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Govt spending on contractors millions more than thought

Phil Pennington, Reporter

Government figures show some departments are spending up to 50 percent more on consultants this year than last.

State Services Commission (SSC) has the job of cutting back spending but has been unable to provide RNZ a breakdown of just what each agency is spending.

Ministry of Social Development (MSD) told RNZ it has chopped its contractor spending by more than half, from $33 million last year to just $17m this year.

This was "a genuine decrease", chief financial officer Bruce Simpson said in a statement.

But a few days later, after RNZ reported on Ministry of Business, Innovation and Employment (MBIE) and Inland Revenue's big spending, MSD came back.

It said if MSD adopted MBIE's approach, then its actual spending was $69m in 2018, not $17m; and $94m in 2017, not $33m.

This shows MSD's spending dropped in the past year - but also that it is three times more than MSD had told the public.

This was prompted about a year ago by a media leak about MBIE's contractor spending, followed by the government's order for a cut back across all agencies.

The State Services Commission was put in charge of this clampdown in June. However, when RNZ asked the commission to provide accurate figures on each department's spending on contractors it did not have them.

"We have developed guidance to improve the quality of reporting on contractors and consultants to Select Committee," commissioner Peter Hughes said in a statement.

"This guidance has now been provided to agencies and will apply retrospectively to the 2017-18 annual review process, and will provide an accurate baseline with which to compare into the future.

"SSC will use the same information for reporting the system view to ministers."

The 2017-18 annual reviews will come out from now until March.

Figures show it will take a major U-turn for some departments to reduce this spending.

Several departments spent 35 to 50 percent more on consultants this year than last - education, defence, and transport among them.

The biggest such spender, Inland Revenue, intends paying out another $180m next year (after a threefold rise in three years), saying its billion-dollar IT overhaul demanded this.

The other big spender, MBIE, said it was trying to cut back.

The Ministry of Health forecasts a slight rise to $21.4m.

State Services Minister Chris Hipkins was talking about "steady downward pressure" from next year.

Minister for Education and Leader of the House Chris Hipkins. Photo: VNP / Daniela Maoate-Cox

Mr Hughes said he expected to see an "overall reduction" in spending on contractors and consultants next year.

"It is important to note that the aim is to reduce expenditure overall, not strictly by each agency individually.

"For example, Inland Revenue may well show an increase in capital expenditure for contractors and consultants this year due to its significant IT development programme.

Among the limited number of agencies surveyed by RNZ were the state sector's two finance watchdogs.

Treasury is forecasting a 47 percent jump in consultant spending to $10 million next year. The Reserve Bank paid consultants $3m last year, triple that of a few years ago. Its spend for 2018 was not available.

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