ACT’s plan for efficient and effective public services

“Government departments are no longer going to be able to get away with spending billions of dollars while failing to deliver meaningful outcomes for taxpayers. Any Government ACT is part of will demand higher standards and greater accountability from chief executives and departments for the money they spend”, says ACT Leader David Seymour.

“Government spending has grown from $80.6 billion a year in 2017 to $137 billion in 2023, a 70 per cent increase in nominal terms. But New Zealanders, including Labour voters, believe public services are now worse than they were a few years ago.

“People are waiting longer in hospital emergency departments and 40 per cent of patients given a commitment to treat do not receive that treatment within the required timeframe. Children’s literacy, numeracy, and school attendance are all falling, with 40 per cent of 15-year-old students struggling to read and write. 2,878 fewer criminals are behind bars, but the number of victims is growing.

“How can government get away with spending so much and delivering so little? ACT says we need to address two underlying problems:

• A lack of measurement and accountability for the quality of day-to-day government services.
• A lack of Ministerial power over, and incentives for, public service chief executives to make sure their departments perform and deliver.

“ACT proposes three changes.

“First, there’s a growing disconnect between what government considers priorities and good performance, and the quality of services the public experiences. Large, expensive and poorly thought-out pet projects like restructuring the health or polytechnic systems are treated as goals in and of themselves. Ministers can be so focused on their pet projects that they lose sight of whether they will improve New Zealanders’ lives.

“The problem is that performance reporting of public services is haphazard, measures can be cherry-picked, results can be reported in a way that isn’t coherent, and it’s difficult or impossible to track trends over time. This Government is rife with examples of politicising performance data.

“ACT will set meaningful performance measures for key government services based on outputs and outcomes (e.g. student performance in international assessments), rather than inputs (e.g. student-teacher ratios).

“Monitoring would be done by the Treasury and reported annually. Measuring the effectiveness of core public services should already be a basic Treasury function, but it has been distracted by dubious concepts like ‘wellbeing’ and the ‘living standards framework’, rather than ensuring investment in public services is making people better off.

“Australia is miles ahead of New Zealand with a wide range of indicators relating to equity, effectiveness and efficiency. The process is long-standing, so it is de-politicised, builds a repository of long-run data which allows meaningful comparisons across Governments, and the public can trust it.

“Second, Ministers are accountable to New Zealanders for outcomes, but they don’t have sufficient power over departments and chief executives to deliver those outcomes. What happens when bureaucrats are incompetent, or when a department doesn’t have the same sense of urgency as the Minister or has priorities of its own? Ministers can shift the blame onto departments, and plead ignorance or an inability to intervene, and then chief executives escape public accountability.

“This problem will only get worse under Labour’s Public Service Act which concentrates power with the Public Service Commissioner rather than democratically elected Ministers. The Public Service Commissioner oversees performance reviews for chief executives. But their KPIs, and the results of performance reviews, are not public. The Public Service Commissioner’s priorities or metrics for success are unlikely to be the same as the Minister’s.

“ACT will enable Ministers to publicly issue their own KPIs for chief executives, conduct performance reviews against those metrics, and then publish them. One KPI all chief executives would have is recognising and stopping wasteful spending. Departmental budgets would be linked to KPIs to ensure activities that the Government prioritises are properly funded. It will also ensure that departments maintain a focus on high value activities.

“Finally, having excellent chief executives – and incentives for excellent performance – matters. But public service chief executives have few incentives to cut waste, discover efficiencies or innovation, or deliver outcomes that the Minister prioritises. Chief executives can lose focus by not adequately understanding how to manage activities and staff according to the Minister’s priorities. The culture of the public service means that poor-performing chief executives can simply shift from department to department.

“ACT would reintroduce performance-based pay, remove the cap on the ‘exceptional performance’ component, and enable this component to be determined by the Minister. The Public Service Commissioner would still be responsible for setting base salaries, but the discretionary component should be determined in line with the Minister’s assessment of how the chief executive has performed against their expectations and KPIs.

“Individual employment agreements would include a base salary, and Ministers would have discretion to attach bonuses when agreeing on KPIs with the chief executive.

“This change will give Ministers a further lever for driving performance. While the Public Service Commissioner has a role to ensure salaries are in line with labour market rates to ensure recruitment, it is not in the best position to decide with chief executives are delivering on the Government’s priorities.

“ACT’s plan for higher standards and greater accountability for chief executives and government departments is a step towards more effective and more efficient public services for New Zealanders.”

ACT’s plan for efficient and effective public services can be found here.