Rt Hon John Key
Prime Minister
15 March 2012

Better Public Services
Speech to the Auckland Chamber of Commerce

Ladies and gentlemen.

Thank you for coming this afternoon.

It’s a great privilege to have won the trust and goodwill of New Zealanders for a second term in Government.

I don’t take that for granted.

That’s why we’re working hard to take the country forward and deliver strong and stable government, just as we did over the last three years.

Today I want to talk about public services.

But before I do, I want to put this speech in the context of the Government’s overall priorities.

We have four priorities this term.

The first is to responsibly manage the Government’s finances.

We’re committed to returning the Government’s books to surplus in 2014/15 and that target is on track, despite events in Europe and the forecast slowdown in world growth.

Our second priority this term is to continue building a more competitive and productive economy.

We’ve got an economic action plan with the 120 key things we’ve been doing to build a more competitive economy.

We are currently developing that plan further. Over time we will be adding more initiatives that contribute to building a better environment for business growth.

Our third priority is to deliver better public services to New Zealanders within tight financial constraints.

That’s what I’m going to talk about today.

And our final priority is to rebuild Christchurch, our second-largest city.

So a better-performing public sector is central to what we will be doing as a Government over the next three years.

And it is hugely important for all New Zealanders.

For a start, New Zealanders care deeply about the quality of the public services they receive and what those services actually achieve.

They care, for example, whether the health system is treating people promptly and effectively.

They want to know that all kids are getting the chance to achieve at school.

And they want to know that government is tackling crime and looking after the most vulnerable members in society.

Second, those same New Zealanders are also taxpayers, so in the end they pay the bills.

They want to be assured that the public sector is spending money with the same sort of care they would themselves, because ultimately that money comes out of their pockets.

And finally, the public sector – defined most widely – makes up about a quarter of the economy so it has a big influence on our overall economic performance.

So the public sector is important.

And it’s changing.

It’s changing already and it will change more over the next few years.

The public sector will become more innovative, efficient and focused on delivering what New Zealanders really want and expect.

I’m talking here about a system that’s organised more around delivering results.

That means getting traction on difficult issues like reducing crime, reducing long-term welfare dependency and reducing educational underachievement.

And I’m talking about changing the whole way government interacts with New Zealanders.

At the same time, public services will have a sharper focus on costs. I expect the public service to have the same focus on its spending that New Zealand businesses and households do already.

All that adds up to a change in culture, which the Government expects and is going to support.

There are already pockets of change in the public sector.

The Defence Force, for example, has committed to a significant change programme.

This involves, among other things, having civilians, rather than uniformed staff, in a number of support roles, and using outside providers for services like maintenance and security.

That programme will free up $350 to $400 million a year, all of which will be reinvested in the Defence Force for projects like weapons upgrades and new equipment.

Government agencies have been jointly purchasing supplies such as vehicles, office supplies, air travel and legal services. So far that process is expected to save almost $300 million over the next few years.

Agencies have also been clubbing together to share corporate services, like finance and HR.

We’ve brought the Ministry of Fisheries, MAF and the Food Safety Authority together to make the new Ministry for Primary Industries. That has meant a stronger focus on the primary sector, as well as significant cost savings.

Infrastructure projects have involved private sector expertise and disciplines.

The new prison at Wiri, for example, will be designed, financed, built, operated and maintained by a private sector consortium.

As a result, the whole-of-life costs are expected to be at least 10 per cent lower than they otherwise would have been.

New technology has been used to deliver better services in some areas, for example the use of SmartGate at Auckland, Wellington and Christchurch airports.

So, as I said, there are pockets of really effective change in the public sector, but pockets aren’t enough. It has to be much more widespread.

We want all government agencies to be constantly looking at how they can better deliver services, and do so without ramping up their costs.

That’s, after all, what businesses and non-government organisations are doing all the time.

The public sector employs some of the best and brightest in this country. I want to give them the flexibility, the encouragement and the mandate to make real change.

To help us think about these issues, we established the Better Public Services Advisory Group, bringing together senior people from business, NGOs and government.

The Advisory Group’s report is being released today, and it sets a clear direction for change.

I’d like to thank the members of that Group, whose advice has informed the changes I am announcing today.

There is more in the report, as well, which the Government is working through as we focus on getting better results, and greater efficiency, from the public sector.

