Government to reduce reliance on consultants

05 July 2018

NZ Government: The Government will reduce the reliance on expensive consultants and contractors, saving taxpayers many millions of dollars a year, State Services Minister Chris Hipkins said today.

“The Government has made a decision to lift the ‘cap’ on core public servant numbers put in place by the previous Government,” Chris Hipkins said.

“The cap was introduced at the height of the global financial crisis but it created perverse incentives and in the following years its arbitrary nature forced the previous Government to find creative ways to get around it.

“The total cost to taxpayers of contractors and consultants up to June last year (2017) was more than $550 million*.

“This is an increase of $272 million – nearly double – on the amount spent in 2008/09, before the cap was introduced.

“We want to bring this spending back down over time and invest any savings in permanent staff.

“In removing the cap, this government wants to see the public service re-build their in-house capability and invest in permanent and long term staff, rather than spend millions on temporary contractors,” Mr Hipkins said.

“This Government has big ambitions for the Public Service.

“We want a public service with an international reputation for excellence and that means attracting and retaining the best talent to careers in the Public Service.

“It’s important we invest in the Public Service because public servants are the people who deliver the vital services that improve the wellbeing of New Zealanders and their families every day.”

Existing mechanisms were in place to manage the Public Service workforce, Mr Hipkins said.

“The most effective way to manage the Public Service is fiscal discipline and accountability,” Mr Hipkins said.

“Lifting the cap creates incentives for agencies to find efficiency savings. It’s up to agency chief executives to demonstrate why they can no longer manage within existing budgets.”

“The Government will also be held to account on public service numbers through Parliament’s select committee process and beefed up answers to annual estimates and financial review questionnaires, which asks departments to justify spending on external consultants and contractors and why internal resources could not be used.

“I’ve made my expectations to the State Services Commissioner very clear and he is confident that he and agency chief executives can reduce the dependence on consultants and contractors as we invest more in rebuilding the Public Service,” Mr Hipkins said.

The relevant Cabinet papers and minutes can be found here.

Note: Sourced from Select Committee answers. At 30 June 2017, there were 29 Public Service departments. Twenty two of them provided answers to Select Committee on contractors and consultancy expenditure. The total spend was $546 million). For those same agencies, the increase since 2008/09 was $272 million (99%).




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