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Trying To Blend The Froth With The Cappuccino

Trying To Blend The Froth With The Cappuccino: The New New Zealand Way?




First let me express my appreciation for the opportunity to again address your meeting, to update you with developments in the land that, according to an Australian adviser to our right wing ACT party, has the potential to save an endangered species and to make a significant economic profit out of a new culinary delight, roast kiwi. Whether one assesses it from an environmental or edibility perspective, it certainly indicates that there is no accounting for taste!

I want to focus on the two key developments that have affected us over the past 15 months when the new Labour-Alliance government was elected – industrial relations and health policy. Please note, however, that these are personal observations and assessments. While I do not believe they are inconsistent with the Association’s approach they do not necessarily represent Association policy and they cover some aspects that have not been discussed internally in depth.

Preparing for this address has enabled me to take my mind off that wonderful experience when our top cricket team, otherwise known as India, pulled off that wonderful victory against your team in the second test while our second team battles against the Pakistanis on benign portable pitches. It also relieves me from the intense pressure I am currently under as I battle to retain my position as top bowler for the Kapiti cricket club’s presidential grade team. I am running neck-and-neck with an ageing pony-tailed bus driver whose creative manoeuvres on the road have trained him well in the art of swing bowling. It is a classic struggle between medium pace bowling and autumn leaves.


In November 1999 New Zealand elected under its system of proportional representation a new coalition government comprising the Labour and Alliance parties. This is often described as a centre left coalition with the former the dominant party including supplying the prime minister while the latter is, in proportion, much smaller and supplies the deputy prime minister. This followed our second election under proportional representation and followed a series of governments, both Labour and National led since 1984, which have invariably been described as monetarist or neo-liberal and of the right or centre right.


One of the features of the past 15 months is something that New Zealanders have been unused to, the absence of U-turns and breaking of promises. The coalition parties promised to repeal the Employment Contracts Act and they did, they promised to reverse the privatisation of accident compensation and they did, and they promised to take the public health system out of coverage of the Companies Act and they did. The poor punter who voted for either party in the expectation that they would continue the trend of U-turns has been sadly betrayed!

There are also other defining features. Although not anti-market the government has a clear view that markets have significant limitation in both social and economic policy. Consequently it envisages a greater role for state involvement and regulation compared with the previous government and the current opposition parties. This is evident in areas such as economic development, employment expansion and banking. This is part of a wider shift in governing political philosophy.


The government went through but survived largely unscathed a difficult year last year. This period has been described as a ‘winter of discontent’ with falling business confidence particularly over the fall in the dollar coupled with the government’s determination to proceed with the repeal of the Employment Contracts Act and the reversal of the privatisation of accident compensation.

However, this opposition and loss of confidence did not have strong popular roots with the public and appeared based more on perception than reality. Consequently the government survived it and at this stage appears as popular as it was when it won the election 15 months ago. Business and public confidence has risen and economic performance including employment have increased although, like Australia, dark international clouds loom on the horizon.


In considering the position in industrial relations and health policy there are two key pieces of legislation – the Employment Relations Act enacted on 2 October 2000 and the Public Health and Disability Act that took practical effect on 1 January 2001.

From 1991 until 2000 the Employment Contracts Act, that was unique in both being outside the international and the nation’s historical mainstreams, governed New Zealand’s industrial relations. In essence that Act:

 Rested on the assumption that there was equality in the bargaining relationship between employer and employee.

 In effect favoured individual rather than collective bargaining and consequently contracts.

 Apart from some unique circumstances effectively terminated a realistic right to collectively bargain on a multi-employer basis.

 Gave no express right of any significance to unions as the collective voice of employees instead negatively regarding them as ‘third parties’.

 Failed to comply with International Labour Organisation standards covering recognition of unions, freedom of association and rights to collective bargaining.

History will ultimately determine how the Employment Contracts Act will be assessed. In my view it is most likely that it will be seen as an aberrant blip on our country’s economic and industrial landscape that came, saw but failed to conquer. We however, as you are aware, benefited in this environment due to important factors such as:

 Our membership comprised highly skilled and specialised professionals for whom there was no alternative source of labour.

