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Chen and Palmer Seminar - Mallard Speech

4 July 2000 Speech Notes Trevor Mallard

I should start by outlining the raison d'etre for the State sector. That is, what this Government thinks is the purpose of a professional, non-partisan bureaucracy like the one we have in New Zealand.
First, the State sector is there to provide services to citizens. But, on its own, providing services is not enough. Such a slim definition would make the State sector no more than a big service-provider - like some sort of grand version of Telecom.

It's the nature of the services that matters. In other words, the State sector is there to operationalise the policy of the Government of the day - to deliver the services that the political process determines are the ones that people need.

Second, the State sector is there to advise and support Ministers. That is, to help Ministers turn political ideas into workable, operational policy. That's the expertise end of the State sector - the place where policy advisors are really tested in turning a notion into a practical plan.

Third - I think it would be fair to say - that this Government believes that there is another dimension to the State sector. The State sector has a reflective quality. That is, it reflects something of who we are as a nation. Of course, a professional well-run State sector only comes with a sophisticated, advanced society like ours.

And our State sector is largely corruption-free. In other words, when you are dealing with public officials in New Zealand - from the police through to the people paying you benefits - you can trust them in a way that you can't in many countries. In other words, the State sector reflects the degree of trust that is inherent in a small, cohesive society.

I should say that I think that the underlying statutory arrangements in the State sector - as they are encapsulated in the State Sector Act and the Public Finance Act - are satisfactory.

Those arrangements are the product of a period in our history. And we have moved on from the theories and thinking that underpinned those arrangements.

But, for the most part, I think that the principles that are in the State Sector Act and the Public Finance Act, are sufficiently flexible that we will be able to adapt them for the beginning of the 21st Century.

The overall trick now is drawing on the arrangements that we already have to get the type of State sector that this Government wants. In other words, a lot of the change you will see in the next three years will be about approach, style, and culture and less about statute and structure.

Nonetheless, there are some tough questions we will have to face up to in the next 18 months about the State sector. Some questions that are just emerging for Ministers.

One is the fact that the State sector in New Zealand contains a relatively broad range of governance arrangements. At one end is the departmental arrangement - a responsible Minister and a CE working together under the close definition of the State Sector Act. At the other end is the SOE - where commercial organisations have been run largely remote from Ministers. And there's a series of variations in between, including the Crown entities.

The boundaries between those governance models - between departments, Crown entities, and SOEs at least - raise some difficult questions that we are still defining.

Let me outline the three overall areas where I think we need to see change in the State sector.

Area one is fragmentation. Today we have 38 Public Service departments and more than 100 major Crown entities. And that doesn't take into account the defence and police forces, much of the education sector, and local government.

That's a large number of State agencies for a country of fewer than four million people.

In the major agencies - in the Public Service departments and the Crown entities - the results of that fragmentation are apparent. For example, in the labour market, departments compete against each other to hire the same staff, sometimes to the detriment of the Government overall.

Some sectors - say education - require major co-ordination from the centre that soaks up resources.

There's an absence of full-loop learning - feedback on whether policies actually work - because the policy advisors work in a department other than the delivery one and the connections between operations and advice aren't established.

Area two is the role of the centre: that's the three central agencies - the SSC, the Treasury, and DPMC, plus the political executive - the Cabinet. Not surprisingly, in a fragmented system, the centre needs to be relatively strong.

But - paradoxically - I think the centre has been struggling for definition in the last ten years or so.

The Treasury's role is pretty clear. But the SSC is still facing up to the nature of its role and DPMC is working fulltime with the co-ordination problems that come from a fragmented State sector and making the adjustment to managing in a Proportional representation environment.

Area three is 'style' or 'culture'. Part of the problem here is the vertical, linear nature of purchase. That's the process by which departments and Crown entities 'sell' their services to Ministers.

It's a good system in that it makes it clear what is being produced, and at what cost. But we have taken it too far.

