Government to review spending on policy advice

  • Bill English
  • Tony Ryall
  • Rodney Hide
Finance Regulatory Reform State Services

As part of its drive to deliver better frontline public services, the Government today announced a review of spending on policy advice across its departments and agencies, which increased significantly under the previous government.

Between 2003 and 2009, total Government spending on policy advice across all ministries, departments and agencies is estimated to have jumped by more than 70 per cent - from about $510 million to $880 million.

"This is faster than the already rapid general increase in total Government spending during this period," Finance Minister Bill English says. "The amount spent on policy advice is now nearly three quarters of the Government's total annual police budget and it almost matches our annual spending on social housing.

"We spend $50 billion a year running the public sector and it is important that we are getting value for taxpayers as well as better frontline services.

"Delivering better, smarter public services is one of the Government's six policy drivers to achieve faster growth. This review is the latest step in that process and we're going into this review with an open mind about what it might find and how we might respond."

State Services Minister Tony Ryall says it is important to align public sector spending on policy advice with the Government's actual policy priorities.

"Part of this sharp increase in spending on policy advice may have been associated with developing new policies relevant to priority Government programmes, but it's not clear that this is the case," Mr Ryall says.

"This review will look at whether the focus and level of this increased spending actually aligns with Government priorities and is helping delivering better frontline services for the public."

Specifically, the review will assess:

  • Whether the level and focus of the Crown's investment in policy advice aligns with Government policy priorities.
  • Whether there is scope to refocus and/or reduce total spending on policy advice to ensure high professional standards, cost effectiveness and strong alignment with Government policy priorities.

The review will be conducted by an external team of former Treasury Secretary Graham Scott (chair), KPMG Australia partner Patricia Faulkner and expert consultant, ACC investment committee member and Commerce Commission member Pat Duignan.

The review team has been asked to report its findings to the three ministers by December. The estimated cost of the review is $124,000. This amount and the costs of supporting the review secretariat will be met by reallocating existing funding within the Treasury and the State Services Commission.

The review team will work with departmental chief executives on the project.

Regulatory Reform Minister Rodney Hide welcomed the review and its potential to reduce unnecessary costs across the public sector.

"The ACT Party's confidence and supply agreement with National provides for a series of taskforces to ‘undertake fundamental reviews of all base government spending in identified sectors', and this review is a direct outcome of that work.

"It's astonishing how government costs have blown out in recent years, putting huge pressure on families and the productive base of New Zealand," Mr Hide says.

"This spending review is good news for hardworking New Zealanders and just another example of ACT and National delivering on their election promises to boost productivity.

"I look forward to working with Ministers English and Ryall on any issues the review may raise."

Review terms of reference:

http://www.treasury.govt.nz/statesector/policyexpenditurereview/per-tor-aug10.pdf

Questions and answers

Why is this review occurring?

  • The Government is concerned that its spending on policy advice is estimated to have increased by more than 70 per cent between 2003 and 2009 - from about $510 million to $880 million.
  • This is faster than the already rapid increase in Government spending during this period. The amount spent on policy advice is now nearly three quarters of the Government's total annual police budget and it almost matches the annual spending on social housing.
  • While some of this increase may have been associated with the development of key policies, the Government has commissioned this review to assess:
  • o whether the level and focus of the Crown's investment in policy advice aligns with Government policy priorities; and
  • o whether there is scope to re-focus and/or reduce total expenditure on policy advice in order to ensure high professional standards, cost effectiveness and strong alignment with government policy priorities.
  • The National-ACT Confidence and Supply Agreement includes an agreement to establish a series of Taskforces that include private sector representatives and private sector chairs to undertake fundamental reviews of all base government spending in identified sectors.

How does the review fit within the Government's wider economic programme?

  • Delivering better, smarter public services is one of the Government's six policy drivers to achieve faster economic growth - so this is part of that wider programme. The Government wants to ensure that money spent across the public sector both represents value for taxpayers and contributes to better frontline services.

Which government departments are the biggest spenders on policy advice?

  • Spending on policy advice is accounted for differently by different departments. For some departments, the spending increases have come about because they have taken on new responsibilities. One of the review's first tasks will be to work closely with departments to understand what's behind those increases.

What will this review achieve?

  • The review aims to produce a number of recommendations so that policy makers across government are able to prepare for the future with the right resources, processes, structures and incentives.

What is the scope of the review?

  • The terms of reference asks the reviewers to confirm the agencies that fall within the scope of the review.
  • Defining the scope will be the first task of the reviewers when they meet in early August.

Will this review lead to expenditure cuts and job losses?

  • The reviewers are starting this work with an open mind as to the nature of the problem and potential solutions.
  • Any spending decisions will remain with the Government and it will respond to the report's recommendations as it believes is most appropriate.

Who will be consulted?

  • The reviewers believe that the input of policy agencies will be integral to the strength of the review. Therefore they intend to consult widely with policy agencies, as well as experts in public policy and management.
  • In addition, the reviewers would welcome submissions on these issues from the public.

How long will the review run for?

The review is required to complete its work by December.