 The Act coincided with an ideological drive to introduce competition into the public health system propelling health authorities to compete against each other and the private sector including for labour.

 The prevalence of international and national labour market shortages of senior doctors.

 Continued statutory protection under the Medical Practitioners and Dental Acts and, through the Medical and Dental Councils, against the potential ability of the Act and the ‘competition’ of the ‘health reforms’ to undermine quality standards. Strong registration standards remained during this period.

 The practical realities of a centralised union dealing with fragmented employers.

These factors meant, nevertheless, that we were in a unique situation whereas much of the workforce was more vulnerable to the lack of rights and lack of protection of this unique legislation.


In contrast the new Employment Relations Act is fundamentally different drawing upon key principles of both New Zealand’s own traditions prior to 1991 and the international mainstream, particularly North America and western Europe. In contrast to the previous legislation its defining features, especially when compared with the repealed legislation, include:

 As their respective titles imply, the new act focuses on the importance of relationships in the employment agreement between employers and employees in contrast to its predecessor’s emphasis on the contractualism of that connection. This is also reflected in the fact that there are employment agreements, collective or individual, rather than employment contracts.

 The Act rests on the key assumption of inequality in the relationship between employers and employees with, in most situations, the balance favouring the former.

 Collective bargaining is expressly promoted.

 Unions are recognised explicitly as the collective embodiment of their members that they represent rather than more distant ‘third parties’.

 Consistent with the above the Act includes express requirements to comply with International Labour Organisation conventions covering rights of unions, collective bargaining and freedom of association. This includes voluntary union membership.

 There are two main forms of employment agreements – collective and individual – that are alternatives rather than supplementary. The Act also provides a third option that is collective plus what are described as “additional matters”.

 Processes are provided to create the capacity for multi-employer bargaining.

 The right to collective bargaining is underpinned by the North American and western European concept of “good faith”.

The Act expressly encourages, provides for, and in the event of impasses in effect requires, mediation. A specific mediation service is established for this purpose in the case of both collective bargaining and, in fact, almost all employment relationship problems.


How should one assess the impact of the new Act? A now deceased leader of the 1949 Chinese Revolution when asked if the 1789 French Revolution has been a good thing, sagely observed that it was too early to tell. Well, if nearly two centuries justifies caution then less than six months certainly does.

Some things have nevertheless emerged. Despite at times hysterical assertions made during the parliamentary debate over the Bill, it has not led to the end of civilisation as we know it, it has not led to economic collapse and it has not led to a flight of capital. Nor has it led to real or potential increased strike action. At one level the new Act increases the scope for strike action because, in contrast with the Employment Contracts Act, it allows for lawful strike action over multi-employer bargaining. But, on the other hand, again in contrast it deflects the pressure for strikes towards express mediation requirements underpinned by good faith obligations.

There have been two major high profile disputes since October 2000. The first involved veterinarians employed by the Ministry of Agriculture and Fisheries. But despite their economic significance they are a numerically small group and the strike was short-lived. Further, the dispute had been simmering away for around two years under the Employment Contracts Act and the new Act provided a mediation role that helped enable an eventual settlement. Despite the publicity it will have an insignificant effect on both strike statistics and economic well being.

The other high profile dispute involves the waterfront and watersiders. But this is a dispute over fears over casualisation that involves picketing rather than strike action. It is complicated by key decisions being made by a major firm that does not actually employ the disaffected watersider and what appears to be a ‘paper union’ created by the same business.

In many respects the existence of this registered ‘union’ highlights a weakness of the Act: the looseness of the union registration requirements. While the Act requires that unions be independent and democratic in order to be registered, there is sufficient vagueness to allow some employers with the inclination and resources to drive a paper union bus through it. Some companies have created unions designed to keep real unions out of their workplaces. The Act would benefit by strengthening to ensure that only legitimate independent and democratic unions are registered and by insisting that unions cover employees with more than one employer or more than one business chain operating through franchises.

