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"A Results Approach to Delivering Better Public Service"

Hon Dr Jonathan Coleman
Minister of State Services

25 February 2013

Speech

“Taking a Results Approach to Delivering Better Public Services”

Speech at NZ House, Haymarket, London. Monday 25 February.

Good evening, welcome to New Zealand House – it’s a pleasure to be here with you in London.

New Zealand has embarked on a significant change programme for our State sector. It involves every agency, ministry and department. Some of you will have heard my colleague the Deputy Prime Minister Bill English speak on it when he visited London in 2012.

We have the challenge of maintaining and improving services at a time of fiscal consolidation and on-going restraint.

Post the Global Financial Crises, our government expects moderate economic growth, but household debt remains high. We need to return to surplus to ensure our government debt stays low.

The New Zealand State Services represents one-quarter of our country’s real economy, so finding savings and efficiencies is important for returning to surplus.

Part of that equation is rebalancing the core public service from back room employees to front line employees.

Under the previous Labour government, numbers exploded from 35,645 in 2004, to 45,297 in 2008. Clearly that was unsustainable; a 27 per cent increase in just four years.

In 2008 our Government introduced a cap on core public service numbers of 38,859 positions. We excluded certain frontline services - Community Probation and Psychological Services, Prison Services, Child Youth and Family, and Work and Income.

As you can see in the graph, those numbers are now reducing, and we have been able to reduce the cap further, which now stands at 36,475 positions.

Another part of the equation is the challenge of delivering better value for money, and the Better Public Services Programme is our response to that challenge.

But Better Public Services is also an opportunity to be more relevant to the modern public’s needs.

At the heart of the Better Public Services programme is a focus on measurable results that matter in day-to-day life for New Zealanders.

Ministers are demanding that departments perform to hit targets in several key areas:

• Reducing Long-term welfare dependence

• Boosting skills & employment

• Reducing crime

• Improving interaction with government for the public & business; and

• Supporting vulnerable children

These results were selected to focus and challenge our public servants. We knew these targets would be tough because they are complex and long-term problems that cut across Ministerial portfolios and agency boundaries.

We also knew they would require a more modern leadership culture in our public service, and we’ve been creating the tools to support that culture change, including through legislative change.

First, we created the Head of the State Services, or HoSS as it’s now called around Wellington. We are expanding the State Service Commissioner’s functions into this new HoSS role, giving him in effect a responsibility and a mandate across the state services to ensure our public services have the right leadership and talent development in place to deliver success.

Who are these leaders? Primarily, our chief executives.

I’d like to reflect on something New Zealand ministers have traditionally – or at least historically – veered away from commenting on: the symbiotic relationship between a responsible minister and their chief executive in getting a department to deliver results.

Despite being in the traditional Westminster mould, when it comes to leadership in the public sector, New Zealand has carved its own path; some would say a world-leading path.

Our chief executives are roughly equivalent to your permanent secretaries, but there are some important differences.

The main difference is that the New Zealand State Services Commissioner, who has the independent statutory responsibility for hiring and managing chief executives, appoints chief executives for fixed terms only – usually of about four to five years.

Come the fifth year, you are reappointed, or you are not. It’s a strong incentive for a chief executive to perform.

What does it mean for a New Zealand chief executive to perform, though?

I’m not talking about making sure all their process boxes are checked.

I’m talking about leading their departments to achieve tangible results.

It’s not enough to simply keep a department ticking along.

Ministers set the direction, and chief executives then put our priorities into action. So the relationship between ministers and chief executives is crucial for getting Better Public Services to work.

Ministers do have several levers when engaging with their chief executives:

Ministers issue an annual Letter of Expectations to the department, setting out priorities for the upcoming year.

The department’s Statement of Intent, or SOI will then outline how it intends to work towards those priorities, within the budget set by Ministers.

SOIs contain a baseline of forecast performance information against which Ministers, Members of Parliament and the public can assess the department’s actual performance in contributing to outcomes.

At the beginning of each performance year, Ministers are consulted on chief executive performance expectations. And then at the end of year, we also of course give feedback to their employer, the State Services Commissioner, on how they performed.

Before a chief executive even starts in the role, Ministers are also involved at two distinct stages in the appointment process.

I know there is an on-going internal debate in the United Kingdom around the appointment of permanent secretaries, and what the role of ministers is in that process.

We have a halfway house in the New Zealand system. Ministers confer with the State Services Commissioner about what qualities and skills the next chief executive will need to have to succeed in that job.

The Commissioner then recruits the person he or she believes has those qualities and skills, and is capable of delivering results.

New Zealand is celebrating 100 years of a professional, neutral public service. We consistently top the International Transparency rankings. Kiwis are pretty proud about the lack of corruption in our system, and we are keen to preserve this.

An independent appointment system fits with what we believe a professional, neutral public service to be in the New Zealand context. We don’t argue that it is flawless - and our system has continuously evolved to improve on itself - but it is working for where we are now.

