ANI O'BRIEN: The Public Service isn’t a six-figure welfare scheme

The reaction to Nicola Willis’ pre-Budget speech today went full throttle before she had even delivered it. The proposals were not especially radical, but you would not know this if you interacted with any media today. It was astounding how quickly large sections of New Zealand’s political and media class moved to attack the measures intended to save money and make our government more efficient. The arguments for consolidating our public service and tightening our belts were shut down before they could even properly be debated.

The Public Service Association (PSA) are the union who represent a large chunk of the public service. Naturally, they have described the reforms as “wilful destruction”. Labour has characterised it as an attack on public service workers and is tying it to the pay equity changes that they characterised previously on an attack on women. The Greens exist to make absolutely everything part of a bigger American-centric culture war and somehow linked it to Elon Musk and DOGE.

None of these are surprising reactions. The PSA exists (in theory) to protect the jobs of their due-payers. It also hits their bottom line when they have fewer public servants from which to extract those dues. Labour, of course, exists to oppose the Government. I would usually have said they exist to proffer an alternative vision for the country, but they are currently refusing to do so.

Media reproduced union and Labour lines almost verbatim from press releases before Nicola Willis had even picked up the microphone at the Business North Harbour event at which she made the announcement. The PSA and the opposition were facilitated to set the narrative on the matter with the NZ Herald running the headline ahead of her speech: “‘Reckless’: Willis’ plan to cut thousands more public sector roles panned”. Stuff ran multiple headlines along the same lines: “Willis sacrificed women for her last Budget, and public servants for this one, says Labour” and “Government plan would cut 10,000 jobs and hammer Wellington, says union”.

The immediate framing was emotionally loaded and highly selective. Thousands of jobs were said to be “on the chopping block” with public servants “sacrificed,” frontline services “under threat,” and Wellington devastated. What was absent from much of this reporting was any real attempt to examine the underlying problems the Government is attempting to address, namely that New Zealand’s public sector bureaucracy has expanded beyond what is fiscally sustainable.

That the Herald said “more” jobs are being cut is telling. Much to the frustration of centre-right voters, this Government has actually pretty much maintained the size of the public service they inherited. There were about 47,250 full-time equivalents in 2017 when Labour took office and that had shot up to 65,700 by 2023 when they left. It is now at 63,657.

We have not been living under an austerity government and what Nicola Willis has announced is not slash and burn. She did not stand up and announce the abolition of public healthcare, the privatisation of schools, or the dismantling of the welfare state. What she outlined was a plan to reduce duplication inside the machinery of government itself by consolidating departments, centralising back-office functions, slowing bureaucratic growth, and accelerating the adoption of shared digital systems and AI-assisted administration.

It is possible to disagree with aspects of that programme without pretending it is some kind of unprecedented ideological extremism. In fact, the Act Party has made sure to make it clear that they would have liked to go further.

Fundamentally, the reaction to today’s news shows there seems to be disagreement about what the purpose of the public service is with one side saying it is the workforce dedicated to serving the public’s needs and the other seeming to think it is a welfare programme to provide six-figure salaries for university-graduates in Wellington.

The side treating the public service as welfare for the well-to-do oversaw the 2017-2023 period of rapid public service expansion, as well as sharp government expenditure rise, vast increase in debt, and the addition of entire layers of policy, communications, strategy and managerial functions throughout the state sector. Yet despite this enormous growth in administrative capacity, many measurable outcomes deteriorated rather than improved during this time.

It has been well-documented that educational achievement declined, healthcare waiting lists worsened, housing affordability collapsed further, and violent crime increased. Infrastructure delivery also remained expensive and painfully slow. As a consequence, public confidence in state capability weakened. I suppose if you don’t see the delivery of public services of the highest quality at lowest cost as the purpose of the public sector then this is unsurprising.

During the years of excess it was also not jobs in the frontlines that were created, it was highly paid back office jobs in massive communications or policy units. That is a large reason why the services did not improve in quality. More clinicians would likely make for faster hospital wait times, but additional communications advisors in Health New Zealand do not have the same effect. I guess you can watch their TikToks while you wait.

There has been a tendency to blur the distinction between frontline services and the administrative structures surrounding them in reporting. However, Willis explicitly stated in her speech that the proposed staffing targets apply to the “core crown service” which is ministries and government departments rather than teachers, police officers, nurses or doctors. The Government’s focus is the bureaucracy with its overlapping agencies.

This fact has not deterred some from apocalyptic predictions of total frontline collapse.

Part of the difficulty is that New Zealand’s political culture has become unusually resistant to discussing bureaucratic expansion as a problem in its own right. This is in my opinion, part of the Jacinda Effect. Under her premiership, increases in public sector staffing were implicitly treated as indicators of compassion, seriousness and social investment. More departments suggested stronger commitment to Doing The Right Thing and more advisers suggested greater expertise. Big bureaucracy became conflated with the delivery of good government. However, a government can employ more people while becoming less competent and spend more money while delivering poorer outcomes.

