Read this headline and weep: Public sector didn’t understand their own departments: English
Senior managers of government departments had little understanding of how their organisations ran when the government took office in 2008, says Finance Minister Bill English.
Addressing a Trans-Tasman Business Circle lunch in Wellington, English said that while people in the capital were more sceptical, the rest of the country have “tears of joy” in their eyes at the government’s plans to rein in the public sector after a decade of heavy spending increases.
It’s not a lack of sympathy for the people affected as individuals. Change is often difficult and unsettling especially if your job is under threat. But from the outside the public sector appears to be bloated and inefficient.
No private sector manager would last long if s/he didn’t understand what they were managing, there’s no excuse for allowing it in the public sector.
However, public service bosses were grasping nettle.
“I’m impressed that departments realise these are not circumstances they can wait out,” he said. “Two years ago, most public sector heads did not understand their organisations. They have a better grip on it now”, following benchmarking studies and a steady focus on cost reduction.
“They now need better industrial relations,” said English. “We can’t get through this process without intensive engagement between management and, particularly, front line staff.”
Nonetheless, the actual cuts expected of government departments over the next four years amounted to only 1% of total spending, in keeping with the government’s political strategy of making “reasonably significant but not too scary decisions” on the way to its longer term goals.
The trick is cut the fat without damaging the muscle. It’s a balancing act which requires the co-operation of the people involved, at least some of whom have it in their power to sabotage the plans.
“That recipe appears to be working,” English said. “Despite having delivered the tightest Budget in 20 years, we have got pretty broad public approval for it. They understand why we’re doing what we are doing.”
If the latest Budget’s forecasts were correct, New Zealand could expect to be one of only two developed economies in the Organisation for Economic Cooperation and Development to be running a Budget surplus by 2015.
There is quite a bit of scepticism about Budget forecast for growth but we are already seeing increased economic activity in the provinces.
Two small examples: I was ordering curtains for one of the dairy farm houses last week and the business owners said they were very busy. A friend rang from Central Otago today, she’s wanting curtains and one business she went to said it would be the end of the month before they’d have time to measure her windows.
The highest prices for agricultural commodities since the Holyoake years would underpin the recovery, while there was no question about whether or not $15 billion to $20 billion would be spent rebuilding Christchurch over the next three or four years.
“It will be spent,” he said, and the impact on the New Zealand economy would be, relatively speaking, three times as great as the rebuild required by the Japanese tsunami.
However, he predicted the non-tradeable sector – businesses not involved in producing for export and import substitution markets – would continue to find times tough for the foreseeable future.
“The great thing about this global recession is that it was an unambiguous signal to stop borrowing up large and spending. That’s why it’s still tough running a retail outlet in Willis Street (in Wellington’s central business district). There has been a big shift in New Zealanders’ attitudes.
“Miserable economists expect people to back to old bad habits” once the economy improves. “However, I believe in you,” English told the high end Wellington business audience.
A combination of the lessons learned from the recession and the aftermath of the Canterbury earthquakes has changed attitudes to spending in the south.
There’s always been a Presbyterian attitude to conspicuous consumption down here. That’s even more evident now with people more committed to saving and investment and a lot less interested in buying things for buying’s sake.