COVER STORY Politics – A two-faced state

The business of government is defining issue in our system. The National side sees the state as at best necessary evil and unproductive. The Labour side sees it as an instrument for improving society and revving the economy.
When it comes to rhetoric for this election National reckons there is fat to be trimmed and rendered down into tax cuts. So does ACT and, in minor key, New Zealand First. Labour and the Greens reckon National’s trimming will cut flesh and so hurt middle New Zealand.
Both sides agree the state sector has grown lot since 1999 when Labour started leading governments. National calls that waste – citing hip-hop tours and spurious tertiary education courses. Labour says it has been rebuilding social and other services (including the armed forces) to level the public demands and to ensure they can function effectively: the health system needs nurses and needs them well paid if people’s expectations are to be met.
These differences have deep implications for how the state sector is managed and its managers trained. The business of government has changed significantly in quality and quantity since 1999 and might well change again with new lead party in the Beehive.
Total state sector staff number 190,000, 13 percent of all employees and up 14 percent on 1999. The wage and salary bill has been growing by eight percent year, the Treasury said in report to the Cabinet in January. It is this expansion which John Key has targeted for $1 billion of savings to help fund his promised tax cuts.
Go back step to the 1980s’ reforms. Private sector management principles, precepts and practices were imported wholesale into the public sector. This was the “new public management”.
The result was more flexibility and responsibility for managers who were turned into executives with fixed-term contracts and performance agreements instead of lifelong tenure, focus on ‘clients’, separation of policy, regulation and service functions, accrual accounting and measurement of performance against outputs (what state servants do) instead of inputs (how many paper clips they buy). Power suits replaced cardigans.
There were gains in efficiency, financial management and clarity of purpose.
But there was also ‘silo-isation’ – the loss of coordinated policy and action as departments and agencies turned into silos, each pursuing their separate and distinct remits and no longer seamlessly connected as one ‘service’. Institutional knowledge was lost as departments were wrenched apart, restructured and reshaped. Some departments, for example, the Ministry of Justice, lost critical mass. Others, such as the Ministry of Youth Affairs, never gained it. Policy wonks were divorced from the coalface and the coalface agencies built up their own competing policy sections.
And the limitations of private sector training, management principles and techniques became apparent. Higher efficiency was not enough in itself; the acid test was effectiveness, which too much staff cutting and separation of functions could undermine. Doing the business of government has specific needs which are not met by routine private sector training agencies. (See box “Managing differently”.)
So from the mid-1990s onwards, under National-led and then Labour-led governments, attempts were made to look beyond ‘outputs’ to ‘outcomes’, to coordinate action across departments and to fill the gaps private sector management techniques did not address.
Outcomes are intended as goals for outputs. Do an agency’s outputs make progress (measured by performance indicators, concept borrowed from the private sector) towards desired outcomes? Doing 100,000 immunisations or holding 25 hui for small business might fulfil departmental contracts but do they actually improve health status or wealth creation?
Defining outcomes has proved easier to conceive than do. Most are not much more than grander outputs. In any case, the acid test of an outcome is the minister’s re-election, which makes it moveable feast.
Some progress has been made since the late-1990s in getting departments to work together, at least at the local level: one mechanism is to appoint lead agencies for some activities; one-stop shops (including Heartland Services, managed by the Ministry of Social Development) have been set up; computer networking is being improved (and likewise internet accessibility for citizens doing business with government agencies); and legislative changes last year have increased funding flexibility for multi-agency activity.
New training and research entities have been developed:
• specialist Leadership Development Centre was grown out of earlier training programmes in 2003 to identify and develop promising state servants for senior posts. This in part responded to complaints by former State Services Commissioner Michael Wintringham of dearth of top-quality people for chief executive positions. Wintringham hired number of chief executives from offshore, particularly Australia, practice the present commissioner, Mark Prebble, has continued.
• Victoria University’s School of Government, which teaches number of state sector management and policy degree courses (paralleling the private sector-focused MBAs), was redeveloped and linked with Australian universities into trans-Tasman virtual Australia-New Zealand School of Government (ANZSOG) to widen the pool of teaching sources.
• Victoria University’s Institute of Policy Studies, which specialises in researching public fundamental policy issues to provide base for state sector policy analysts’ thinking, was recast and incorporated into the School of Government.
Why go to this trouble and expense when there are private sector training agencies? “There is core of similar characteristics in public and private management, but there are differences, says Professor Gary Hawke, head of the School of Government. “Those differences are big enough to say that public management is different from private management.” top department head puts it this way: “You cannot go and get Secretary to the Cabinet or China analyst off the street.”
Some would add (see box “Managing differently”) “public service ethos”, sense of over-arching and long-term responsibility to the public.
The result is that it is rare to bring someone in from the private sector direct into peak state sector post, especially in the core public service. But plenty do come in at lower levels – few even as high as deputy – which gives time to learn the ropes. In fact, the State Services Commission says, around nine percent of all state sector staff move in from or out to the private sector each year.
So there is cross-fertilisation. Imports from the private sector can be particularly useful as change-agents. But the big efficiency and refocusing drive of the late 1980s is long past – and in any case, the incoming Helen Clark government in 1999 was suspicious of private sector principles – some of its most prominent ministers had been unwilling fellow-travellers in the radically reforming 1980s cabinet.
There were even suspicions of the Treasury alumni ensconced in number of top departmental posts. That included Mark Prebble, then head of the Department of Prime Minister and Cabinet, but he has since won accolades from Clark.
As result, the new Cabinet was determined to return the public service to more direct ministerial control and to reintegrate functions the 1980s’ reformers had separated. The courts are back in the Justice Ministry and the benefit agency lumped in with the Ministry of Social Policy to form the Ministry of Social Development (MSD), with much expanded policy contingent, designed to contest policy with the Treasury. Special education and building regulation have been brought back from Crown status to departmental status. Contracting out, especially of hospital operations, has been cut back and the work brought in-house.
But this has turned out not to be systematic recasting of the state sector. Th