And so the Government’s proposed reforms are built around three broad ideas. The first is consolidation. Willis told us today that New Zealand currently operates with 39 ministries and departments administering budget lines. She contrasted this with countries such as Finland (12), Australia (16), and the United Kingdom (24), all of which operate with fewer central agencies relative to population and governmental scale.

Fragmented bureaucracies create duplication almost automatically and so separate ministries require separate executive teams, legal structures, communications operations, compliance systems, HR departments, and layers of interdepartmental coordination. These kinds of structures inevitably bed in and develop strong institutional incentives toward self-preservation regardless of whether they operate efficiently.

What has been announced indicates an approach to reining in the public sector that mirrors the logic of organisational consolidation in the private sector. When large companies merge, they routinely centralise administrative functions including shared payroll systems, technology platforms, HR operations, and procurement processes. Willis has effectively made the case that government administration should not be uniquely protected from similar restructuring pressures.

The second component of the reforms Willis highlighted was digitisation and AI adoption. Large organisations across the developed world are already integrating AI-assisted systems into administrative and analytical work at pace, but the public sector has lagged, as tends to be the case. Institutional incentives within government favour caution, process and legacy systems over rapid adaptation.

The examples she referred to were AI-assisted medical note-taking, cloud-based administrative systems, integrated customer-facing platforms and digitised back-office functions are already commonplace in many sectors. The Government’s position is that these technologies should reduce duplication and administrative overhead over time, allowing spending to be redirected toward more visible forms of service delivery. From the back office to the frontline.

The third element, reducing the size of the core public service workforce to roughly 55,000 by 2029, is obviously the most politically contentious. But even here, much of the commentary has obscured the scale of the previous expansion. The Finance Minister is not proposing the elimination of the modern state. This is actually largely just an attempt to return the size of the core bureaucracy to roughly the same proportion of the population that existed before Labour took office (1% of the population).

Criticism of this project is not necessarily illegitimate. Reforms are not guaranteed to succeed. Large bureaucratic restructures often fail as chaos reigns when those who have the most interest in preventing a restructure are the ones basically entrusted with enacting it. Governments frequently underestimate the complexity of administrative integration as well as the potential for oppositional human interests to hold back projects. So there are entirely legitimate concerns about implementation, pace, and unintended consequences.

The intensity of the reaction to Willis’ speech suggests many within Wellington remain deeply uncomfortable with that argument being made explicitly. What emerged throughout the day was not merely disagreement about staffing levels or agency structures, but a much deeper anxiety about questioning the moral legitimacy of bureaucratic growth itself.

That anxiety helps explain why so much reporting immediately defaulted to personalised emotional framing rather than sustained structural analysis. Stories about lost jobs are emotionally compelling and politically useful whereas discussions about duplicated governance structures, administrative layering and institutional incentives are less evocative.

However, as I say, and as the Government is desperate for Kiwis to understand, they are not going to suddenly fire 10,000 nurses or shut hospitals. Much of the savings, they say, will come from exactly the functions that rapidly expanded across the public sector over the last decade eg. communications teams, policy units, strategy divisions, duplicated HR structures, internal engagement roles, programme management offices, compliance layers and sprawling middle-management structures that accumulated as departments grew larger and more administratively complex.

Now, that does not mean every person working in those areas is individually incompetent or unnecessary. Large organisations naturally develop support functions over time and they can be vital to smooth running, but there are certainly opportunities to maximise efficiencies, as the corporates say. When separate ministries all maintain their own support structures duplication and waste are inevitable. Willis’ speech strongly suggested the Government believes many of these functions can either be consolidated across agencies or significantly streamlined through shared digital systems and automation.

There is also likely to be substantial reliance on attrition rather than dramatic overnight redundancies. Public sector turnover already exists through retirements, resignations and fixed-term contracts ending. If departments are instructed not to automatically refill every departing administrative role, staffing levels can gradually decline over several years without the kind of abrupt mass layoff scenario critics are invoking. The Government is clearly betting that technology and consolidation will allow agencies to absorb much of this reduction over time, particularly in clerical and back-office functions where digitisation has already transformed productivity in much of the private sector.

Stuff has reported that the following departments will not be subject to the cost saving measures and reduction in staff:

The New Zealand Defence Force, Police, Oranga Tamariki, Corrections, the Ministry of Health, the Ministry of Justice, the Government Communications Security Bureau, the New Zealand Security Intelligence Service, the Education Review Office, Crown Law, the Ministry of Defence, the Serious Fraud Office, Parliamentary agencies and most of the Ministry of Education - except its tertiary education functions.

Ani O'Brien writes at Thought Crimes