The Government expects to save $2.4 billion by overhauling New Zealand’s public service, including reducing the number of departments, increasing the use of artificial intelligence, and cutting the number of public servants by nearly 9000. 

As the Herald reported last night, Finance Minister Nicola Willis is using a pre-Budget speech in Auckland today to outline three legs to the Government’s public service reforms, which she expects to improve services, lift productivity and deliver better value for money. 

Over the next three to five years, the Government will “significantly reduce” the number of public service agencies, with the new Ministry of Cities, Environment, Regions and Transport (MCERT) being used as an example of “what is possible”, Finance Minister Nicola Willis said. 

Customer-facing and back-office systems will be digitised, with artificial intelligence (AI) embedded “as a basic expectation for all public entities”. The aim is to make services “easier and more affordable” for people to interact with. 

At the same time, Willis said the Government will “pull the brakes on the increase in overall public servant numbers”, with a target of public servants being about 1% of the population. 

She said this is what the historic norm was prior to an increase under Labour. The public service currently equates to about 1.2% of the population. In numerical terms, it rose from about 48,000 people when Labour took office in 2017 to around 63,000 in December last year. 

“We will be tracking progress towards a numerical target of no more than 55,000 full time equivalent public service employees by July 2029. That’s 8700 fewer than were employed in December last year,” Willis said. 

“Let me stress that these targets apply to the core public service and do not include teachers, nurses, doctors, police or people employed by Crown entities. We fully expect that with good budgeting we will be hiring more nurses, police officers and others in critical frontline roles.” 

Willis said a reduction in workers would be achieved by “doing the things your business considers routine: allowing for natural attrition, stopping duplication, streamlining back-office functions, accelerating uptake of digital tech and requiring government agencies to report every quarter on their progress towards the targets”. 

She said that “to reflect and drive the efficiencies” expected from the reforms, the Budget will reduce most agencies operating Budgets by 2% in the coming year, followed by a further 5% in each of the following two years. 

The agencies excluded from the Government’s savings exercise include the Defence Force, Police, Oranga Tamariki, Corrections, the Ministry of Health, the Ministry of Justice, the Ministry of Education (excluding tertiary functions), the Government Communications Security Bureau, the New Zealand Security Intelligence Service, the Education Review Office, Crown Law, the Ministry of Defence, the Serious Fraud Office, and Parliamentary agencies. 

Finance Minister Nicola Willis at a North Harbour Business lunch event. Photo / Dean Purcell 

“Those savings add up, and have created significant headroom for higher-priority investments, a total of $2.4 billion over the forecast period, averaging $597 million a year. 

“These savings will now be deployed to better purposes – to delivering more services in our health system, to increasing educational resources for our schools, to building infrastructure and strengthening our defence force and police.” 

In speaking about the reduction to Government departments, Willis highlighted that there are 39 departments and ministries administering Budget lines in New Zealand, compared to 16 in Australia, 24 in the UK and around 12 in Finland. 

“Following today’s announcement, public service agencies will be asked to come up with proposals to logically merge their existing activities around citizen-facing functions, using common technology platforms. We expect to announce more detail in the coming months.” 

Public Service Minister Paul Goldsmith said the public service growth rate between 2017 and 2023 was nearly three times faster than the overall labour force, while back-office and support functions grew significantly faster than frontline service delivery roles. 

“Some of that growth was necessary during the Covid pandemic, but over the long-term New Zealand cannot sustain administrative growth outpacing the productive economy. 

“This overhaul is about ensuring more resources reach frontline services and fewer are tied up in duplication and administration.” 

Deputy Prime Minister David Seymour in his capacity as Act leader has campaigned on reducing the number of departments. 

Earlier this year, he said he wanted the Ministry of Arts, Culture and Heritage to absorb the ministries of Ethnic Communities, Women, Pacific Peoples, Seniors, Youth, and Māori Development. 

Responding to Willis’ announcement, Seymour welcomed a reduction in Government departments and spending while calling for cuts to go deeper. 

“Reducing core public service FTEs to below 55,000 by July 2029 is a slower reduction than ACT campaigned on, but it proves our long-held position was right.” 

His desire to shrink the size of government also included the number of ministers, echoing his previous comments supporting a 20-minister cap with only one or two departments each. 

Seymour teased another announcement tomorrow in which he would “reveal how many regulators this country has”. 

“It will show that the public service headcount is only one part of a much larger problem. We have a twisted spaghetti of regulators who don’t just cost money to fund, but suck up people’s time and force others to give up completely.” 

Speaking to reporters this morning at Parliament, Luxon acknowledged people would lose their jobs as a result of his Government’s public service cuts, which he was quick to defend. 

“Yes, there will be job losses over time. 

“The public service is not a make-work function, it’s not here just to maintain jobs and maintain a position of how it was always run since 1995, in the same way. 

“We have to constantly evolve the public service to make sure it’s on point and it’s delivering for New Zealanders.” 

The Government is currently creating a new Ministry for Cities, Environment, Regions and Transport (MCERT), which merges the Ministry for the Environment with the Ministry of Housing and Urban Development, the Ministry of Transport, and parts of the Department of Internal Affairs. 

Luxon pointed to the new ministry as a recognition central Government had failed in some of its collaboration with local government, and it made sense to join ministries together. 

“There’ll be cases where it doesn’t make sense for it to come together, but there are also lots of cases where we have endlessly duplicated IT services, accounts payable services, lots of back-office functions.” 

Luxon didn’t rule out reforming the number of ministers in his Government, given one of the many gripes he had was ministries reporting to several ministers at a time. 

Labour leader Chris Hipkins said the proposed public service job cuts weren’t “good news for New Zealanders”, noting that a large portion were based outside of Wellington. 

He suggested that frontline workers could be caught up in the losses. 

“They’re social workers working with vulnerable kids and families, people working in our prisons, people working at our border, people working in the conservation estate, they are frontline jobs.” 

Hipkins said he had “no problem” with a “more integrated public service” and using technology, but he wasn’t keen on “setting arbitrary targets”. 

“There is no way you could reduce that many people working for our public service without reducing frontline services.” 

Asked if he would like a “more integrated service” that had the same headcount of workers, Hipkins acknowledged that may lead to job losses. He said a particular headcount shouldn’t be a measure of success. 

“We should be focused on having the right number of people to do the jobs that we need.”