Speech to IPANZ (Institute of Public Administration New Zealand).Finance
As we look out at the next three-five years across the wider public service, there are a few issues that I think it would be useful for you, along with us, to be thinking about.
First though, I want to remind you in fairly simple terms about the general framework that the Government has brought to dealing with the huge challenge of providing public services in difficult times.
Back in 2010 we set some clear fiscal parameters. One of the most important was that you, as public servants, would know what your department’s budget would be beyond the financial year you were already in. What’s more, you are probably alone in the Western world in that those numbers are still the same today, three years later.
So that was intended to provide certainty. It was not intended to provide what everyone wanted, necessarily, but to make clear the parameters within which public organisations would be working. Alongside that certainty we have tried to create an environment where people can focus on how to do a better job, rather than how to get more money.
That aspect is one of the quite significant changes to the way Government runs its Budget process and its on-going interaction with departments. Probably the single best illustration of that is the four-year plans which are now the core vehicle for the Budget. Those four year plans are developing as strategic documents that are complimented by the performance improvement framework.
So the Budget, rather than itself being the way that Government imposes its strategy on the public service, becomes just a vehicle for the appropriations that we need to support the strategy that public sector organisations are following.
The traditional annual Budget cycle was an energy-sucking, frustrating exercise. It was often not only fruitless in its search for savings but destructive of the longer-term health of the large, complex organisations that government funds. So the ministerial bilateral still exists in some small pockets but it’s pretty much been eliminated because it’s an ineffective way to think about the tasks that we need to undertake on behalf of the public.
So we set clear fiscal grounds and created an environment where both Ministers and public organisations have the opportunity to take a longer-term view and think about their common sense of purpose for public services. Part of the deal is not to rush in and try to grab random savings out of these organisations.
The most recent development along that path has been the 2012 Cabinet signing up to a set of 10 results that we believe are important for New Zealand. And we have not only signed up for those results but we have signed up to the publication of them and the regular reporting of them in a way that no other Cabinet has ever done.
It’s quite a big step for politicians to voluntarily cut down their room for manoeuvre about what they are trying to achieve. But we’ve done that because of the confidence we have in our public service to achieve those results.
I can tell you that if Minister’s didn’t think we could achieve less child violence, lower re-offending rates of prisoners, or more kids getting through NCEA Level 2, we would not have signed up for them. That doesn’t mean, of course, that they are not very, very challenging targets.
But we signed up for them because we think we can achieve them and where we don’t achieve them, we will learn an awful lot trying.
The positive impact of that has become clearer by the week as we see more and more of the public service responding positively to that clarity.
Of course over time those results will change, like any measure. Perhaps we will find easier ways to achieve some of the results. Maybe we will find that in some instances the results can’t be achieved. Maybe we will find that a lot of our spending and interventions make no difference. Or as someone said to me, “if we are going to fail, lets fail cheaply, rather than expensively”.
So we are allowing for the possibility of failure. I don’t think that is such big deal because we owe it, particularly to those New Zealanders who are very dependent on our public services and who are themselves in a situation of vulnerability and powerlessness that we at least tolerate the potential embarrassment of failure in an effort to make significant changes to their lives.
At the forefront of our thinking, all the time, must be the people to whom we are delivering this vast array of services.
What I think goes along with that is a growing understanding of, what I think of as “collective thinking”. We’ve had some words for how we would all like activities of government to be different. One of those is ‘whole of government’. Well that’s got some application in some circumstances but actually, most of us aren’t trying to work with the whole of the government and if we tried to we would get nothing done so I’m not sure it’s a term that serves our purpose particularly well. It’s been a general notion which we haven’t found that useful in actually making choices.
Another term has been collaboration. Well, collaboration is a process not a result, and one of its features has been goodwill: that’s great. But collaboration neither invokes nor invites accountability, and that’s not great. Too often, collaboration means even larger and longer meetings.
However, when we start considering collective impact, it’s focused on what can together actually achieve. It’s not focussed on the fact that we’ve found out that there’s another department that does what we thought we were doing and so we’re going to work with them.
The public don’t really care about that. They care about results. They assume that we spend our time thinking about achieving results for them, not about designing processes for ourselves.
So where does the Minister of Finance’s obsession with the track to surplus, and the Government’s obsession with the track to surplus fit into this picture? Well it fits in very simply: What works for the community, works for the government’s books.
When we have one less prisoner reoffending, we save a lot of money. When we turn around one sickness beneficiary on the road to the Invalids Benefit, we save an enormous amount of money.
So our fiscal objectives are not contradicting the drive for better public services. Rather, our fiscal objectives will be achieved by better public services and that is why we put such a strong focus on improving those public services and a stronger focus, in fact, than we actually put on saving money.
I want to run through some of the notions that I think are going to be quite important and that I think are useful for you and us to think about over the next three-five years as the momentum of change in the public service picks up.