It is too early to assess whether union membership will increase - especially when the paper unions are put to one side. Anecdotal reports suggest that it is including in the more vulnerable private sector. Our own membership is increasing although this has been the pattern throughout the 1990s, particularly in the past five years. We are having a record membership year although to what extent this is simply a continuation of an existing trend or a reflection of the non-adversarial tone of the new Act is debatable. It has to be said that the adversarial environment we have experienced over the past decades has benefited our membership levels. What is interesting, however, is that we are experiencing an uncharacteristic strong membership growth at the end of our financial year (31 March).

It appears to me that despite it being early days the industrial relations environment in the health sector has improved. It appears that concerns held by health professionals over their employment conditions are being taken more seriously. For the first time since 1991 the Nurses Organisation, for example, has been able to progress down a process that might lead to multi-employer bargaining in order to address serious concerns over national disparities and inequities in the employment conditions of their members.


In our situation there has been little change because we were already in a unique situation due to the factors discussed above. Nevertheless the largest employer in the public sector, Auckland Healthcare (now the Auckland District Health Board) had successfully used its powers under the former legislation to deny senior doctors the right to a collective contract. While they could not prevent collective bargaining, and this did lead to a collectivised outcome, it was a less satisfactory and less robust contractual arrangement. Under the new environment they were not able to sustain this unreasonable position.

Our own bargaining approach will continue but we are increasingly mindful of the serious recruitment and retention crisis that threatens us. When I first came into this job over 10 years ago there were shortages in two main fields – anaesthesia and psychiatry. Now it is across-the-board. While there has been recent publicity over radiation oncology several other specialties are also affected; in fact, few are not. Nor are these shortages geographically restricted to particular regions such as provincial New Zealand and smaller hospitals. Our largest district health board providing tertiary services, for example, is facing shortages, potential shortages and low fields of applicants in many areas.

Consequently, in addition to fairness and equity reasons, increasingly we have to take into the importance of providing terms and conditions of employment that compare favourably with what is an intensely competitive international medical and dental labour market. This international market is one in which across-the-board shortages also apply, in part enhanced by conscious efforts to increase the medical workforce, coupled with superior employment conditions. This includes, but means more than, negotiating improved salaries and continuing medical education expenses.

This also means that New Zealand is specifically non-competitive in the following areas:

 Unlike Australia we do not have higher rates of remuneration on a national basis for hours worked when on an on-call roster in order to recognise the anti-social, onerous and dangerous nature of the work. Some inroads have been made but there is much work to be done before we can say we are competitive.

 Annual leave has historically been poor particularly when compared with international competitors where six weeks are the norm. Historically we only had in effect 22 days but in seven out of the 21 district health boards we have now negotiated six weeks. The others are between 25 (five weeks) and 27 days.

 Since 1992 when the National government finally extinguished the rights of aspiring new entrant state sector employees to subsidised superannuation, its absence, has been a major blot on the employment landscape. And yet it is a prevalent part of the alternative employment landscapes internationally including Australia. Consequently we have pursued it with vigour since then. Although some advances were made it has only been in the last couple of years in which we have made significant progress. We are now in the position where a district health board can’t even be nationally competitive without subsidised superannuation let alone internationally competitive. Currently superannuation is on a roller coaster and I anticipate it being resolved albeit perhaps with some phased implementation in all of our remaining negotiations scheduled for this year.

There is one additional matter worth mentioning that is on the agenda for separate discussion at this meeting. We are increasingly sick and tired of, what are in effect, managerial and political platitudes over the importance of quality improvement without the concurrent need for the time and resources to achieve it. Over the past decade it has been doctors and nurses that have struggled to maintain quality standards in a fiscally retrenched and often ideologically squeezed environment more often that not with managers and governing politicians seemingly pushing in the opposite direction.

Given the labour intensive nature of health service delivery this invariably requires time or more specifically time out from activities directly related to the treatment of particular patients. We call this non-clinical time for activities such as peer review, clinical audit, credentialling, teaching, literature reading and teaching. It is our estimate that a minimum of 30% of a senior doctor’s time for routine duties and responsibilities should be available for this critical activity if quality improvement is to be more that a bit of rhetoric that is spat out from time to time.


The Employment Contracts Act did not sit in splendid ideological isolation. It was part of a wider schema and belief system on how society should be organised. The health system was an integral part of this ideological schema.


