Finance Minister insists funding cuts will be redirected to ‘frontline’
Wednesday, 31 January 2024
Finance Minister Nicola Willis defended the Government’s approach to public service cuts, insisting the expectation remains that services such as education, health and defence redirect funding to the “frontline”.
The Government has also changed its approach to slashing contractor and consultant spend, instead folding it into the overall spending reductions before this year’s Budget.
It comes after the public services expected to find savings went beyond those identified in the National Party’s original ‘Back Pocket Boost’ plan, announced before the election, to areas such as the Office of the Clerk and the Ministry of Disabled People.
The plan explicitly excluded agencies from delivering an efficiency dividend, instead expecting them to redirect savings “found in the back office into frontline services”.
That included Health and Education ministries, Te Whatu Ora, Corrections, Oranga Tamariki, Police and the Defence Force, and crown entities such as Kāinga Ora and Waka Kotahi.
The Post understands those organisations will be expected to provide a plan to the Government and their minister to show where they can make the expected savings, and also include how they could redirect that money into frontline services.
“There’s no ring fencing,” Willis said.
“The difference was that we would use any funds we found there to deploy to the frontline, that remains the case.”
In addition to the numerous public services cutting costs, the Defence Force has been “working to identify credible savings options”, while the Ministry of Health was “currently considering options for cost savings”.
“Recruitment is paused (unless exceptional circumstances require it) and no decision has been made on redundancies at this time,” a spokesperson said.
Meanwhile, Aroturuki Tamariki, the Independent Children’s Monitor, is holding two vacancies.
National previously promised to slash $400 million a year on contractors and consultants, and Willis was adamant that target remained.
“We're asking in the first instance that they look at their consulting and contracting spend as part of the savings exercise, and then from there, we will set them targets for the future.
“Where we judge agencies haven't come up with big enough reductions in that spend, we will set them very clear expectations.“
A letter, provided to The Post, written by Deputy Public Service Commissioner Heather Baggott to chief executives on December 21 states, “The Government expects agencies to start reducing public sector expenditure, including consultant and contractor expenditure, with a focus on value for money and aligning expenditure with the Government’s priorities”.
Baggott reiterated her “expectation that you engage with employees and unions during this process as the people doing the work are well placed to identify improvements or efficiencies that may enable the achievement of expected cost reductions”.
Chief executives would receive new performance expectations following the end of the first 100 days of the new Government in March, “that reflect any additional results, targets or portfolio priorities set by Ministers”.
Kalyn Ponti chief executive of Humankind, a Wellington-based employee HR organisation, said uncertainty was “high among public sector employees, and we’re seeing an increase in public sector employees proactively applying for alternative roles as a result”.
“Thoughtful management of the restructuring process is key to maintaining both productivity and culture, instilling trust in leadership, retaining key talent, and ensuring that individuals leave with their mana intact.”
Willis told Business Desk in September that National would set consultant and contractor caps on individual departments after instructing chief executives to report those budgets before Christmas.
Asked why she had not put the caps in place, Willis said in the “first instance, we've asked all agencies as part of our savings exercise to include those reductions in their percentages”.
In a December briefing to Speaker Gerry Brownlee from Parliamentary Service, Brownlee was warned of front-line services being directly affected under current funding constraints, while costs were escalating.
The same briefing also warned of immediate and significant cost pressures across the Office of the Clerk’s entire budget.
The briefing outlined there was limited ability to make further cuts beyond the previous Government’s 1% cut, “given that both already face funding constraints, run lean organisations, and have no Government-directed policies or programmes of work to scale down”.