Turmoil ahead: will the pendulum swing again to change New Zealand’s public sector?

By on 19/09/2023 | Updated on 19/09/2023
A picture of the executive wing of the New Zealand Parliament Buildings, known as the Beehive
The executive wing of the New Zealand Parliament Buildings, known as the Beehive, with Bowen House to the left and Old Government Buildings on the right. Photo: Szilas, reproduced under public domain via wikipedia

With the general election in New Zealand less than a month away, the country’s public services are braced for change. Tim Fish explores New Zealand’s public service reform history and how a new balancing act is being developed for the future

With its State Sector Act 1988, New Zealand became the poster-boy for a new type of public sector reform agenda – New Public Management (NPM). This advocated introducing private sector practises as an attempt to increase efficiency and improve the way the delivery of public services were measured through creating agencies empowered to drive operational delivery. These reforms were part of the market-based political agenda that has dominated the developed world since the 1980s.

NPM was intended to address the problems associated with the concept of traditional public administration that had governed civil service practises in New Zealand since 1912 and was thought to be partially responsible for decades of low growth and relative economic decline.

However, the intentions of the State Sector Act 1988 and NPM were not fully realised.

Dr Flavia Donadelli, a senior lecturer with the School of Government at Victoria University of Wellington says that New Zealand’s reforms were said to be “the purest model of NPM in the world, at least theoretically on paper, but in reality that is not how it works when bringing in abstract ideas and implementing them”.

A paper published in July 2023 by Donadelli and professor Rodney Scott from the University of New South Wales in Australia, ‘Dynamics of public administration reform processes: contrasting top-down purity and bottom-up bricolage reform in New Zealand’, stated that since the passing of the 1988 State Sector Act, New Zealand’s journey of public sector reform has been through various stages.

Read more: New Zealand election battle lines drawn over public services

An initial period of change followed the 1988 Act under the Labour government of David Lange that lasted through to 1990, and then there was a period of stabilisation that lasted through to around 2011. After the global financial crisis there was a process of gradual reform that took place under administrations of both left and right that, in many ways, reversed the central tenets of NPM. This culminated in the Public Service Act 2020 under the Labour-led government of Jacinda Ardern that officially repealed the 1988 Act.

New Zealand’s journey was more radical than in other countries because its political system at the time – a first-past-the-post electoral system, unicameral Parliament, centralised government and uncodified constitution meant that changes could be implemented much faster. Since 1996, New Zealand has had a proportional representation voting system usually requiring multiparty governments.

Donadelli says that rather than reversing NPM and returning to the practises of the past, the Public Sector Act 2020 has instead taken New Zealand’s public sector into a new post-NPM era.

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She told Global Government Forum that NPM was “very negative in many aspects regarding fragmentation of government and lack of communications that generated many problems. We are not moving opposite to NPM but towards a [post-NPM] philosophy that is opposing some of those assumptions, at least in theory”.

Moving to a values-based approach for government

There is no agreed consensus on the description of what post-NPM looks like, but Donadelli says there is “some level of agreement that post-NPM is much more value-based, with government focused on values, accountability, democracy, inclusion, and on outcomes instead of direct outputs, with more coordination, more centralisation, and politicisation with decisions from the top”.

Public policy expert, professor Grant Duncan, told Global Government Forum that since the late 1990s New Zealand “quietly stepped back from the public sector reforms quite significantly”.

He adds: “In terms of the core public service there was a realisation that, when importing modern management techniques from the private sector into the public sector, some things stuck and some didn’t.”

In particular, the two NPM reforms that caused the most problems were the structure of the public services and the use of performance-related pay.

Structural reforms under NPM saw large bureaucracies disaggregated into more single-purpose agencies and separated out of the core service. The intention was to make them more focused on delivery and to reduce state-control and influence. However, Duncan says this kind of fragmentation has not worked and there has been a loss of strategic oversight and whole-of-government coordination. “Even the single-purpose agencies were sometimes competing with each other, rather than collaborating across government,” he says.

Read more: Trust and teamwork: Hannah Cameron on how New Zealand dodged the COVID bullet

Performance-related pay saw an incremental reversal as the introduction of key performance indicators saw a behavioural displacement among staff, which narrowed their focus on delivering what gets measured to the exclusion of all else.

The Labour-led coalition government elected in 2017 sought to speed up and solidify the reversal of NPM and passed the Public Sector Act 2020. It has tried to reverse the fragmentation of the public service by reintroducing principles of public service for civil servants, with organisational values and behaviours set across departments and agencies. It has also reintroduced pay equity and collective bargaining. Meanwhile the public service commissioner has a stronger role in the service leading a public services leadership team of chief executives. To encourage collaboration the 2020 Act also introduced the ability to create interdepartmental ventures and joint operational arrangements to deliver services across a small number of agencies.

“You need a more whole-of-government focus to serve ministers and cabinet more effectively because a lot of big policy issues are inherently multidimensional, they’re not single-purpose soluble problems,” Duncan says. However, he added that Labour’s problem is that they have tried to centralise everything as a solution.

“Centralising the 16 Institutes of Technology and Polytechnics was a disaster… and the health sector isn’t performing any better thanks to centralisation. They have had structural reforms as a solution and then they’ve gotten fixed on the solution and lost sight of what they’re trying to actually improve.”

Despite a possible trend in the public sector journey towards a post-NPM policy agenda, Donadelli says traditional NPM “is still very strong” in government. She says that recent announcements by the main political parties advocating cuts to public spending as “motivated by an austerity mentality that seems to be coming back, that we have to save and be efficient during times of economic crisis”. Duncan says that it is possible New Zealand has reached a “high water mark” in the post-COVID era and should there be a change of government come October “there could be some pressures to re-institute some of the more managerial principles” as advocated under NPM.

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About Tim Fish

Tim Fish is a government and defence journalist with experience in politics and global travel. With a MA degree in War Studies and work as reporter on public service publications, Tim has expertise and has written extensively on government and international security.

One Comment

  1. Greg says:

    Great to understand some of the context for current public sector malaise and under-delivery.

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