Public Service cuts: what if anything has ‘broken’ so far?

Monday, 5 May 2025

PSA national secretary Fleur Fitzsimons says public sector managers are telling her “what we are seeing is a dismantling of the state”.

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ANALYSIS: Can the public sector soak up more funding cuts without the average Kiwi being aware of any impacts?

Or is there any evidence that the cuts already ordered last year are starting to have a tangible impact on people’s lives?

Last year Finance Minister Nicola Willis ordered departments to come up with a plan to cut their baseline spending by either 6.5% or 7.5%, though not all have actually implemented cuts that deep.

Willis made clear in a pre-Budget speech last Tuesday that she believed she had more room to wield the scalpel.

Outside of priority areas such as health, education and defence, and beyond a small number of exceptions, government departments would not be receiving additional funding in the Budget, she said.

Based on current Treasury and Reserve Bank inflation forecasts for the year to June next year, that means they can expect about a 2.1% reduction in funding, in real terms.

The finance minister gave a pre-Budget speech on Tuesday morning, where she outlined what’s in it.

And Willis said there would be “a significant savings drive”, which it is understood will come on top of that, and which she has yet to quantify.

Some managers in the public service admitted last year they were quite unsure how much they could cut before something fell over in their departments.

That suggests chief executives and ministers, higher up the chain, may have been flying blind, cutting first and then seeing what happened.

However, there are signs the Government intends cuts to be more “targeted” this year.

Union leaders admit that cataloguing tangible impacts on the public from funding cuts to date is not a straightforward task.

Some are quick to point out that doesn’t mean there is no effect — or won’t be down the track — from, for example, an exodus of scientists from Callaghan Innovation or a loss of policy expertise from departments.

“The nature of the way that the state operates isn't that every individual would always see the impact of every cut, because it is a system that operates for the benefit of us all over time,” Public Service Association national secretary Fleur Fitzsimons says.

But what then is there to point a stick at?

Back in June, 100 school building projects were put on ice, with very direct impacts for tens of thousands of students and teachers.

Cuts to the school lunch programme have been one of the most talked-about economies to date.

The downgrade of the Interislander ferries project and spending on the school lunch programme have been perhaps the two most controversial economies.

Currently, there is industrial action by senior doctors under way, which could be attributed to funding pressures in the health service.

But there have been such junior doctors’ strikes before ‒ last year, in 2019 and in 2008 ‒ so that is unlikely to come across to the public as a new phenomenon.

Out of the social-economic problems that could be compounded by budget cuts, homelessness is the probably the one that is most obvious to those who are not directly affected.

Salvation Army director Ian Hutson says it has observed a significant increase in people living rough over the past year.

That is, however, in the context of a longer-term trend that saw the number of people classified as ‘homeless’ rise from 99,462, or 2.1% of the population, in the 2019 census to 112,496 people, or 2.3%, in 2023.

Homelessness is often at the sharp end of people’s concerns about the quality of public services.

The Social Development Ministry has been prioritising getting people into work, rather than homes, and government funding cuts to the Salvation Army itself have reduced the amount of social work it can do to prevent people falling into homelessness, Hutson says.

There has been a reduction in emergency grants to people in trouble at the same time that demand for help has risen because of higher unemployment, he says.

But a direct link between public service cuts and more people living on the street is hard to prove, Hutson said, meaning it would be even harder to quantify.

“I believe the public service cuts have had an impact, but because there's so many other things going on sometimes, it's hard to tell.”

Fitzsimons points to the fact there are about 1300 ‘at-risk’ children without a social worker assigned to them as of the end of March as a sign cuts have left Oranga Tamariki seriously under-resourced.

That is not unprecedented, though. Former Labour Minister Steve Maharey reported Child, Youth and Family had about 4000 unallocated cases at one point in 2001, and the tally has bubbled up now and again since then.

The reality behind performance statistics can sometimes get murky, which means it is people’s ‘lived experiences’ that may matter most.

Labour workplace relations spokesperson Camilla Belich observed Employment NZ has been warning on its website of a three-week wait responding to people seeking assistance about disputes with their employer, which she attributes to funding cuts.

Cut too far and services can break, but when?

But a spokesperson for Employment NZ says it is getting on top of that, with the wait now reduced to one week — although there is a still a nine-week wait for actual mediation.

But Fitzsimons believes the goal posts on its performance have been shifted.

“They've changed the way they express that on their website. It used to be ‘how long before you see a mediator’. Now they're measuring it by how long you wait to get an acknowledgement.”

One of the spending areas in which it is hardest for policy-makers to figure out the extent of any “fat” is in IT services.

Just as in the case of physical assets such as buildings, it can be impossible for public sector bosses — and certainly ministers — to know long technology upgrades can be deferred without big consequences.

Get it wrong, and the first sign of trouble might be a ransomware attack succeeding because of a piece of out-of-support unpatched software.

But if there has been a rise in such incidents, they have so far flown below the radar.

Fitzsimons says that what public sector managers are saying privately to the union “is that what we are seeing is a dismantling of the state”.

But to people living outside Wellington who weren’t initially unsympathetic to the economy drive, that may sound melodramatic.

Most widely used public services might seem to be trucking along, and while public servants may be feeling the pressure, they don’t appear to have cracked en masse yet.

And while that remains the case, it may be simply too soon to call out an increase in general dysfunction in public service that would be sufficiently widely discernible to prompt a significant voter backlash.

Whether Willis will go obviously too far in this month’s Budget remains to be seen, but it is clear she is showing no sign of doubting her mandate to continue.

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