As I have previously reported to you in 1993 our public health system was radically and dramatically turned on its head with the replacement of 14 statutory health authorities, area health boards, with 23 crown health enterprises (CHEs) and four purchasing bodies, regional health authorities. In contrast with the area health boards, the new CHEs were intended to be more narrowly involved in secondary care and more hospital based. Further, again in contrast, they were state owned companies governed by the Companies and Commerce Acts. They were intended to compete against each other and against the private sector.

Over time as the new system floundered from difficulty to difficulty, from crisis to crisis, structures changed. The commercialism slowed down following the 1996 general election and a short-lived coalition government of the National and NZ First parties. This led to the 1998 amendment to the 1993 Health and Disability Services Act that included the following changes:

 The four regional purchasing authorities merged into one Health Funding Authority.

 Crown health enterprises had a change to hospital and health services (HHSs).

 There was an explicit preference for public provision of existing publicly provided services. Contracting out and other forms of privatisation could only be approved if there were health gains and no fiscal risk to the crown over a 10-year period.

Although slowed down, and the language of collaboration and cooperation started to re-appear as part of the policy making vocabulary, the commercialisation structures remained intact with particular reference to the Companies and Commerce Acts. We had a tension between the structural foundations pushing one way and the rhetoric and language pushing in the opposite direction. While the pace of commercialisation and privatisation slowed it was still evident. For example, the Taranaki HHS (led by an Australian to boot) slowly but steadily advanced down the path of contracting out some clinical services. Further south, in Wellington, the Capital Coast HHS (under the inept turbulent leadership of a computer salesperson from El Paso) facilitated the privatisation of its sexual health services. Meanwhile the then largest American Health Maintenance Organisation (Aetna) came close to assuming control over much of the funding for an important provincial city public hospital (Tauranga).

During this whole period of the former government’s controversial ‘health reforms’ the Labour and Alliance parties were aggressively critical of this policy direction including privatisation in its various forms. Health was among the key issues in the 1999 general election campaign and the opposition of these two parties to this policy played no small part in their electoral success and ability to form a new government.


In contrast to industrial relations where there is a Labour minister of labour and an Alliance associate minister of labour leading to a more shared approach to policy, in effect after the election the smaller Alliance party ceded health policy to the majority party. Both the health minister and her associate ministers are all Labour. The practical effect was that in the case of the Employment Relations Act, while Labour played the lead role, both parties had a sense of ownership over it. However, this could not be said for the new health legislation. It is largely Labour’s exclusive baby with the Alliance making critical submissions on the Bill to the parliamentary select committee and proposing amendments, with some success, right up to the eleventh hour of its progress through the House of Representatives.

The landmark health legislation was the Public Health and Disability Act adopted by Parliament after a torrid session towards the end of the year that took effect on 1 January 2001. The main features of the health system under the new Act include:

 Hospital and health services (through mergers by now reduced to 21) are replaced by 21 district health boards (DHBs) responsible for primary care in addition to secondary and tertiary care. This contrasts favourably with the rigid Australian demarcation between primary and secondary care based on the federal (Medicare)-state divide. Coinciding with local government elections in October their boards will include a majority of elected representatives. Previously the board members were all political appointees.

 In contrast with HHSs, the new DHBs are not covered by the Companies and Commerce Acts. The system is not therefore underpinned by competitive commercial business principles and does not have a legislative incentive for privatisation.

 The Health Funding Authority is disbanding with its functions, and many staff, moving into the revamped Ministry of Health that expands into operational and funding roles additional to its current policy advisory and regulatory roles.

 The Ministry is to fund DHBs who will be responsible for the provision of health services in their geographic regions. They will provide some services themselves (predominantly secondary and tertiary care) while they will arrange for the provisions of other (predominantly primary care). Over time they are expected to assume full funding responsibility for primary care. Currently this remains centrally funded. Some services (eg, family planning) are expected to continue to be centrally funded.

 Primary care providers funded by their DHB through capitation will form part of networking Primary Health Organisations (PHOs). Patient enrolment with PHOs will be voluntary despite the capitated funding.

 The Act provides for the establishment of a New Zealand Health Strategy (also a Disability Strategy) within which DHBs were to operate. One of the objectives was to ensure national consistency and equity and to avoid the emergence of 21 separate fragmented health systems.