Once a chief executive is in place, what then for a minister?

We are not involved in the day to day running of a department. That is a matter for the chief executive.

Again, here is a difference between the United Kingdom and New Zealand.

In the United Kingdom, your Cabinet members are physically located in their respective departments.

In New Zealand, Ministers are co-located with each other within our Parliament buildings; primarily the Beehive.

We would rarely physically visit our departments, and officials come to the Beehive to brief us. There is not just a theoretical separation of the Minister from his or her department’s operations, there is a physical separation.

But not being involved in operations doesn’t mean we don’t see a department’s organisational health.

When Iain Rennie became the State Services Commissioner, he was concerned that the public service was not perceived as taking ownership of its own performance improvement across departments.

While there were plenty of reports from external agencies and lobby groups – and these were often critical of the public service - these reports did not recognise the strengths of the public service.

The Commissioner also wanted to move the culture of the public service towards continuous improvement and innovation.

Performance Improvement Framework reports, or “PIF” reports, give ministers - and the general public - a snapshot of whether a chief executive is creating an organisation that is fit for purpose today and for the future.

We are seeing some interesting trends across PIF reports.

By and large, when a discrete event happens – such as the Christchurch earthquake – the public service really gears up and delivers some impressive results.

However, the public service hasn’t been as good at transacting business as usual. These PIF reports are helping departments to continuously improve at delivering on their core bread and butter business.

PIF reports also give Ministers independent assurance on their departments’ organisational health, as these reviews are undertaken by external experts; not by another public service department.

We can also tell how the public thinks departments are performing through Kiwis Count.

The State Services Commission’s Kiwis Count survey is a continuous polling programme. New Zealanders are asked about their recent experiences when using front line public services, such as hospitals, police, customs, and paying taxes. The Commission then reports to Ministers on a quarterly basis, using the last six months of data.

The survey also asks Kiwis what factors are most important to them when using a government service. The factor with the largest rating increase since the first Kiwis Count survey was ‘It’s an example of good value for tax dollars spent’.

I am proud to report that over the first two quarters since this survey became continuously running, we have seen performance lift from an overall score of 69 to 72 in the first quarter, and then in the second quarter from 72 to 74 out of 100.

Our government is creating further levers to ensure chief executives are working together towards the cross-portfolio outcomes we need.

Importantly, we created functional leads. This is a new way of organising our public services, so that a particular agency has the mandate and expertise to create efficiencies across specific parts of departmental operations. Our government has mandated functional leads in three areas: procurement, IT, and property management.

As one example of what functional leadership can achieve:

In November last year, I announced a 30 per cent reduction of the Wellington office footprint of five large Government departments.

The functional lead for property – our Property Management Centre of Expertise – did this by taking a system wide approach. It identified opportunities for leasing decisions across several departments to be taken together to achieve an economy of scale, and then applied their specialist expertise to manage the process.

It also identified space already being leased by one department that was surplus to needs and could be repurposed to meet another agency’s needs. Finally, it created efficiencies by co-locating agencies working in the same sector to the same accommodations.

The reduction in space reduction will save $338 million over 20 years, or about 181 million pounds sterling.

This may not sound impressive in the UK context, but it was a 20 per cent reduction in cost compared with the status quo. Imagine a 20 per cent reduction in London office costs, and you start to see the potential our functional leadership programme has for saving the taxpayer money.

Functional leadership is a step away from individual chief executive accountability for their department’s operations. We simply can’t achieve economies of scale if departments are not required to sign on and participate in functional leadership programmes. For Better Public Services to succeed, chief executives need to have regard to not only what their own department’s priorities are, but what the sector priorities are.

The State Sector and Public Finance Reform Bill is an omnibus bill that strengthens tools for managing the State sector and public finances in New Zealand.

It also requires chief executives to consider the collective interests of government, and make their stewardship role more explicitly focus on the Crown’s medium and long-term interests. Or put more simply, under the proposed changes, chief executives must by law work towards sector goals, not just their own department’s goals.

We have been very clear that we want cross-House support for these changes. Re-shaping our public service is not done lightly. Of course, there are no easy rides in politics, and I expect these proposals will be hotly debated.

It is a field that is dry and academic to many, but in practice it can have wide-reaching impacts for how our public service operates. It’s a field that can also trip up the newer players in our House of Representatives.

During the first reading of the Bill in September, one member of the House claimed the new legislation was trying to give the Prime Minister a power that would effectively make him a dictator over the public service.

In making this claim, that member overlooked that the provision had already been on our books in law for 24 years!

Where do the central agencies fit in all this?

New Zealand’s central agencies include the State Services Commission, the Treasury, and the Department of Prime Minister and Cabinet.

Together, they make up our corporate centre, and in theory are both the support base and driving force behind other agencies as they pursue our result targets. So, Ministers expect the corporate centre to step up and make progress happen faster, leading by example.

What we have found though is that there are still improvements that need to be made back in the corporate centre, before the rest of the picture can reach its potential.

