Gabriel Makhlouf, Treasury, New Zealand: Exclusive Interview
Head of the New Zealand Treasury Gabriel Makhlouf, worked as a senior civil servant in the UK for 15 years before moving to the South Pacific country. He tells Global Government Forum what the two countries’ governments have in common, what sets them apart and what challenges lie ahead in New Zealand
Gabriel Makhlouf’s accent is somewhat hard to place. Sounding almost entirely British, a slight New Zealand twang sneaks in every now and then. Given his background, it is hardly surprising that his accent is difficult to pin down: Son to a UN diplomat, Makhlouf, chief executive and Secretary of the New Zealand Treasury, was born in Egypt, and has lived in countless countries, including the Congo, Bangladesh, Samoa, Fiji and Ethiopia and the UK, where he completed his secondary and university education.
His experience of living in different countries, he says, “has certainly made it easier for me to do a number of jobs that involve an understanding of international contexts and to move to New Zealand.” It may have been partly his background that made his transition from the UK to New Zealand five years ago a smooth one. But Makhlouf explains that the two countries, albeit 20,000km and 11 hours apart, have some similarities. With both nations being part of the Commonwealth and set up under the Westminster system of government, joining the New Zealand government as a senior official after 15 years in the British senior civil service, “felt very familiar”, he says.
However, he adds that there are some differences between the two systems, one being in the relationship between ministers and senior officials. Makhlouf, who is the government’s chief economic and financial adviser, takes his own role as an example and explains: “In the UK, there is no constitutional difference between the Chancellor of the Exchequer and the Treasury: the Chancellor is the Treasury, and all the officials in the Treasury work for the Chancellor. In New Zealand, if [a newspaper article] says ‘the Treasury says X’ that would be me and my colleagues, and if it was to quote the Minister of Finance, it would quote him or refer to ‘the Government.’ So that’s a distinctive difference between us, although, of course, we work for the government of the day in the same way as UK Treasury officials do.”
New Zealand is also much smaller than the UK: its population of around 4.5m amounts to just 7% of that in the UK, which is home to 64.1m people. The small size, he says, “means that some decisions can be made relatively quickly here. I’m not sure it necessarily makes the issues themselves less complex or more straightforward, but in New Zealand there’s only one house of Parliament, it’s a single chamber, so the process of making legislation can be quicker than in the UK.”
Another major difference in the two governments is the role of departments and their relationship with the centre of government. In New Zealand, the public sector was radically reformed over several years beginning in the late 1980s: Tightly held central control gave way to autonomous departments, headed by chief executives with the authority to take decisions relating to the whole of their organisations as well as the freedom to hire and fire staff and negotiate pay. A contractual relationship between chief executives and their ministers was introduced meaning chief executives could be held to account for outputs. “It was up to them how they wanted to organise their department, what they did and all the rest of it,” Makhlouf says.
In the UK, departmental spending, including civil service pay is strictly controlled by the centre. Several top civil servants have argued for greater pay flexibility, especially for the most senior ranks so that they can attract more skilled people. But the idea has been met with little appetite and pay restrictions are being cited as the number one reason why government is finding it hard to attract the best into its top posts. GovernUp, a new think-tank looking at civil service reform, has called for greater freedoms for delivery agencies, similar to the New Zealand model. But Makhlouf explains that the government in New Zealand has recently started to address some of the inefficiencies caused by departments’ autonomy.
Departments’ strong independence meant that the system became fragmented. “In the beginning [fragmentation] was very deliberate,” he says. “The structure that was set up gave enormous accountability to chief executives to run the departments and deliver outputs to their minister.” But, he adds that over the years the government has realised that “the world has become more complicated and that many issues can’t be successfully delivered by one organisation – they require working together across agencies.”
To better connect the different departments, and to “in many ways force agencies to be working across the system rather than just within their own organisations”, the government introduced a range of measures, Makhlouf says: “Three years ago, the current government announced that it wanted to achieve ten ‘better public service’ results over a period of five years.” These goals range from reduction in benefit recipients, improvement in education, reduction in crime, to greater e-connectivity between businesses and individual citizens and the government. Each has a designated chief executive and minister, but rather than working away at the project by themselves, it is their task to bring together “a group of chief executives to work together to succeed.”
Another area in which the government is actively trying to join up departments is ICT procurement and accommodation: “We’ve now got functional leads on ICT, procurement and accommodation who essentially lead on behalf of all departments. In the past, every department would do its own thing, but now we work through these particular functional leads to maximise the value and effectiveness in our spend.” This has also enabled, he adds, “a much greater assurance function around big [ICT] projects.”
Over the last few years, the departments have also reformed their approach to talent management approach for its most significant positions: “We now have much more coordinated talent management across the public service,” Makhlouf says, “so all our top talent is now considered by a career board of chief executives. The idea is that you make sure that we have sight of talented individuals and can guide their development in the interests of the whole service rather than just individual agencies.” Similarly appointments to around “80 key positions” are still handled by departments and their chief executives, but they also require “approval from the centre.”
These recent moves seem to be in line with what the UK government has been working towards: it has been strengthening its professions, some of which are taking a more and more central approach to recruitment and talent management; it created the Government Digital Service which has the objective to lead the digital transformation across government, making public services digital by default, and simpler, clearer and faster to use; and it created and has been expanding the scope of the Crown Commercial Service which is responsible for improving key commercial and procurement activity across departments.