 A statutory body is created with the responsibility for advising the Health Minister on health workforce planning and development needs. This absence was one of the major weaknesses of the previous system where the prevailing ideology was that either the “market” (whatever that meant) or employers (ie, HHS managers) would sort out workforce needs. Experience has shown that this was a failure and its absence has contributed in no small part to the shortages we currently face and that threaten to compound. The new advisory committee will be responsible for the whole health workforce rather than specifically medical unlike AMWAC and is to be under-resourced with a budget that will only provide for an executive officer, a couple of policy analysts and a bit of secretarial support.

Gulf between Policy-Makers and Health Professionals;
white-board warriors and frontline toilers

One of the major criticisms of the health system in the 1990s was the large gap between policy-makers and health professionals. It has been described to me as rather like the froth that sits on top of rather than blends in with a cup of cappuccino. In terms of general policy development health professionals were out somewhere in the periphery, sometimes it felt like being lost in the ether. While this situation has improved with, for example, the formation of sector advisory groups on projects such as the NZ Health Strategy, formation of the health workforce advisory committee and the primary care strategy, they are still very much distant from the engine room where they should be.

Instead the government relies heavily on the bureaucracy to develop and implement its policy. While many Ministry officials have worked hard, well and loyally, overall the organisation is still distant from the sector that views it with much suspicion and is constrained by practical inexperience and nearly a decade of following a quite different philosophic approach. There is also an unfortunate suspicion and cynicism among some policy advisers, hopefully only a few, about the veracity and accuracy of health professional concerns believing them to be a ‘beat-up’ or overstated. Equally important many health professionals are aware of this suspicion and cynicism.

One of the consequences of this environment is that those in the sector frontline have a limited sense of identification with it. It has yet to capture ‘hearts and minds’ not because the system is considered fundamentally flawed but instead because there is no sense of ownership, of it being “our” legislation or “our” system. This is ironic because the major legislative principles of the former unpopular system have been repealed and the broad direction if not all specifics are consistent with the culture and ethos of health professionals. There are in my view two reasons for this – pessimism about the future after a decade of ideological restructure and the failure of the government to actively engage the sector in the engine room of policy implementation.

The government would do well to be mindful of the difference of approach to the passing of the Employment Relations Act. The Council of Trade Unions was overjoyed with the new industrial law even though if it had been ‘calling the shots’ the Act would have been different. The political engagement and management by the government helped make this possible. While overjoyed is too strong to describe our own reaction we were at least pleased. This was much different in the health sector where by the time the legislation was passed the generally reaction of doctors and, I believe, nurses had become ‘ho hum’ and lukewarm. This was not a negative response but was indicative of our distance from and lack of relative engagement in the process.


Questions still remain about the new system. Will we end up with 21 different systems or will the role of the Ministry/Minister and the NZ Health Strategy successfully prevent this from happening? It is too early to make this call but I do not believe that fragmentation of this type is inherent in the structure. Rather like all universal health systems there will be an evolving balance in the degrees of centralisation and decentralisation that will prevail at any given time.

More serious, however, is the risk of bureaucratic growth, ironically one of the major criticisms of the former system. The merger of the Health Funding Authority into the Ministry is sensible. In a country of less than four million people two central government agencies shaping and determining health policy is overkill and duplicative. But one thing we know about bureaucracy, especially in health, is that the combination of compulsive procreative tendencies and absence of birth control means that it reproduces in a way that would make an Argentine ant envious. The demise of the Authority is not leading to the reduced bureaucratic costs that many would have hoped.

One concern about bureaucratic growth is the formation of shared systems organisations owned by groupings of DHBs. This may not be serious and may be useful providing that they retain their express role of enhancing regional coordination between DHBs in administrative and related matters. But if they go beyond rationalisation and coordination and duplicate what DHBs do anyway, then bureaucratic growth is inevitable. Again time will tell.

Possibly of higher risk are the proposed Primary Health Organisations. These do not presently exist although some Independent Practitioner Associations may, with restructuring, evolve into them. Whether they generate more bureaucratic growth will depend on whether they are confined to networking work or whether they take on a life of their own and duplicate the work that DHBs ought to be able to undertake.