Ernst & Young recently produced at the Commissioner’s request an Independent Quality Assessment of the Better Public Services programme. It certainly wasn’t sugar coated. It said:

“The programme has yet to develop critical elements that are fundamental and necessary to achieve its aims.”

“From our interviews it was not evident that leadership, ownership and prioritisation are at the levels required for better public services to be achieved against its stated culture change ambition.”

“Central agencies are seen, from the outside and by themselves, as not always presenting a united front.”

“The array of messages and demands sends a confusing message to departments on what needs to be produced for delivering results.”

Our corporate centre is working to address those criticisms about leadership, ownership and prioritisation in the report, including by developing a joint Performance Hub for providing performance advice on agencies across the Public sector.

We’re also learning from the United Kingdom experience in your public sector reforms. We all face these common challenges of the global recession, and a limited public purse.

The Right Honourable Francis Maude and Sir Bob Kerslake’s visionary Civil Service Reform Plan in 2012, to deliver a modernised civil service capable of supporting a prosperous United Kingdom, contains many elements attractive to governments committed to delivering taxpayers the efficiencies from public services they should expect as of right.

Indeed it is with a degree of envy that outsiders might witness the pace of change as the plan unfolds. I have watched the United Kingdom:

• develop centralised approaches to procurement, property, ICT and major projects to drive efficiencies

• drive spending cuts of 33-50% in admin budgets by 2014-2015

• abolish 114 quangos with plans to close more

• establish the first central government mutual, MyCSP, to administer civil service pensions

• launch an all-of-government website to provide information and access to government services

• establish eight major shared service centres for government departments

• pioneer contestable policy making and applying insights from behavioural science to public policy

I won’t go on, but looking at the United Kingdom’s achievements in a short period of time bolsters my confidence that the New Zealand public service can and will also deliver impressive results.

And speaking of results, let’s look at where the rubber meets the road: Is our BPS reform programme actually making a difference?

This month we reached our first litmus test of progress in the ten Better Public Services result areas. Later this year we will release a snapshot on progress.

Let’s start with our fifth target: that 85% of 18 year olds will have achieved NCEA level 2 or an equivalent qualification in 2017.

(NCEA Level 2 is equivalent to one step down from your “A” levels).

The Ministry of Education has begun working with schools and communities covering the bulk of students who are unlikely to achieve NCEA Level 2.

Initially 18 schools were supported to identify and assist 370 learners to achieve NCEA Level 2 in 2012. With a 50% success rate for these 370 learners, most of these schools will be on track to achieve 85% NCEA 2 in 2017.

So yes – we are already making a difference, and by trialling targeted assistance, we can see what does and doesn’t deliver results.

Part of our third goal is to increase infant immunisation rates. We want 95 per cent of eight-months-olds to be fully immunised by December 2014 and to maintain this through to June 2017.

Rates for Māori children and those who identify as living in poorer areas are a particular concern for us. When we came into Government in 2008, immunisation rates for Māori children lagged under the 50% mark.

Our first pulse-check is showing that we’re on track. For the three month period ending 30 September 2012, 87 per cent of eight month olds were fully immunised. This coverage rate already exceeds the Health Target goal of 85 percent coverage by July 2013.

The coverage rate for Maori was 78 percent and 81 percent for those living in deprivation deciles 9 and 10. This is a big increase, but there is still work to do.

Our seventh target is to reduce the crime rate by 15%, reduce the violent crime rate by 20%, and reduce the youth crime rate by 5% by June 2017.

As of now, all measures are on track to meet or exceed the targets. In the first period of the BPS programme, crime, violent crime and youth crime have dropped respectively by 6%, 7% and 4%. This is on top of a recorded crime rate that was at its lowest point in 30 years.

Our eight target – to reduce the re-imprisonment rate by 25% by 2017 – is also on track.

There has been a 7% reduction in the rate of re-convictions from the previous year. The re-imprisonment rate has only decreased slightly, which is expected due to the lag in rehabilitative interventions.

The Justice sector has prepared a joint 4 Year Plan, instead of separate plans as individual agencies. It aims to direct resources to where they will make the most difference. The Justice Sector Fund supports initiatives that will create further savings and test initiatives that will further support the BPS result targets.

Preventative policing, Courts and reducing reoffending operating models are being overhauled to be more offender, victim, and user-centred.

Summary

When our Government was elected to a second term in 2011, we were faced with a challenging picture; the Global Financial Crisis and the need to return to surplus.

We took that challenge – the need to save money – and turned it into an opportunity – showing the public that even with using less taxpayer money, we could deliver better services.

We put new tools in place to support agencies including through the legislative changes, created the Head of the State Services, and gave agencies functional lead mandates.

We’re already seeing the start of real results, but we want them faster, and we want them bigger. This is a challenge for both our Government, and for our public service leaders.

It is also a challenge for the UK Government, and our public sector leaders will no doubt continue to follow your progress with interest and learn from your successes.

Thank you.

ENDS

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