Has anybody here seen a departmental purchase agreement that included a statement of values and behaviours that the department should apply on behalf of the Government? I bet you haven't … but as I have just said, values and behaviour are one of the defining characteristics of the State sector.

That has been part of the problem with Work and Income. The department has delivered what it was contracted to provide, but not always in the style that Ministers and the public expected.

The trick lies in reaching a balance that supports our values as New Zealanders and which takes into account the range and types of organisations in the New Zealand State sector.

So, turning to solutions. How are we going to confront these problems?

On fragmentation, I should say immediately that - with the exception of the health sector - we won't undertake wide-ranging, major structural reorganisation like that of the 1980s. It is too disruptive, time-consuming, and damaging to morale.

We are working on a Crown entities bill right now - indeed, that bill will be one of our biggest initiatives this year in the State sector. But that is not a reorganisation: it is an attempt to regularise what is currently a series of uneven governance arrangements.

I'm pleased with the changes that Michael Wintringham is proposing for the SSC - turning it into a department that will look forward and try to anticipate the big questions before we get to them. In other words, the SSC is redefining the role of the centre … slowly and carefully.

Overall, the Government wants to see a more assertive centre - for example, in setting and maintaining values and in trying to contemplate the big questions we will face.

So one of the problems we face is setting and asserting values and standards that will stretch right across the State sector and which will take into account the different purposes of organisation types and governance arrangements … and which still reflect what the Government wants from its agents.

Cabinet has three roles - with regard to the State sector anyway. They are to determine goals - what the State sector is trying to do on behalf of the Government … to allocate resources - that's usually the Budget … and to co-ordinate activity - getting chief executives and agencies working together, in concert with Ministers.

You could argue there is a fourth role: assess progress towards the goals and adjust policy accordingly.

We have a big policy programme and one that requires a lot of co-operation and co-ordination. And we face a budget constraint. So, there's a big test for us - Ministers - here.

Style and culture: I have already hinted at a key point about this area: style and culture that is out of step with public expectations is about more than just bad headlines in the newspaper.

If one of the roles of the State sector is to reflect the society it serves, then the style and culture of the State sector has to reflect society's values.

The Government does expect change here. I think it is fair to say that the message is out there already and that departments and agencies are already responding.

Yesterday, I released the Government's response to the state sector aspects of the Hunn report into the Department of Work and Income New Zealand.

That included a commitment to setting out a clear set of expectations for the state sector and establishing a standards board.

The statement of the Government's expectations as to how State sector organisations will behave has been called a State sector 'charter'. But it's really a statement of what the Government expects in the style that institutions will adopt. That values statement is likely to be administered by the central standards board which will work in concert with the SSC and advise Ministers and agencies on values and standards.

Building capability: Yes, capability in the State sector has run down. But we have no systematic way of measuring and maintaining capability in the State sector. How would you know how much capability has deteriorated and what you should do about it when you have no measures? We have to address that, and the work that the SSC is doing in that area is designed to begin to break that problem.

But it is a big problem and I acknowledge that the job of building capability - acting as a supra manager - will put more pressure on responsible Ministers who are already working very hard .. and where the expectations of the role of Ministers is - at the moment, anyway - unclear.

So - in summary - the Government's plans for the State sector:

The statutes that underpin the State sector in New Zealand will remain largely as they are. The big changes that you will see over the next three years or so will be in style, culture, and approach - the way things are done. There will be some structural reorganisation … but there won't be a repeat of the late 1980s and early 1990s.

We'll be working towards a more collaborative State sector … including local government … that readily embraces the notion of service to the community and where practices consistently reflect what taxpayers expect.

A redefined role for the centre is likely to emerge - slowly - over the next three years. And in the Crown entities sector, the aim will be consistency and clarity through legislation.

E-government will be employed, but carefully, and we'll aim to support Ministers and chief executives more closely in maintaining corporate capability.


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