The NZ Medical Association has been more critical (perhaps cautious would be a better description) of the new system than we have been. To some extent this reflects the fears among GPs, where the NZMA has its greatest membership strength, that the new DHB based system risks a hospital take-over of general practice. To some extent it reflects the NZMA responding to its role as a pan-professional medical organisation speaking out on concerns and implications as they assess them.

Nevertheless we would not necessarily disagree with the concerns raised by the NZMA. We all share concerns about potential fragmentation, bureaucratic growth, and hospital take-over (perhaps alternatively GP take-over). We are also perturbed by the continued gulf between policy-making and practitioners. These are all potential risks that we face and need to be pointed out. Perhaps the differences, in tone rather than substance, is that the NZMA tends to attribute these potential risks to this particular health system whereas we tend to see them as potential risks of health systems in general and at any given time. These approaches are tendencies rather than absolutes and, I suspect, in both cases have evolved more unconsciously and instinctively than consciously.

In my assessment the key problem in this new health system is the relationships within the wider sector inclusive of health professionals, managers, policy-makers/advisers and politicians. They are not good and have not been good for many years. The DHB system is being established in an environment in which there has been medium-term low morale and excessive estrangement. The inherited gap between policy makers and managers acting as white-board warriors and health professionals toiling at the ‘coal-face’ is profound. The new system will not begin to achieve its objectives until the gap is narrowed and eventually overcome. But this is the challenge of all health systems based on principles of universal coverage and access, not just New Zealand’s.


The most extraordinary decision to date has been the Minister’s decision to approve the privatisation of anaesthetic services by the Taranaki DHB. This was being developed quietly throughout 1999 without consultation with the government. It was consistent with the approach of Taranaki management in the area under the previous government. When the whistle was blown on this last November the Ministry quickly investigated. However, around two months later on the advice of the Ministry the government backed down and seriously undermined its own credibility over privatisation. The Minister genuinely believes that she acted on the best advice available and to her credit has imposed limitations such as that this is to be one-off and not to set a precedent. There is no doubt that the Minister is angry about this incident and I am sure feels betrayed, for good reason, by Taranaki management.

Increasingly as one peers under the rock there are things about it that don’t make sense and suggest, in the absence to date of information to the contrary, a ‘once over lightly’ investigation with Taranaki managers eyeballing Ministry officials down. This may or may not be the case but things don’t make sense including:

 There was fear of claimed litigation. But no contract had been signed, only verbal undertakings at most appear to have been given, there is no indication that people gave up positions or suffered economic loss because of supposed verbal undertakings, and there appears to be no written legal assessment by, for example, the Crown Law Office.

 Taranaki management claimed that the privatisation would lead to savings of about $185,000. But where is the evidence to justify this claim? The Ministry advised the Minister that this was because the anaethetists would be contracted to work all their clinical sessions. But they are already contracted to work all their clinical sessions except obviously if they are ill or on approved leave. What is different? Have the alleged unsubstantiated savings been achieved by creative accounting? There are some little utilised potential provisions (eg, sick leave, sabbatical) that could with little difficulty and a vivid imagination be converted into perceived real monetary balance sheet liabilities and consequently savings because they would not be applicable to the independent contractors working in the private company. And what about current departmental administrative and other overheads? Are they transferred to the new company or are they retained in the DHB? Is like being compared with like, is reality being compared with hypothetical? These questions appear not to be asked, let alone answered.

 It was claimed that non-approval of the privatisation would lead to a loss of anaethetists. But where is the evidence of this apart from management claims? The employment structure of the privatised service is attractive to those who own the company for understandable fiscal reasons and to those who do not have an expectation of working in the region for the longer term. The latter factor is because this type of employment is based on higher remuneration in exchange for the loss of non-salary benefits (eg, annual leave, sick leave and professional development entitlements) and loss of security of employment. Aside from those with a fiscal interest in the company it is an attractive option for those who are more likely to leave the region sooner rather than later anyway and unattractive for those who are committed to the longer term. The logic is self-defeating.