I don’t pretend that these are policy-wonk descriptions, rather they are general notions that certainly I have found useful and that I have distilled from listening to well-motivated, thoughtful people who I get to hear day after day in my office and down on the frontline.
The first one is this: “We know their names”. That is, for me, a very vivid way to capture the idea that we can actually get our arms around the most complex problems that government is trying resolve, and has tried to resolve for many decades.
We do know the name of every failing secondary school student. They’re not just categories such as “Maori” or “Pasifika” or “low-income” or whatever. They are boys and girls and we know who they are and what schools they attend. When you think about it that way, in my view it is a much stronger motivation to take actions that could make a difference.
Because when we’re trying to make the choice of overcoming our institutional differences or patch boundaries, we sometimes ask “is it worth it?” Well it is when you think of the boy who might be sitting in a classroom right now, or perhaps is being truant, and whose life could change if we in our well-paid jobs could only identify those things we need to change in order to make that boy’s life change.
We know the names of every prisoner who will be released in the next few years. Actually there are not that many of them. There are a few thousand. And we also know that any one of them who gets re-imprisoned will cost us $900,000 per year, and $250,000 in capital if a new prison bed is required.
We know the name of every solo mother under 18. There are 2600 of them. And we know that their children are the most vulnerable in our society which is why the government has contracted a supervising adult for every single one of them. And it’s only 2600 mothers, less than the population of a large secondary school and we know a lot about each person in our larger secondary schools.
We almost know the name of every workplace affected by the next regulation we are about to pass and whether it will make that workplace safer, less economic or more competitive. If we think about it that way we will ask more questions about those regulations before we pass them.
We will within a few years know the state of water quality in every significant waterway in New Zealand. That gives us the capacity, community by community, to make the changes we need to make to ensure that the environmental quality of that water doesn’t deteriorate, and to make those changes in a way that doesn’t reduce our economic growth.
So particularising these issues enhances our ability to solve the problems we’re trying to solve. Fortunately, I am seeing less in our policy papers - less of the broad generalisations that are meaningless when it comes to making decisions. My current example that I’d like to see stamped out is ‘we need culture change’. Well yeah, sure. But what? Where? How? Culture is what we do, not what we say. If you want to change the culture, go and do something different.
So what we’re trying to achieve, is to change one thing at a time, one person in particular, one community, one school, because until you change one, nothing is changed.
A second way of thinking about what’s going to work over the next few years is another really straightforward notion; we need other people to help us do our job. In fact, I would go a bit further. If you are not working with someone outside your department, or not part of some external review by somebody, then something’s wrong.
There is no function of government, or no purpose of government about which we know so much that we don’t need someone else’s input. I haven’t come across one yet. We are not a universe unto ourselves. Lots of people outside the public service solve complex problems every day - massively complex problems. Go and find a simple item in The Warehouse and then try to track the complexity of the supply chains that mean that that simple item ended up for sale on a discount in your local Warehouse. To get it there, someone solved a massive logistical problem, successfully. And we expect them to do that. They know a lot about that stuff. So why don’t we go and ask them, when we’re trying to solve our own problems, how they did it. How did so many organisations interact so precisely to deliver a result?
The public have to be customers of ours. They have no choice. The quid pro quo means we should have a deep and abiding respect for the impact of our actions on them. So other people can help us do the job. It’s becoming quite clear to all of those who are affected directly by the results that we publish, and it’s becoming quite clear to Ministers that if they are going be held accountable then it’s in our interests to find everyone else who can help us with what we’re trying to achieve. Not just someone else, but everyone else. And that means a much more outward-looking public service, and we are getting it.
If I could just use one example, we’ve done a useful exercise in recent times with the Association of Non-Government Organisations of Aotearoa, traditionally a very strong critic of the government, and particularly of centre-right governments. Treasury and MBIE have sat down with them and gone through the exercise of how government contracts with their membership and it’s thrown up major change because we’re listening and they’re speaking reasonably and they’re delighted to be part of policy-making change. So we need other people to help us do our job and if you’re not talking to them, well get started.
The third thing for the next 3-5 years is this: Get used to uncertainty. I could put it this way; learning is uncertainty. The biggest risk for the public sector is that because it is essentially monopolistic it doesn’t have to change on any given day. But in the long run, it does have to change and I think everyone actually now understands that.
The most unstable processes, the most unstable organisations, are those which are not regularly tested. Because then they don’t have to make the adjustments that need to be made. So in the public sector there are still a whole lot of transaction processes that are not subject to any competitive innovation or pressure on price so they haven’t changed in 20 years. Now they’re going to have to change substantially because we simply can’t afford to keep paying for inefficient, highly manual, complex transaction processes when we’ve got technology that can make those routine, and reduce the costs very significantly.
