John Armstrong: State service shake-up by stealth

Whatever you think of Anne Tolley and her trenchant advocacy of national standards, the Minister of Education deserves some credit for having the good grace and fortitude to front this week's announcement of the restructuring of her ministry.

Unlike some of her Cabinet colleagues who have deliberately kept their distance and left the dirty work to the chief executives of their departments, Tolley appears to have realised she is obliged to take some responsibility for the likelihood of some Ministry of Education staff losing their jobs.

Tolley's fellow ministers are probably quietly wishing she hadn't. Facing questions from various media about where exactly the savings were coming from and the scale of job losses, she veered between saying she didn't know and deferring to her chief executive, Karen Sewell.

Ministers never say they don't know. They never look or sound anything other than that they are in charge.

Tolley's latest slip will quickly be forgotten. Lingering longer will be questions about exactly where Wednesday's announcement slots into the grand scheme of things when it comes to the Government's overhaul of core state services.

News of the ministry's euphemistically-titled "ongoing organisational change programme" followed reports that some minor state agencies were about to be merged. These included the Food Safety Authority being absorbed back into the Ministry of Agriculture and Fisheries, and the National Library and Archives New Zealand being swallowed up by Internal Affairs.

Tolley's announcement also coincided with the surprise decision by Director-General of Health Stephen McKernan not to seek re-appointment when his term expires at the end of July.

He insisted his departure was not the product of tensions over the shake-up of the health bureaucracy and the shift in power away from his ministry to the new National Health Board.

The denial is unlikely to have washed with most Wellington-based public servants. They would have seen smoke and assumed fire.

They will have joined the dots between these three events and drawn one conclusion: while John Key might have promised National would not radically restructure the state sector, here was further confirmation National was doing exactly that, but doing it in small steps.

Should public servants be worried? Probably. No branch of the state services appears immune from restructuring - not even the Treasury which had a clean-out of some of its most senior managers just before Christmas. Some ministries are in the throes of a second wave of rationalisation.

The sudden flurry of activity this week prompted the Public Service Association to call on ministers to be upfront about their plans for the state sector. But the union only needs to look in the rear view mirror to see where things are heading. National initially said it would "cap" the total number of state servants. No one talks any more about "caps". Not when at least 1000 jobs have gone west.

Still, if National seriously intends stripping the Wellington-based bureaucracy back to skeleton levels with public services largely contracted out to private providers, this Government is going to take an awfully long time to finish the job.

It is true that all three of the big social policy ministries - Education, Health and Social Development - have now been restructured in one form or another since National returned to power.

But if National is really running a hard right agenda, it would surely be looking for bigger savings than the $10 million that the Ministry of Education must find next year - little more than 2 per cent of its operating budget.

The merger of a few minor state agencies plus a piddling cut to the budget of one ministry that has long been regarded as chronically overstaffed hardly qualifies as radical.

While beating up on the Wellington bureaucracy never lost anyone any votes outside the capital, the Government has not wielded the axe to anywhere near the extent it could have done given its popularity.

That reflects its risk-averse nature. Approaching the mid-point of its term, so cautious is this Government that its appetite for restructuring may already have peaked.

As it is, ministers have also been careful to shroud any ideological motive behind reform of the state sector under the cover of the Government's fiscal crisis and an associated drive for greater efficiency in the spending of taxpayers' dollars.

Bill English has declared the dire state of the Government's books rules out any increase in departmental budgets for the foreseeable future.

In doing so, the finance minister has cleverly forced departmental chief executives into restructuring exercises and efficiency drives without leaving any obvious fingerprints.

English's obvious goal is to engender a culture change in the public service that results in significant improvement of services and their delivery, including using the private sector if necessary.

Other factors are placing further pressure on chief executives to push for efficiency.

English has instituted a form of peer review under which chief executives monitor each other's progress in achieving more by working with less.

A joint initiative by the Treasury and the State Services Commission will run the ruler over departments every three years to ensure they are delivering "the right things in the right way at the right prices".

This so-called "performance improvement framework" - the results of which will be published - may be complemented by similar monitoring by the yet-to-be set up Productivity Commission.

Perhaps the most notable development is the resurgence of the Treasury, which senior members of the current Government believe had become too passive during Labour's reign because its advice was consistently ignored.

The Treasury has a long-term view. It has warned that the combination of poor economic growth and the baby boomers moving into retirement makes the provision of Government services at current levels unsustainable. It is quite happy to wave the stick at other departments on the Government's behalf.

All of this makes it extremely difficult for the Government's opponents to attack its overhaul of state agencies. How do you argue against measures designed to improve efficiency and get more value from the spending of taxpayers' dollars?

Further thwarting Labour's and other parties' efforts to alert voters to what National is doing is the Government's relatively unrushed timetable of three to five years for making big changes to the state sector.

Such a timetable has enabled the Government to avoid a slash and burn approach which would have brought swingeing cuts in budgets and a marked deterioration in services.

National does not expect all Government agencies to move at the same speed when it comes to lifting performance. It is quite happy to pursue reform in a piecemeal fashion over time. It feels more comfortable doing it that way rather than in a big-bang fashion which might court a public backlash. Doing it that way still helps the Government to maintain momentum - one reason, it thinks, that explains why it is so popular.

It may all look very ad hoc. And much of the reform is going on beneath the radar. But there is a plan. As for revealing it? Well, fat chance of that.