Today I am announcing three changes.

The first change I’m announcing is that there will be a new results-driven focus for the public service.

The public service will be set challenges and will be accountable for achieving them.

So I have identified 10 challenging results that I want to see achieved over the next three to five years.

Achieving these results will be difficult and demanding. In fact for some of them it will be extremely difficult.

But I make no apology for my high expectations.

I came into politics to make a difference.

And it is time for a clear focus on what will make New Zealand a better place.

Number one - I expect a reduction in long-term welfare dependency. In particular I want to see a significant drop in the number of people who have been on a benefit for more than 12 months. At the moment about 215,000 people are in that category, and that’s far too many.

Number two – I expect to see more young children, and particularly Maori and Pacific children, in early childhood education. That’s because all the evidence shows that time spent in early childhood education helps future learning.

Number three – I expect immunisation rates for infants to increase, and I want to see a substantial reduction in rheumatic fever cases among children. These are important health issues for children and were part of our policy at the last election.

Number four – I expect a reduction in the number of assaults on children. Far too many children in New Zealand suffer abuse and assault, and that is simply not acceptable.

Number five – I expect more young people to come through the education system with a solid base of skills, whether they get those at school or at a tertiary institution. So I want to see an increase in the proportion of 18-year-olds with NCEA level 2 or an equivalent qualification. Good progress has been made in this area over the last few years, but I want to see even more.

Number six – I expect to see a more skilled workforce, with an increase in the number of people coming through with advanced trade qualifications, diplomas and degrees.

Number seven – I expect a reduction in the crime rate. And that doesn’t just mean total crime, it also means violent crime and it means youth crime. I want to see all these measures coming down.

Number eight – I expect a reduction in the rate of re-offending, from people who are in prison or serving a community-based sentence.

I also want to change the way government interacts with people and businesses.

Doing business with government, and getting information from government, should be easy.

We live in a world of social media, online sales, internet banking and apps for almost everything.

But the advances we see in the private sector – the sort people have come to expect – have not been picked up well by the public sector.

Part of that is technical. I’ve actually been shocked at how obsolete many public sector IT systems are, and how big the challenge will be to upgrade and modernise them.

The Government is already investing heavily in this area, as we are with ultra-fast broadband, and that will continue to ramp up over the next few years.

But we don't want to just tack new technology onto current business practices.

We are serious about creating a sharper sense of purpose, and that involves maximising the use of technology to provide better and faster services.

I want to see technology used to create a step-change in customer service.

So in addition to the eight results I’ve just mentioned, I want to see two more things.

Number nine – I expect to see a one-stop online shop for all government advice and support that businesses need.

And number ten – I expect to see transactions with government completed easily in a digital environment.

So those are my 10 expectations.

They are not a wish list – they are a to-do list.

They are not everything the Government is doing, or everything the Government thinks is important.

But they are a set of results where I want to see real progress.

For some of these results, we already have processes underway to begin tackling them.

Our welfare reforms, for example, if implemented well and followed through by departments, will help to reduce the number of people who have been on a benefit for more than 12 months.

In other areas we will need to do a lot more work.

Many of the results fall between or across the responsibilities of individual government departments. That’s part of the reason they are difficult.

So achieving these results means changing the way the public sector works.

It means, for example, making people accountable for achieving something, not just for managing a department or agency.

And it means giving public sector leaders more flexibility to operate in different ways.

Some of these changes will require amendments to the State Sector Act and the Public Finance Act.

I have appointed Ministers to lead each of these 10 results, along with a public service chief executive who is accountable for demonstrating real progress against his or her result.

Responsible Ministers are expecting to sign off the initial plans to deliver against these results by the end of this month.

Underneath each of the results will be a measurable and stretching target, like a certain percentage increase or decrease within a particular time.

We have already decided one of these concrete targets.

For example, the Minister of Education has told me that for result number five she has set a target of 85 per cent of 18-year-olds having NCEA level 2 or equivalent in five years.

The current figure is around 68 per cent, so achieving the target will be very tough.

But I don’t want easy targets. I want targets that are going to stretch the ability of the public sector to deliver them, and that are going to force change.

Because if they are easy targets they aren’t worth doing.

This is not an exercise in ticking boxes.

The targets will be signed off and announced by 30 June, and we will be regularly measuring progress against them.