So that’s the trade-off for government. We are willing to tolerate and work with uncertainty so that we can learn how to do things better and that means shortening our learning loops. An example I can think of is education where there are plenty of people who have lots of advice about how to change the education system. But sometimes 10 years or more can pass between when we first think of an idea and begin to nut it out, and when it turns up in a Budget. But 14-year-olds in secondary school disengage within six weeks, not 10 years. So our 10-year learning loop is irrelevant to that boy whose name we know and who may be truant right now. If we’re not doing something for him now, inside six weeks, then we are letting him down and we’re letting down the taxpayers who think we know what we’re doing.
I think part of this toleration of uncertainty is to be a bit humble about what we do know.
Often I think we deal with issues, both politicians and public servants, with specious certainty. The fact is, there are things we have done for a long time and we don’t know what their impact is. So being open minded to the alternatives, to different possibilities, is very important.
A fourth thing to be thinking about over the next three-four years is the impact of technology. In a lot of our organisations now the only public equity is our ownership of the IT system. That’s it. The biggest capital investment the taxpayer has in your organisation is the IT system and our traditional habits around IT systems are pretty bad. What looks to any particular organisation like a one-off problem they need to deal with, looks to the Minister of Finance like a consistent litany of problems. Most weeks one way or another the failure of our thinking about IT comes across my desk. Novopay is just one of the more recent ones. Of course it doesn’t have to be that way. In fact, it can’t go on being that way.
In my view, because of the change of public expectations around the use of technology, and the opportunities for using it to change our business models and how we interact with the public, it’s going to be critical for anyone in senior management, and most people in middle management, to understand it. And that would be a big shift from where we’ve been, which is that our biggest most complicated investments are decided by “the IT guy”. Sometimes the senior management can remember who it is, but not always. I’m not saying it’s like that today, but I have to say that three or four years ago it was.
Those IT projects need to be owned by senior management and it is one of the principal tools for change alongside how we work with our people over the next four or five years. Technology and our people. That’s it. A lot of the other stuff is just commodity management - property, cars, desktops, whatever. Anyone can do that. In fact, I sometimes wonder why senior management in our organisations seem to love spending so much time on stuff anyone can do.
What is unique about your organisation is that no one else in the country knows what you know about that particular part of government that you are running. Understanding the link between what only you can do, and technology, is the critical part of being a successful and competent public servant of the future.
I think we will go through a period of change now in how Ministers and Cabinet deal with information and technology, in fact, we’ve been working on that for three years but we need to formalise it.
The most obvious manifestation is going to be the leadership function of the Government Chief Information Officer (GCIO). It’s not just the funding but the mandate and the GCIO needs a strong mandate because frankly, the public service technology establishment has not responded positively or well to the changed environment and that is going to have to change.
I just want to finish off with a few remarks about how far we’ve come since the first time I spoke to IPANZ as Deputy Prime Minister. Some of it is just raw numbers. I could give you any number of facts - here’s one that has struck me. The very first forecast I saw in late 2008 for spending in this financial year (ie the 2008 forecast of spending for 2012/13 for the whole government) was $76 billion dollars. Well by today, that’s dropped to $72 billion, which is roughly what we’re spending this year. So this year we will spend $4 billion less across government than four years ago we thought we were going to. That’s despite inflation and wage increases and with increased demand for all public services because at $72 billion we are producing a lot more high quality public services and some of them much more effective than they were before.
A current example is the recent announcement about more apprenticeships. That announcement is the culmination or output of three years of very hard work across a range of departments to sort out the youth pipeline and trade training which had turned into a political propaganda tool with all the enormous waste that you’d expect would come from a propaganda tool.
Now 14,000 young New Zealanders can get more and better training and we are spending less than four years ago in that area.
Another measure I’ve got is just the sheer scope of change that is going on now. I’m always reluctant to use the names of departments, so this isn’t a comprehensive list, I’m just thinking of the paperwork I’ve seen this week, and each one of these organisations appears to me to have gone through a fairly thorough process of re-thinking what they’re doing. Defence has probably done the most of any part of the public service - thinking about its purpose but then acting decisively to realign with that sense of purpose. And the list is long. Just in the past three or four days it includes ACC, Defence, MSD, IRD, the justice sector, natural resources sector, Department of Conversation, Ministry for Pacific Island Affairs, and then others like Education who are just getting under way. Now that is two thirds of the public service. So I think we should have a growing level of confidence that the way the public service is responding to the circumstances it finds itself in is really starting to show through. And for those who haven’t had a pretty big re-think about what they’re doing, they will almost certainly have to. We are only in the first year of a three-year programme to save a billion dollars.
Most organisations are getting ahead of the curve. Where they are not doing that, we are keen to support them to do so. So in so far as three or four years ago we set out in a changed world after a global financial crisis to achieve more for less, I’m pleased to say that because of your efforts, we are getting more for less and the principal beneficiaries of that are the New Zealand public.
You are meeting, I think, their expectations of a professional public service that knows what needs to be done and has the will and crucial skills to get on and do it.