Traditionally, each government department bids each year for its own funding through its minister. Many ministers complainedthis created a double-up between departments who didn’t talk to each other enough, despite both dealing with similar problems. The fact that funding was doled out annually meant that departments could not plan effectively for the future, because they could only count on funding until the next Budget.
In 2022, Willis’ predecessor Grant Robertson piloted multi-year budget “clusters”. This would mean funding several departments in a single sector over a period of three years. It was meant to break down barriers between departments, encouraging them to collaborate on similar problems with the certainty that they had funding for three years. The two “clusters” chosen to pilot the scheme were natural resources, which included the Ministry for Primary Industries, the Ministry for the Environment, and the Department of Conservation and justice, which included the Ministry of Justice, Department of Corrections, New Zealand Police, Crown Law Office, and the Serious Fraud Office.
Willis was less convinced and had Treasury review the cluster pilot. In July last year, Treasury concluded that the scheme had not lived up to expectations and recommended it be closed early. Willis has agreed to that advice, closing the pilot clusters last October.
“There’s nothing wrong with experimenting, but this experiment was a complete failure,” Willis said.
She said the approach led to a lack of fiscal discipline with departments exceeding the three-year funding envelope.
“There’s nothing wrong with experimenting, but this experiment was a complete failure. It allocated funding which was supposed to last for three years and it didn’t even last one. It created a lot of bureaucratic inefficiency in terms of reports and planning with very little obvious benefit.”
Treasury's assessment of the pilot. Photo / Treasury
Treasury backed Willis, with its own report on the cluster approach saying that it “did not lead to meaningful improvements” and that the multi-year funding approached in Budget 2022 to cover the period until Budget 2025 needed to be topped up just one year later, in 2023. Treasury, noted, however, that this was during a period when inflation exceeded forecasts, but it also said that agencies had “frontloaded” spending, by getting too much money out the door in the earlier part of the three-year window.
Treasury found that departments in the natural resources cluster continued to budget in the traditional way.
Labour’s Edmonds said the change was “classic Nicola Willis shortsightedness”.
“The Government should encourage streamlining, not cancel it. The clusters were introduced as a pilot to try get better outcomes across agencies. For example, the Justice Sector cluster was set up so the different agencies could work together to get better justice outcomes. This is outlined in the Budget documents which state ‘The Justice Sector is complex and interconnected. Seemingly isolated changes made in one part of the criminal justice system can have a big impact on other parts of the system,” she said.
The Treasury report found the cluster approach had some benefits including, “marginal improvements in planning”.
Willis said the Government continues to want cross-department collaboration, but said the clusters were “the wrong method for achieving it”.
Thomas Coughlan is deputy political editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the Press Gallery since 2018.
