Public Service added thousands of new hires late last year, data shows

The core government departments were still hiring at a considerable clip late last year, even as a new Government took the reins, promising to reduce their ranks. In contrast, the agencies had already begun to pare their spending on the outside help of consultants and contractors, new data released by the Public Service Commission (PSC) shows.

Despite the new Government’s widely broadcast cost-cutting intentions, and possibly because of them, full-time equivalent staff increased by 4.1 per cent, and reached an all-time high of 65,699 full-time equivalent positions (FTEs) across the public service in the six months to December 31.

Some 2580 FTE employees were added to the 38 departments and departmental agencies that form the central agencies of the public sector: seven shrank, 31 expanded.

Over the last five years the public service workforce has grown by 32 per cent.

In contrast, spending by those central government agencies on contractors and consultants dropped to $526.2 million in the six-month period – $344.6m in operating expenditure and $181.6m on capital expenditure – a considerable reduction.

The public service’s consultant and contractor bill topped $1.268b in the full fiscal year 22/23, and $1.243b in fiscal 21/22.

The PSC has not published mid-year July to December data for spending on outside advice previously.

The figures suggest that agencies responded to the previous Government’s belated efforts at trimming public service spending – starting around mid-2023 – by cutting outside contractors and consultants, while continuing to expand hiring into their own ranks.

A spokesman for the PSC said the workforce increase through the second half of 2023 reflects the work programmes and priorities of the previous Government: “numbers are expected to drop in line with the Government’s savings and efficiency drive and as Budget 24 decisions start to flow through.”

The new National-led Coalition Government has promised to cut annual public service spending by 6.5 to 7.5 per cent, the fine detail of which is up to the public service bosses, according to Finance Minister Nicola Willis, who is also Minister for the Public Service.

Agencies should focus on low-value programmes, back-office jobs, and consultants and contractors, Willis has said.

Willis told the Herald that the new hiring figures reflect the previous Government’s lax approach to public expenditure: “there is not a lot of evidence the public service took the last government’s savings exercise seriously, but it has heard the message from this government. Numbers are declining and we expect them to continue doing so.”

The three greatest hiring gains in the period were made by: the Ministry of Social Development (up 405 FTEs, an increase of 4.5 per cent); the Ministry of Business, Innovation and Employment (up 365 FTEs, an increase of 5.9 per cent); and, the Inland Revenue Department (up 363 FTEs, an increase of 9 per cent).

In the last full fiscal year (22/23), the total base salary cost for the public service rose by 11.8 per cent ($648m) to $6.1b, driven by the increase in overall numbers and a 7 per cent rise in average salaries.

The PSC has not updated the data for the six months to December 31.

The commission warned that the half-year data is subject to some anomalies, such as seasonal variation, and is more variable than annual results.

The creation of Health New Zealand (which replaced the District Health Boards) and to a lesser extent the Māori Health Authority, have also very likely skewed lower both the overall public service consultant spend and the hiring gains.

In fiscal 21/22 the Department of Health spent $154m on contractors and consultants. Covid-19 related spending was undoubtedly a factor in the level of spending, and many of those measures have ended. But diminishing Covid-19 related spending is unlikely to account for all the drop.

In fiscal 22/23 the department spent a much reduced $47m on outside help, and in the six months to December, it spent just $12.7m. Its internal workforce also fell over the 18-month period by 7 per cent.

The core government departments were still hiring at a considerable clip late last year. Photo / Mark Mitchell

Much of that spending, and some department employees, moved to Health New Zealand (Te Whatu Ora) and the Māori Health Authority (Te Aka Whai Ora, soon to be disestablished), both of which were created on July 1 2022. How much is not clear.

Neither new agency falls within the public service. The spending on consultants and contractors since formal establishment is likely in the hundreds of millions of dollars. Fiscal 22/23 figures are due to be published shortly through Parliament’s annual review process.

The Ministry of Education continued to lead the pack in contractors and consultants. It forked out $131m in the six months to December, more than two-thirds of the money was considered operating expenditure, the remainder was related to capital expenses like school buildings.

The Department of Internal Affairs (responsible for the now repealed Three Waters plan) appeared to make the most financially meaningful cuts to outside spending: its spending topped $122m in fiscal 22/23, and dropped to $44m in the most recent six-month period.

The PSC also updated pay data for its agency heads.

A PSC spokesman said that average total pay for public service chief executives increased 1.2 per cent to $495,000 in the six months to December 2023.

”This increase is reasonable in the context of a 2.2 per cent increase for Crown entity chief executives in 2022/23 and a 3.5 per cent increase for chief executives in the private sector for the same period,” he said.

He noted that public service chief executives did not receive an increase for three years, from 2020 to the end of 2022, due to pay restraint.

“We are now starting to see some increases come through, which is reasonable. The net result over the last five years (since 2018) is a 4.4 per cent increase,” he said.

The largest pay bump in 2023 went to Penny Nelson, director-general at the Department of Conservation. Pay for many public service bosses, including Nelson, is calculated across calendar years. In 2023, Nelson was paid $495,000, an increase on the previous year of 13.5 per cent.

The PSC spokesman said the increase resulted from a recent “resizing” of the role, and a January 2023 remuneration review.

* Correction: The Ministry for the Environment achieved staff gains of 22 per cent, representing additional staff of 182 FTEs. This occurred in fiscal 22/23. This story originally stated incorrectly that the gain was the largest percentage increase across the public service agencies in the six-month period to December 31, 2023.