This information will be publicly available, so New Zealanders will be able to judge for themselves how well we are doing.

So that is the first change I am announcing today.

The second change I want to announce is that the Government is resetting the cap on core government administration, at a lower level.

This term, there will be no more than 36,475 full-time equivalent positions in core government administration.

We are under that number now and we will stay under it.

The cap will count most people working in government departments and in some Crown entities, but doesn’t include frontline staff like teachers, police officers, hospital staff or prison officers.

We campaigned on this during last year's election and we are delivering on that promise.

Having a cap worked well in our first term.

When we came into Government in 2008, we immediately imposed a cap of just under 39,000 FTE positions in core government administration.

That cap was successful in turning around what had been a huge increase in public service numbers.

The definition of core government administration wasn’t around at the time, but we know that from 2002 to 2008 the number of people employed in government departments increased by around 12,000 FTEs. That’s an overall increase of 38 per cent in just six years.

Our cap changed that. The number of FTE positions in core government administration stopped growing, and then dropped by about 2,400 over three years.

That is not a radical decrease by any means.

It does, however, reflect the fact that the public service is subject to the same pressures that are on households and businesses right across New Zealand.

We want to keep that pressure on staffing numbers – again, in a sensible and modest way – which is why we are lowering the cap to 36,475.

I do not want the number of positions to rise.

In fact I am confident that staffing numbers will stay under the new cap, given the tight budgets in the public sector.

The third change I am announcing today is that Cabinet has agreed in principle to establish a single, dedicated, business-facing government department.

Our intention is to create a new Ministry of Business, Innovation and Employment on 1 July this year.

That may seem like a quick timeframe but, as I said at the beginning of this speech, we are serious about creating a new public service that is innovative, efficient, and focused on delivering what New Zealanders really want and expect.

At 1 July, this new department would integrate the functions of:

• The Ministry of Economic Development.


• The Department of Labour.


• The Ministry of Science and Innovation.


• The Department of Building and Housing.

The new department would have around 3,200 employees at the outset, making it a similar size as the Ministry of Justice.

We have asked for a due diligence report in April, which will provide detailed advice on implementation and transition.

This report will also include advice on the future location of some current functions of the Department of Building and Housing, such as social housing policy and the Tenancy Service.

We’ve always said there is a high hurdle for structural change in the public sector. The benefits have to significantly outweigh the costs.

A single business-facing department meets that test.

It will help drive the Government’s priority of building a more productive and competitive economy.

It will strengthen the public service’s ability to work on business policy, regulation and engagement, so the Government will get a much more co-ordinated and focused resource.

And it will be easier for New Zealand businesses to engage with government, rather than dealing separately with a number of different agencies when they are seeking advice or support.

Given our recent experience of bringing departments together – into the Ministry for Primary Industries, for example – we also expect to see efficiencies through reducing duplication and overlaps.

It is our intention for current employees of the four departments to move across to the new Ministry on 1 July, and for there to be changes at the senior leadership team level.

Agencies have been informed today and Chief Executives will be communicating this proposal with their staff.

It is worth noting that other countries have also established single, business-facing government departments in recent years.

The United Kingdom, for example, established the Department for Business, Innovation and Skills in 2009, and Australia last year established the Department of Industry, Innovation, Science, Research and Tertiary Education.

And I do want to say that this is the only departmental merger we are currently planning.

I’m not ruling them out in the future, but there is no plan for wholesale reorganisation.

We already have a very full plate with the work that is already underway and the changes I have announced today.

To recap, the three changes I have announced today are:

• A set of 10 challenging results I expect the public sector to achieve over the next three to five years.


• A lower cap on the number of FTE positions in core government administration.


• A new business-facing government department.

Together, these changes represent a major shift – a shift towards delivering results that really matter to New Zealanders, and delivering them within the very real financial constraints we are all under.

Today I have outlined the way forward for a public sector that makes a real difference to the lives of New Zealanders.

A public sector that works together to get results.

A public sector that embraces innovation.

A public sector that spends taxpayers’ money as carefully as they would themselves.

A public sector that sees the potential of what it can achieve.

And a public sector that delivers for all New Zealanders when they need it.

Ladies and gentlemen, I believe that the public sector I have talked about today is going to make a very positive difference for this country.

ENDS

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