Wednesday 20 September 2017

A Policy A Day: Public Service Reform

In the lead-up to the election, we are examining a policy a day. We're exploring a variety of policy areas, explaining the background and analysing some of the policy options, with a mixture of technocracy and values-based approaches. Inevitably, some opinion will make its way in and we make no apology for that - after all, we're voters too. A list of all the articles is available hereEnjoy!

Today's post is by Ben Ogilvie

Public service reform – how parties are planning to run and/or change the government that they’ll take over after the election. I fully expect to get half the hits of my fellow authors, but give me a chance here. The public service is what delivers a lot of the government’s services to New Zealand citizens, and is in charge of contracting most of the rest. Further, it’s the area of government responsible for giving Cabinet advice on what to do, and what not to do. So its effectiveness and proper functioning clearly make a hell of a difference to people’s lives [1]. When you stop to think about it, public administration is, I’d argue, the least stable policy area in New Zealand, changing up a little with every government since the 1980s. There have been reforms which essentially define, according to your opinion of them, whether you’re left or right wing in this country even today.

Those reforms (introducing a very contractual approach to employment in the public service; the privatisation of state owned assets; use of market systems in some areas of regulation such as the fisheries quota; and disaggregation of government departments) were the application of neoclassical economic theory to the business of running the country – often talked about as ‘New Public Management’ (NPM for short). New Zealand is well-known in the international academic literature for being the most comprehensive and ‘pure’ in its adoption of an NPM approach. It was, in some ways, an understandable move. The new Labour government had inherited a ‘command and control’-style public service that wasn’t really fit-for-purpose to address the modern challenges that were emerging. The public service wasn’t all that inclined to do what the government of the day wanted from it, and needed a hell of a shakeup. The NPM approach was what Treasury, quietly ignored, had been cooking up over the last few years under Muldoon, and could serve up as a ready-made solution. The Bolger/Shipley governments after 1993 pushed NPM further, until the Schick Report in 1996 suggested that while the reforms had solved a number of problems well, they’d created a whole new set of problems that were, perhaps, starting to get slightly out of hand.

The Clark government through the 2000s took the position that the public service needed to be reinvested in, and oversaw the “managing for outcomes” and “review from the centre” initiatives. Both attempted to fix the issues identified by the Schick Report, like overly siloed departments and agencies, and a focus on the outputs of government rather than its outcomes. Think, for example, of judging success on the number of state houses built in a given year (an output), rather than whether homelessness was actually reducing (an outcome), or kilometres of tar seal laid (an output), rather than whether congestion was decreasing (an outcome). It might surprise you to know that through the NPM period, government departments had judged their performance on outputs, and even that had only been the case since the reforms – before that, good performance was a matter of process, making sure all the forms were filled in right, budgets allocated correctly, and everyone was following the rules.

Of course, a number of public employees, as individuals, had been focused on outcomes for a while (especially in areas like social work and health, where the outcome for the citizen that the public servant works with is really the point), but the Clark government’s approach did start giving public managers permission to ‘do what needed to be done’: with significantly larger budgets than the Bolger/Shipley administration had offered them.

Since National came into government in 2008, we’ve seen quite a bit of reaggregation of government departments such as the creation of the Ministry of Business, Innovation and Employment (currently serving half of cabinet and referred to as a ‘super-ministry’ for some time after it was established), a marked tightening of the public budget, and perhaps most significantly the introduction of the ten Better Public Service (BPS) targets as a model for continuing the focus on outcomes and working cross-departmentally. The adoption of BPS as a model was surprisingly innovative – a government voluntarily set out a range of criteria to judge its own performance by, outside the pressures of an election. Regardless of what you think of the goals themselves [2], the explicit identification of the ten priorities across the whole of government seems to have been effective in encouraging inter-departmental work and a focus on the effects of interventions rather than the activity. The other major innovation is Whānau Ora, for which the Māori Party is mostly responsible. The way Whānau Ora adopts a contracted, 3rd-party service provider approach could be considered NPM orthodoxy. However, its use of primarily non-profit community organisations is a somewhat innovative take on the basic theory.

What’s next for the public service?
It turns out, that’s a bloody good question. There’s not a heck of a lot of published policy on the future of the public service this election. It seems like it’s not ‘sexy’ enough to warrant its own announcements, so even if parties do have a stance on it, they’re only talking about it in private – weird, right? I mean, who doesn’t vote on the minutiae of public services policy? But you can start to piece together an impression of parties’ desired directions from their other policies and announcements to date. An important caveat, however, is that often the devil lies in the details – a promise to provide free public transport could mean provision through either public or private providers, and then the way private contracts are structured can change significantly.

