Public service grows, contractor and consultant spending up

Thursday, 2 November 2023

The size of the public service has increased, contractor and consultant spend is slightly up and average annual pay is 7% higher than the previous year, the latest public service data shows.

The snapshot showed the year to June 2023. Shortly after, the Labour government announced a permanent requirement to tighten belts by cutting 1% or 2% to baselines, as well as cutting contractor and consultant spend in the public service by $165 million a year.

The public service increased by 4.5% during the period, with a 7% increase to the average annual salary to $97,200. Comparatively, Stats NZ reported the private sector pay increased 7.7%.

Public service pay restraint, a hangover from belt-tightening during the Covid pandemic also known as a pay freeze, was only lifted in March this year.

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. Its capital spend increased 9.8%, while the operating spend dropped 0.7%.

Capital expenditure goes towards developing assets of the agency, while operational expenditure goes towards the everyday running of the agency.

The operating spend of contractors and consultants dropped to $912m. That was 13.1% as a percentage of spending on the Public Service workforce, down from 14.5%.

The pay of chief executives rose 2.3%, while the gender pay gap dropped slightly to 7.1%. The average salary was $101,700 for men and $94,500 for women.

Labour’s public service slash would stay under a National-led government. In addition, National promised to expect an average 6.5% savings dividend from 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.

It was expected to pay for part of the party’s tax policy, while critics say frontline services will suffer.

On top of the Government’s plan to cut contractor and consultant spend in the public service by $165m a year, National is taking aim to the tune of $400m a year, with expenditure caps to be introduced next year.

A December 2022 workforce forecast to then-Public Service Minister Chris Hipkins said the public service had only grown 0.3% from June 2022 to September 2022 – with officials warning if workforce growth did not occur it could impact delivery and could result in an increased reliance on contractors and consultants.

Contractor and consultant operating expenditure was previously forecast to drop by 15%, compared to 2021/22. However, the briefing stated that “if spending at 2022 September levels continues, we project that operating expenditure could be closer to $890 million in financial year 2022/23 (compared to $927m in 21/22)”.