 Similarly it is implied that the privatisation will be good for recruitment. Again where is the evidence? There is certainly no evidence of this anywhere else in the country. Further, for the reasons just discussed it is not a system attractive to recruiting specialists except for shorter-term commitments. It is invariably the non-salary benefits (eg, leave, professional development) and greater security of employment that provide attractive conditions for both recruitment and retention. Instead this is a model more suitable to short-term employment, exactly what the DHB does not need.

 It is claimed that the privatisation is the only or best way to deal with surgical funding streams from the Health Ministry and Accident Compensation Commission. Again no evidence is provided. Further, no other DHB/HHS has privatised its anaesthetic service for this or any other reason. At most this claim might indicate more about the calibre of management than anything else.

It may appear harsh but I am left with no other option, in the absence of information to the contrary, that the Ministry lacked the expertise in employment relationships and related matters to rigorously assess the claims made about the case for privatisation and failed to obtain it. The Minister made a decision in good faith but on poor, inadequate advice that should have been better scrutinised by her own advisers.

Compounding this dilemma is a statement she made defending her decision in parliament where she said that the Labour Party had never been opposed to privatisation. This astonishing statement was contrary to Labour’s overriding critique of the former government’s policy and the unambiguous message gave voters through the 1990s before taking office. What she meant, I think, is that roughly half of health care is privately provided. This is largely primary care through general practice and to a lesser extent private hospitals.

But she or her advisers have confused issues. This is the privatisation of a core clinical service that has always been publicly provided and there were no good reasons why it could not continue to be provided in this way. If the former National government had allowed the privatisation of this service Labour (and the Alliance) would have got stuck in boots and all. The message to the wider sector is now what is fundamentally different?

One of the disturbing aspects is the claim being made that the privatisation was consistent with Cabinet guidelines. These guidelines were developed in part to clarify the relationship between public and private provision. Public provision was to remain and favoured unless there were demonstrable benefits. In the absence of any verifiable evidence to the contrary this decision could not be consistent. Unless of course the guidelines are simply weasel words intended to go through the motions; the sort of guidelines you have when you are not having guidelines. It is unfortunate that the government disregarded the advice in our parliamentary submission that the Bill be strengthened to provide a preference for public provision where viable and consistent with good health outcomes.

Inevitably many will see this decision as a ‘sell-out’ and a U-turn with the message that the government is soft on privatisation in the health sector. This is unfortunate I believe, based on the information available to date, that it is an aberrant ‘cop-out’ involving a poor decision influenced by poor quality investigation and advice. But it continues to be the case that unsubstantiated claims are sufficient to meet the requirements of the Cabinet guidelines then I will have to revise this assessment.


There is no shortage of other issues presently confronting the health sector. Among them are:

Funding, or rather the adequacy of, will always remain a critical issue.

In the first half of the 1990s public hospital funding was significantly eroded on a real per capita basis. While funding in the second half improved this was largely through ad hoc time-limited initiatives such as surgical waiting times. This appeared to rest on the naive assumption that you could run a public hospital like a hire pool company.

There is currently controversy over whether public hospitals are facing funding increases or decreases. The government and managers say the former while many managers say the latter. The answer may well be both depending on one’s approach. Funding comes in two forms – baseline and ad hoc – with the latter becoming increasingly important in the late 1990s. The new government has shifted the emphasis more towards the former. Baseline funding is increasing while ad hoc funding is generally not being renewed. This is conceptually sound but it is important that the total baseline at least matches on a real per capital basis the previous total of baseline and ad hoc. This is not the case and so for surgeons in operating theatres and physicians in clinics the distinction is irrelevant and semantic and for all practical purposes represents a cut.

It would be disappointing if, as is being suggested, there is no effective and reasonable increase in health funding including public hospitals in the budget due in May. It has to be remembered that the ad hoc funding initiatives of the former government should have been permanently built-in increases. Patients should not be disadvantaged because a previously flawed arrangement has not been fully addressed. The government can expect disappointment and anger from health professionals if further real money is not injected into health this year. Funding concerns, of course, will never go away. The day they do is the day that New Zealand wins two consecutive cricket tests.