National have, earlier this year, committed to a new line-up of BPS targets, and have practically no information (so far as this author can glean) on any proposed changes they would make to the public service, so are likely to continue down the path they’re on now. That’s, well, not so surprising, given that they’re the government, and you’d hope had gotten most of the reforms they wanted to make done by now – if you’re still tinkering in years 10-12 of your government, you really need to ask yourself what you’ve been doing. Budget 2017 supports this; aside from the short-term boost of funding to several areas this year and next, increases to Core Crown Expenditure are projected to return to very similar levels over the next five years as it has been since 2008, which averaged out to just under 4% each year [3]. That’s a pretty tight belt for the public service if you remember that the population grows about 1% each year, and inflation can be 1-2%.

Uniquely this election, the Labour Party has a specific ‘Public Services’ policy package, but haven’t made any kind of radical reform a significant part of their platform. Interestingly, the ‘Community and Volunteer Sector’ policy which falls under that heading talks about using contracted service provision, lamenting that government under National has failed to differentiate between community/voluntary organisations and businesses when seeking to contract out government service provisions. It then goes on to pledge that a Labour government will seek to strengthen the sector significantly, and “explore aspects of Whanau Ora which can be transferred into the community and voluntary sector”, which suggests the potential for an expanded and perhaps more formalised role for organisations in the sector in delivering services for the government with significant support. Aside from that specific set of policies, the Budget Responsibility Rules (BRR), jointly announced with the Green Party, limit Core Crown Expenditure to around 30% of GDP. Going by Budget 2017, this suggests a maximum rise in government spending by around 2-3% of GDP and therefore some reinvestment would be needed.

The Greens themselves have no direct policy on public sector reform and, well, that’s pretty much it. A number of their policies use market-based instruments to achieve a range of outcomes, such as their Carbon Tax Cut to reduce greenhouse gas emissions, and their stance on other issues such as health or education (notably advocating for better direct funding and opposing use of privatisation or markets in those sectors, such as Charter Schools) shies well away from market-based ideology. Their most applicable recent announcement is the aforementioned BRR, which overall suggests the Greens are likely to follow Labour’s lead if elected.

Probably the most directly applicable policy announcement to public sector reform from New Zealand First this election has been their commitment to re-establish the New Zealand Forestry Service. Not, though, that they’re really re-establishing a forestry service – more it’s a statement that they’ll return to an old-school ‘command and control’ approach to timber exportation. The most interesting bit is the ruling out of taxing timber imports (a market mechanism, which would be in-line with the NPM approach). Overall though, their direction seems oddly mixed, insisting on preventing asset sales at both central and local government, but at least for local government insisting that rates revenue only pays for half of new expenditure. Largely though the somewhat old-fashioned ‘command and control’ approach seems to echo through a few parts of their policies.

Before anyone comments about the unfairness of not including some of the other minor parties here: the Maori Party is pretty clear on its desire to continue Whanau Ora. Again, having been in government the last nine years, if it wanted or was able to get anything past the National Party it would have by now. ACT's 'Privatise All Of The Things Now, Markets for Everyone' doesn't need much elaboration.

The choice this election, then, if you, like me, vote mostly on the future of the public service, is between a continuation of the tight-belted status quo, or a potentially more community-partnered public service, with a more comfortable budget. There’s a side dish of slightly old-fashioned government, if you’re an New Zealand First fan, but even then, that influence would be limited by their minor party status. It’s a little unclear as to what the parties of the left make of BPS as a model, but the innovative Whānau Ora is almost definitely sticking around.

Ben Ogilvie is currently working on a Masters degree in Public Policy at Victoria University of Wellington, and worked as a research assistant on the Deloitte State of the State report 2017. He has been a Green Party member since 2011 and plays D&D 5e as a level-3 Druid Gnome. His interests include: stopping climate change, dismantling systems of oppression, effective a-partisan public service, Mayer et al.’s framework for policy analysis, and dogs [Editor: Ben just lost ten friendship points, cats are the best].

[1] If, of course, you buy the narrative that government does make a difference to people’s lives, but if you don’t – you know this is a policy/politics blog, right? Why the hell are you here?
[2] Inb4 “reducing welfare numbers doesn’t mean getting people into work where are those people going” comments cos yes I know I’m a Green dude I’ve heard it all before chill out. I’m not judging the targets here, I’m judging their existence and role.
[3] See for tables showing that projection – I’m afraid you’ll have to do the math yourself.

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