The biggest difference
Makhlouf points to a bigger difference that sets the two systems apart: transparency. In New Zealand, civil servants’ advice to ministers is generally published in its entirety once a decision is made. In the UK, this kind of information is kept out of the public’s sight. “So it’s a much more transparent regime [here] than in the UK,” he says.
The UK has moved to greater transparency with the introduction of the Freedom of Information Act, which came into force in 2005 and creates a public right of access to information held by public authorities. But, while the public can use the act to request information, the UK government does not publish information to the extent that the New Zealand government does. “My impression is that in New Zealand we publish a lot more information than in the UK,” he says.
Opponents to this level of openness in the UK argue that the government needs a ‘safe space’ to discuss matters. Makhlouf says that “this also applies here – you do need a safe space to consider issues, so if issues are under active consideration, then papers don’t get published. But once the decision’s taken, the need for a safe space is less obvious and the advice is made public.” And, he adds, “some material is redacted, for example for commercial confidentiality, but generally speaking, it can get published pretty quickly after it’s provided. How long it takes will vary but, “for example, within a couple of months of 21 May, when our budget was announced, we will have published the advice that went into the preparation of the budget.”
Exposing all this advice means that “the public can see what the arguments were for a particular decision, they can see the different trade-offs that governments inevitably have to make, and they’re better informed,” Makhlouf says.
Does the constant prospect of having one’s advice published make him and his colleagues more cautious and less free and frank? Not really, he replies. “I think it’s all second nature here, at least in the Treasury, it’s just the way it’s done. I think people want to give their best advice as a matter of professional pride. But I suppose different people will react differently to the knowledge that their advice will get published at some point.”
A tradition of transparency
This kind of philosophy goes back a long time in New Zealand, he explains. It is enshrined in the Official Information Act, which has been around for more than 30 years. In the UK, on the other hand, the Freedom of Information Act “is still relatively young”.
Makhlouf is a big fan of New Zealand’s openness and believes other governments, including the UK, could learn a thing or two from the country’s approach. “I think transparency is a good thing. My experience of it here has been positive. I mean, sure there are costs to operating a system of publishing advice and one needs to think about how you actually administer a system like that, but the principle of transparency, I think, is a positive thing.” He added that “other countries could benefit from that degree of transparency – even that of the UK, which is rated highly by Transparency International’s financial transparency index.”
Asked what he sees as his biggest achievements in his current role so far, he says pragmatically: “I don’t spend a lot of time thinking about what I’ve achieved, the focus is very much on the now and on where we’re going.” However, asked to reflect on what his department has achieved collectively over the years, he becomes more chatty: “Some of the things we’ve done over the last few years which I’m very proud of include the development of our Living Standards Framework – the work we’ve done to enable the better management of welfare spending and our external focus.”
The Treasury sees its mission as working towards higher living standards for New Zealanders, and the framework takes into account traditional factors such as economic growth but also sustainability, risk, equity and social infrastructure. Led by Makhlouf, it “starts from the proposition that although economic growth matters, it is not the only thing that matters to people, and it is one of a number of factors that should go into the development of good policy,” he says.
Moving this agenda forward is on the top of Makhlouf’s list of priorities. It has already had an impact on the Treasury’s work including its attitude to welfare spending. Officials are focused on ensuring “they understand the long-term drivers of welfare costs including identifying where up-front investment would make a difference to reduce the long-term liability”. It has also meant that Treasury officials are spending more time working with stakeholders in the business and wider community so as to “enable advice to be grounded in reality”.
But the Treasury and other departments need to work together. In order to succeed, he says, the public sector must “work differently and much more as a coordinated, integrated public service as opposed to a collection of individuals.” While this is “work-in-progress” and “moving in the right direction”, he says further work is needed in order to get “to a position where we can be confident the new ways of working have become the new normal.”
The biggest risk the country faces, he says, is “not seizing the opportunities in front of it: New Zealand has been around for 175 years – a lot less than the UK – but for the first time in those 175 years, it is part of the region of the world that is growing the fastest. There’ll be growth in the US, and there’ll be growth in Europe, but actually Asia is where we’re going to see an explosion in the number of people in the middle classes. It’s Asia where we’re going to see pretty spectacular growth, so the big challenge and opportunity for us is to integrate ourselves as a country much more closely with the rest of Asia, and that’s a very exciting time ahead, but it’s not going to be straightforward.”
Asked how New Zealand can achieve this level of integration, he says that “there’s no single silver bullet”, but adds that the “potential for people-to-people links” is increasing with, for example, more and more students coming to study in New Zealand,“many New Zealanders living in Asia” and vice versa. “We need to get our businesses connected, and have more inward and outward direct investment,” he says. “And we need to invest more in language skills that connect us to Asia.”
He also calls for “a good set of free trade agreements”, and adds that China is currently New Zealand’s single biggest trading partner, and that the country has a “very good relationships with the ASEAN community”. He adds that New Zealand is “in the process of negotiating the Trans-Pacific Partnership agreement which involves a number of Asia-Pacific countries and the United States.”
Given his experience of living in multiple countries and his ability to grasp international contexts, Makhlouf seems well placed to drive these cross-border relations. His background can only be of help when attempting to integrate New Zealand further into Asia. But Makhlouf’s enthusiasm will not be enough by itself to ensure New Zealand does not miss a big opportunity. It will require cooperation from departments across government. But, with current drives to ensure greater collaboration across government agencies and international trade agreements on the rise, things seem to be moving that way.