New Zealand: An Early Adopter of PMR…

…but still reforming

The 1980s, NZ style…Peter Jackson’s Bad Taste, 1987

Sir Robert Muldoon, PM 1975-1984David Lange, PM 1984-1989

Protesting the Springbok tour, 1981

Split Enz’ True Colours,

1980

System generating deteriorating fiscal and debt positions

Core state and state trading enterprises performing poorly

Public sector inflexible and unresponsive No accountability for major failures Poor retention of quality staff Poor information systems led to poor decisions Budget process unstable Input controls limited efficiency and flexibility

◦ Micro-management rather than freedom to manage

Before the Initial Reforms:

Performance management: ◦ About supporting better decision making;◦ Rests on accountability for results;◦ Should distinguish different elements of

performance. Financial reporting, budgeting and control:

◦ Should support accountability for results;◦ Should rely on robust measures – accrual

accounting;◦ Needs independently-set accounting rules;◦ Needs to promote budget management not

maximization;◦ Should replace financial controls with financial

incentives.

Core Propositions of Reform

State sector employment rules:◦ Should support neutral public service responsive to

Ministers;◦ Are ideally merit-based, transparent and involve

Ministers;◦ Work better if decentralized;◦ Need to distinguish government’s role as regulator from

employer. Structure of public service:

◦ Best served by separating commercial from non-commercial;

◦ Maximize neutrality between public and private trading enterprises;

◦ On non-commercial side needs to create focus and expose conflicts;

◦ Should facilitate contestability in advice and service

Core Propositions of Reform (cont.)

Systemically better fiscal and debt performance◦ Tested through GFC

Improved core and state trading performance – not perfect

Improved accountability – also not perfect Better staff retention – but internal bidding up

◦ Difficulty competing with private sector Better decisions – but mistakes still happen Managers freer to manage – but loss of big

picture

After the Initial Reforms

What did the Reforms of the 1980s achieve?

Improve/Neutral

System generating deteriorating fiscal and debt positions ICore state and trading enterprises performing poorly IPublic sector inflexible and unresponsive I/NNo accountability for major failures I/NPoor retention of quality staff IPoor information and systems led to poor decisions IBudget Process unstable IInput controls limited efficiency and flexibility Micro-management rather than freedom to manage I

Specification of and accountability for outcomes Only partial success in operation of accountability Weak customer focus Poor incentives to innovate or capture economies of

scale Problem of silos – multiple contributors to outcomes Clients want more flexibility and responsiveness Too narrow a view of risk Room for greater efficiency gains

◦ Contestability of supply, adopting new technology Quality of policy advice mixed Stronger leadership needed from centre More generally, a need to push harder to make the

system achieve results

Weaknesses & Challenges since then:

New Zealand’s recent reform efforts

• Performance Improvement Framework• Investment Statement of the Government of New Zealand

• Better Public Services Initiative

A joint Central Agency initiative to help State Sector leaders drive performance improvements in agencies and sectors. Self-review and independent review.

Turning the heat up on Ministers and Chief Executives to focus on achieving Government priorities and BAU.

Each agency develops a plan in response to the recommendations in the reviews. Central agencies monitor and support agencies to ensure their improvement plans are implemented.

Additionally, biennial surveys of public views of public sector performance.

Performance Improvement Framework

Builds on a history of strengthening PFM since the 1980s, including the Long-Term Fiscal Statements.

Provides an overview of the significant assets and liabilities on the Crown's balance sheet, how they have changed and how they are forecast to change over the next five years

Provides an articulation of balance sheet risks, allowing them to be better managed

Increases the external scrutiny of the Government’s financial management

Shifts the focus from income and expenditure to investment, and from individual agencies to the

Crown’s overall position

Investment Statement of the Government of New Zealand

Led and championed by the PM Changing the public sector model and culture. Building on early success in bringing down the road

toll since the mid-1990s. Specific results areas:

◦ Reducing long-term welfare dependency; ◦ Supporting vulnerable children;◦ Boosting skills and employment; ◦ Reducing crime; ◦ Improving government interaction with New

Zealanders.

Better Public Services: Results

‣ CEs will lead sectors to deliver these results◦ Identify critical, measurable results to achieve

Ministers’ priorities◦ Work to and publically report on Results Action

Plans◦ Align organizations, and work with others, to

achieve results

Better Public Services: Results (cont.)

Greater involvement of the private sector:◦ Proposed contestability in provision of core

services. Proposed requirement to market-test whether tasks could be done better through outsourcing, whether to private sector or CSOs?

◦ Increased, and innovative, use of PPPs. The build/run PPP for a new prison includes incentives aimed at reducing recidivism

‣ Ministers are considering providing greater flexibility for agency Chief Executives, with proposals to:◦ Change the State Sector Act to provide more

organizational options to deliver results: sector boards, joint ventures, executive agencies, policy

hubs.

Changing How We Work

◦ Change the Public Finance Act to support results focus: consolidate Votes; strengthen incentives for collaboration and results; four-year budget plans, and financial accountability, by sector as well as department; manage across years.

‣ Greater use of technology, including online channels

Changing How We Work (cont.)

Consolidation◦ Ministry of Business, Innovation and

Employment from four existing Departments and Ministries. The goal is to create a single business-facing agency.

◦ Recently, the Ministry of Primary Industries formed to encompass all government work across the agricultural, horticultural, fisheries and aquaculture, forestry and food sectors, as well as biosecurity.

Changing the Structure

◦ The three Central Agencies (Treasury, State Services Commission and the Department of Prime Minister and Cabinet) now share administrative and support functions and are charged with working more collaboratively together.

Reducing the number of core government administration employees to 36,475 FTE

Changing the Structure (cont.)

Do the basics well Be nice to accountants (and other professions) Outcomes matter – but so do outputs Mindset matters - profoundly

Personal Reflections

A dynamic public sector is good for the soul The paradox of improvements in performance

management itself not measured well Ongoing and constant reform can avoid huge

disruption◦ But truly “no gain without pain”.

Personal Reflections

Striving to be better, not resting on your laurels Seek input from the best – then make it work for you Dealing with scale Importance of regional integration What should be the role of the public sector in a

small country?◦ SoEs◦ Mixed Ownership Model◦ Privatization

Public is rightfully demanding higher performance and more involvement

Never waste a good crisis

What Can We Learn from Each Other?