The Front Page: Why has the Government spent so much money on consultants?

Consultants have been raking it in - but this is nothing new.

The Government has spent millions upon millions of dollars on consultants pursuing major policy ideas.

This is despite Prime Minister Chris Hipkins saying for years there’s a need to lessen the Government’s reliance on the private sector to get things done.

In fact, this is one area where we’ve seen bipartisan agreement, with National leader Christopher Luxon also critical of the level of spending on consultants in New Zealand.

NZ Herald senior journalist Kate MacNamara has been investigating New Zealand’s relationship with the consulting industry and she tells The Front Page podcast that while the spending on consultants has risen, the issue is bigger than any single Government.

“Since about 2018, spending on consultants and contractors is about 30 per cent for core Government,” she says.

“The big picture is that spending is marching higher on external help and advice at the same time as the bureaucracy, through employees and public servants, is also getting bigger.”

Much of this spending has gone toward big policy ideas that necessitated external support, the best example of which would be the Three Waters plan.

“The start date for the Three Waters reform programme is in fiscal 2020/2021, so we have numbers to the end of last year, and that comes to $56 million out of a departmental spend of something like $94m – so more than half the budget for Three Waters to date has gone on outside work.”

While this figure is staggering, MacNamara says that every Government faces a balancing act between taking work in-house and hiring more staff and commissioning consultants.

“As a reporter, what you’re looking for is the gap between what the Government says they’re doing and what they’re actually doing,” she says.

“When the Nats were in power, they always said that they wanted to keep a lid on the number of public servants, but what they didn’t necessarily want to talk about was the increased spending on consultants.”

Part of the challenge for the Labour Government was that it has taken on a number of major projects, which necessitated more outside help than usual.

Upon starting his tenure as Prime Minister, Chris Hipkins addressed this issue head-on by canning a number of high-profile policies that demanded significant levels of consultant spending.

“He took a look at the gamut of policies and legislation the Government was pursuing and said it was too big. Not in as many words, but he essentially said, ‘We’ve bitten off more than we chew.’”

By cutting policies like the RNZ-TVNZ merger, he has essentially also reduced the amount the Government is spending on consultants.

But is this enough? What is the long-term impact of reliance on consultants? And will future governments be more hesitant to rely on consulting work because of the level of criticism aimed at Labour?

Listen to the full episode of The Front Page podcast to hear more on this issue.