There is still a naïve belief that there is a fundamental or inherent conflict when organisations both fund and provide health services. This is considered by some, and in effect acknowledged by government advisers, as a feature of the DHB system because it will provide some services and arrange for the provision of others. I consider this to be a weak legacy of the funder-provider split ideology that underpinned the former government’s attempt to commercialise the public health system. Therefore this inherent tension has to be managed. But ever since Adam was a cowboy we have had a demarcation between funding and providing. Organisations of any reasonable size invariably have to disburse funding internally and externally in order to get things done. It is little more than good ‘house-keeping’. The fact that DHBs do not have the capacity to directly provide itself all the services they are required to ensure are provided does not generate an internal conflict. Those that hold this conflict view exaggerate its significance and should consider a philosophic and pragmatic nappy change. The government would be unwise if it continues to give this advice serious credibility.

Waiting Lists

The government’s credibility was eroded by an accidental botch-up when it overstated and hyped up claims of reduced waiting times arising out of a regular quarterly report. That report did have some good news about increased activity and greater certainty for more people. But figures were misinterpreted leading to a beat-up media statement exaggerating the extent of good news and diminishing concerns over access. The government appeared stunned that the NZMA and we expressed scepticism over its claims and concerns over continued high levels of denied access. This, in effect, undermined the good news story. Our response should have been anticipated. We have been giving the same consistent message for some years with the release of each quarterly report.

To her credit the Minister promptly apologised when she realised the initial error. Few of her predecessors would have done so, or at least not so quickly. But it must not happen again. There are few things that anger health professionals more than political hype when they know from their hands-on experience at the front-line what the truth is and the extent of serious unresolved problems of access to key services. At the risk of appearing egotistical professional bodies like the ASMS like to see themselves as barometers of veracity, a veritas weather gauge. If future ministerial statements over quarterly reports are similarly hyped up and if access continues to remain a serious problem, then our approach will be exactly and consistently the same.

The Medical Practitioners (Foreign Qualified Practitioners) Amendment Bill

Currently before Parliament is a dangerous and poorly thought-out Bill proposed by the ACT party that focuses on making it easier for overseas-trained doctors to obtain vocational registration in New Zealand. Rather than the Medical Council the Bill proposes that for this group of doctors it be instead the National Qualifications Authority. But the Authority does not have the expertise to do the job. We do not have School Certificate in paediatrics in this country. Either the Authority would have to seek expertise (ie, from the colleges), which would be no improvement on the current situation, or it would have to apply a lower threshold thereby lowering standards, compromising quality and creating a two-tier system of vocational registered doctors. Labour and the Alliance oppose the Bill. Consequently it could only pass with the combined support of ACT, National (this is questionable because in part of the presence of sensible medical practitioners in their caucus), the Greens, NZ First and United. It is a big ask but not impossible. Consequently the threat has to be taken seriously.


In conclusion we are generally comfortable with the direction of industrial relations in the health sector and welcome the Employment Relations Act as constructive, fair and workable legislation even if we might not agree with some details. In health the main thrust of the new legislation is also positive with the new system offering potential benefits. There are obvious concerns about potential risks but these are risks of all systems that seek to provide universal, comprehensive and accessible care. The real problems in the health sector are more to do with relationships and calibre (both managerial and policy-making).

The government also needs to be less sensitive to criticism in the health sector. There is too much passionate commitment among health professionals for organisations like the ASMS and NZMA to be mute over things we disagree with. It is our role and what our members expect of us. Nor should the government believe that we would be silent because we don’t want the ‘evil’ policies of the 1990s back, a crude ‘lesser of two evils’ approach. We simply won’t buy it. In fact, the National Party has made constructive comments suggesting that they won’t restructure the new system should they return to the Treasury benches and we are improving our dialogue with them consistent with our non-partisan approach. We have a longer-term aspiration of a greater multi-party consensus on health policy direction.

In the meantime this government should not have the mistaken view that we or others will be silenced by some perceived notion of lesser and greater evils. If anyone believes this now, then jettison the error. We have never ‘peed’ in any health minister’s pocket and we are not about to start now. At the point when the froth blends in with rather than sits on the top of the cappuccino then we might reconsider.

Ian Powell


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