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Public sector cuts: ‘No reprieve’ for staff, as ministries signal years of fiscal restraint

Azaria Howell,
Publish Date
Wed, 29 May 2024, 5:00am
Photo / Mark Mitchell
Photo / Mark Mitchell

Public sector cuts: ‘No reprieve’ for staff, as ministries signal years of fiscal restraint

Azaria Howell,
Publish Date
Wed, 29 May 2024, 5:00am

A greater focus on restraint across the public sector is expected to go on well beyond the Budget, according to a leaked document from one agency, and official communications from others.

Agencies have been chasing cost-savings of between 6.5 and 7.5 per cent on average - some finding less and some slashing more, to strike the Government’s desired balance. Agencies under the latter directive are tasked with slashing back cutting more from their budgets if their staff numbers have seen a more significant increase since 2017.

It has also recently been confirmed that the Ministry of Foreign Affairs and Trade has been spared major from the extent of the cutting cuts, and only needs to trim its budget by one 1 per cent.

Foreign Minister Winston Peters has said $15 million in savings per year has been found, “from back-office efficiencies and lower priority activities to play our part in turning around the country’s fiscal position – for a total of $60m million across the forecast period”.

Last month, the Herald revealed that the Ministry of Māori Development was told to find millions in cost-savings, beyond the upcoming Budget.

A similar sentiment appears to be brewing at the Department of Internal Affairs (DIA).

A leaked document, sent to staff members at the Department of Internal Affairs in relation to their cost-cutting directive, quotes chief executive Paul James as saying: “We can expect greater focus on restraint, reprioritisation, value-for-money, alignment to priorities and efficiencies for some time, possibly 3-5 [three to five] years”.

In the introduction prefacing the proposal to cut jobs, James said “the first step” in the programme of what he calls a culture of responsible spending, is the initial baseline savings drive to find $1.5 billion a year in savings.

The department DIA has been tasked with 6.5 per cent cost-savings, and has been going line-by-line through building leases, freight costs, travel, contractors, consultants, catering, and events.
Roles are being cut, with staff told the agency cannot meet its savings requirements solely by cutting expenses and holding vacant positions.

The Herald understands final decisions will be made in June, staff will be reassigned through June and July, and a new structure at the department will come into force on 12 August 12.

In the lead-up to the Budget, Finance Minister Nicola Willis revealed the Government’s directive to slash-back spending would see thousands of jobs chopped, with hundreds more expected to come.

“Our hearts go out to anyone losing their jobs, but Budget 2024 has required us to carefully prioritise taxpayer dollars. Budget 2024 is unashamedly a budget for the frontline,” she said.

Agencies have been told to operate within reduced Crown-funded baselines from July this year.

The DIA document, seen by the Herald, states that following July, “we still have to propose some organisational structure changes”, due to both the Government’s fiscal sustainability programme and rising cost-pressures around salaries and corporate costs, including insurance and rent.

In a statement responding to questions about the apparent directive to find years of savings, Finance Minister Nicola Willis said the Government is committed to ensuring the “highest value from public expenditure”, to be delivered through the ongoing fiscal sustainability programme.

“No future savings targets have been set. Ministers and Cabinet will make decisions on final savings as part of Budget 2024. These will be announced on Budget Day,” Willis said.

Public Service Association national secretary Kerry Davies told NZME in an interview the cuts will impact “severely” on jobs, and will flow-on to “the delivery of services”.

Davies is sceptical that Willis’ first big spending package will be a “frontline” Budget.

“The cuts that are being made are the jobs and the services that enable the delivery of frontline services.”

Other agencies’ communications reveal a further annual focus on savings.

Communications sent to the Ministry of Māori Development Te Puni Kōkiri, obtained by the Herald through the Official Information Act, state the expectation for cost-savings was confirmed at the end of 2023, when Nicola Willis directed the agency to identify savings of 6.5 per cent “or $34.6m per year from the 2024/25 financial year”.

In its search for savings, the agency has paused recruitment and committed to reducing costs around travel and events.

A previous statement from Willis confirms agencies are expected to find about $1.5b billion per annum in savings. The Finance Minister’s mini-Budget, unveiled in December, includes $7.4b in savings over four years.

The Ministry for Primary Industries (MPI) has also confirmed, in a recent statement, it was asked by the Government to find 7.5 per cent savings “per annum starting from the financial year starting 1 July 1, 2024,” when releasing what it called final decisions.

Kerry Davies said the apparent directive was “really concerning”.

“What it says to people working in community and public services is that this is an ongoing process and there will be no reprieve from worrying about losing their jobs. It’s really hard for people to focus on delivering services and doing their job well if they’ve got the threat of losing their job hanging over them constantly,” she added.

MPI confirmed changes to business units will come into effect in the upcoming financial year.
The Ministry of Defence has not faced the same fate as the Ministry of Foreign Affairs and Trade, according to documents released to the Herald under the Official Information Act.

Speech notes from Secretary of Defence and agency chief executive Andrew Bridgman confirm the ministry’s target to save 7.5 per cent from “next financial year”, starting in July.

“Any specific details will remain budget sensitive until the Budget is released,” the document shows, redacting a number of points.

“I appreciate there is a degree of uncertainty in the public sector right now,” Bridgman said.
In a statement earlier this month, the ministry of Defence said it had not undertaken any change processes, adding vacancies continue to be considered on a case by case basis.

“The majority of our work programme relates to multi-year, large-scale military procurement and as projects are completed and new ones approved, our workforce can change as a result,” a spokesperson confirmed.

Ministry of Health staff have previously been informed the agency will “need to make changes by the time we go into the next financial year, or very soon thereafter”.

Going forward beyond the Budget, the Herald understands the Health Ministry’s decisions on its organisational structure will be announced after King’s Birthday on Monday.

It had been told to find 6.5 per cent savings.

Next week from June 4, Ministry of Health staffers will be invited to meetings if their job is proposed to be impacted or affected. The meetings are to be held the week following, to advise them of the decisions that have been made.

Following the individual talks after the Budget but before the commencement of the financial year, an all-staff meeting will be held, which staff have been told will not come with a questions and answers segment. It’s understood the Ministry of Health’s new structure won’t come into force until early September.

The timeline, outlined to Ministry of Health staff, comes after revelations around proposals on the table, including confirmation the ministry had been looking at slashing roles in tobacco regulation, and chose to cut jobs ahead of trimming down the salaries of its senior leadership team.

Other agencies have been under a voluntary redundancy scheme, and some ministries have confirmed new proposals.

Just last week, Ministry of Social Development (MSD) people and capability team leader Nadine Kilmister said it had started consulting with staff on proposed changes with four business groups.

MSD projects it will have a total reduction of 712 fulltime equivalent staff, including 218 of which are voluntary redundancies.

Azaria Howell is a Wellington-based multimedia reporter with an eye across the region. She joined NZME in 2022 and has a keen interest in city council decisions, public service agency reform and transport.

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