – seen through the establishment and implementation of the tertiary alliance. the participation of many senior public servants in the Australia-New Zealand School of Government. The refocusing of the Leadership Development Centre and the first intake of talented people into the new Executive Leadership Programme.

Better integrated structures and processes

Strengthening the Public sector can also be achieved by better integrating structures and processes.

This is being done in a number of ways, for example, by building networks, improving co-ordination, and using technology.

A current example of improving co-ordination is the Public Finance (State Sector Management) Bill. This is a significant change in the foundation legislation of New Zealand’s public management system. The Bill will increase the State sector’s ability to operate as a single system by:

improving the ability of agencies to fund collaborative arrangements, applying the main features of the public service accountability regime to Crown entities, and extending the State Services Commissioner’s leadership on senior leadership development and values and standards in the state sector.

E-government

Full use is also being made of new technologies to strengthen the public sector’s ability to serve the public.

Through e-government, government can provide people with more convenient access to information and services, and provide greater opportunities to participate in our democratic institutions and processes. For example, feedback on policy issues and consultation documents can be conveniently provided by many citizens through the Internet. A Seriously Asia conference reviewing New Zealand’s relations with Asia and co-sponsored by the government last year, made excellent use of the Internet in its preparatory work.

A recent survey by Victoria University confirmed that rural people were high users of government services online, appreciating the ability to contact government at a time that suited them.

The survey also found that more than seventy per cent of those surveyed accessed government information on the Internet. The search noted that participants had a much higher level of trust in government on the Internet than they do for the Internet in general.

Making the public service a leader in employment practices

Our government wants the public service to be an employer of choice for young people, and to remain a career of choice for existing public servants. Yet the public service cannot always compete on salaries. Other initiatives are needed to attract and retain staff.

That’s why the government has recently introduced a new retirement savings scheme for public servants, where the public service employers will match the contributions employees make to their retirement savings to a certain level. This scheme models the type of arrangements which the government would like more employers to adopt.

The government has also signed up for a more positive working relationship with the public service’s largest union – the PSA – formalised through a Partnership for Quality agreement. Both parties commit to develop a modern, innovative public service which is highly successful for both citizens and public servants. When interests do not coincide, each partner undertakes to respect the other’s view, rather than allowing the difference to dominate the whole relationship. It means a shared commitment to good faith.

The government is also taking the lead in advancing pay and employment equity. The gap between the average pay for men and women in the public sector is sixteen per cent. Last year we set up a taskforce to advise government on how the gender pay gap in the public health and education sectors could be addressed. The taskforce recommended a five year action plan, which we are now working on. Our government is committed to valuing and maximising the contributions of women in the paid workforce and being a leader as an employer in achieving that.

Promoting diversity within the public service

We believe it is important to have a public service which reflects the diversity of the population it serves. That means supporting schemes to attract more young people, Maori, and Pacific people into careers in the public service. The numbers of Maori and Pacific Island public servants have increased by nearly 1,400 in the last five years, and they now make up nearly a quarter of all public servants. Their representation in senior management positions, however, is below their representation in the overall public service workforce, and more will need to be done to see their greater advancement there.

Conclusion

The New Zealand public sector continues to undergo change to meet the demands which government places on it. On top of the greater efficiency achieved in the earlier generation of reforms have come changes aimed at increasing its capacity to contribute to strategies for active government and policy leadership. These changes also aim to increase trust and confidence in government processes and services.

Throughout, the New Zealand public service has maintained its tradition of political neutrality and is regarded as free of any systemic corruption. These are priceless assets which my government, and I am sure all future governments, is determined to maintain.

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