National’s arbitrary cap on staff numbers has caused this blowout in consultants and contractors costs, plain and simple. They’re not delivering more efficient public services, in fact quite the opposite – Kiwis are paying more to get less. It can’t possibly be more efficient to make someone redundant one day and then reengage them on consultants rates only a few days later, as we’re now seeing happen throughout the public sector.

National’s supposed drive for greater efficiency in the public service has failed miserably. They’ve failed to adequately monitor the effect of their cuts, failed to stop cost blowouts in other areas, and failed to live up to their promise of a more efficient and effective public service. The consultancy culture has gotten so out of hand under National that Bill English’s own department, the Treasury, even hired a consultant to write a review on the use of consultants.

In these tight economic times, Kiwis want to know that the government is spending their tax dollar wisely. A more efficient and effective public service should be a major priority for any government. National has failed to deliver it.

This was inevitably going to be one of the consequences of National’s arbitrary ‘cap’ on the number of people employed by the public service. If government departments aren’t allowed to employ new staff, but still have to do the same amount of work, or in some cases even more, what will they do? They’ll contract the labour in, and it looks like that’s what’s happening.

As Danya Levy’s story on Stuff reminds us, last month the Defence force had to admit that it had rehired two Navy staff just weeks after making them redundant after it was unable to fill their roles. The more arbitrary cuts National inflicts, the more of this we’re going to see.

I’ve blogged before that I support a greater focus on efficiency and outcomes within the public service, but the National government are doing things back to front. They’re too focused on what they can cut and what they can sell, rather than reviewing what they actually want the public service to deliver. That’s where there attention should be focused.

Sue Moroney’s Parental Leave and Employment Protection (Six Months’ Paid Leave) Amendment Bill

This Bill extends paid parental leave to 26 weeks, which, among other things, supports the World Health Organisation recommendation that exclusive breastfeeding is recommended up to 6 months of age. The ability for parents to choose to care for newborn babies is an essential part of supporting families to develop nurturing relationships.

Extending paid parental leave from the current entitlement of 14 weeks to 26 weeks would support families and also create jobs across the economy as employers engage staff to replace those on paid parental leave. As the majority of paid parental leave is uplifted by women, it has the added benefit of creating jobs in areas of the economy where women work, while supporting families and the well-being of children.

This Bill recognises the fiscal implications of this additional entitlement,by staging the implementation of 26 weeks paid parental leave over the course of 3 years.

Lianne Dalziel’s Illegal Contracts (Unlawful Limitation on Regulators’ Powers) Amendment Bill

This Bill will amend the Illegal Contracts Act 1970, to extend the coverage of the Act to prohibit attempts to limit the power of any regulator to award any remedy or distribute the proceeds of any settlement or court order to any individual.

This issue came to light with the ING/ANZ settlement, where ING had set a deadline for investors with money caught up in the frozen funds, (ING Diversified Yield Fund (DYF) and the ING Regular Income Fund (RIF)) to sign up to a partial compensation deal, but in so doing the investors were forced to sign away their right to take further legal action against ING, or even participate in the benefits of someone else taking action against ING. This was despite the fact that the matter was still being investigated by the Commerce Commission.

The offer letter contained a release clause which included the following terms:

“By accepting this Offer you agree to surrender, settle and release all other rights or claims you may have against certain parties in connection with the relevant Fund… including any claims or the extent of any claims of which you are not currently aware, and any claims brought on your behalf or for your benefit by another person.

“…It also means you are agreeing not to benefit from any claim made by any other person in connection with the Funds…”

A Release Disclosure Document was annexed to the Offer Letter and this contained a list of those covered by the release (essentially ING, ANZ, NZ Guardian Trust, and all of the financial advisers who had advised on the investment in the Fund) and referred to the investigations being undertaken by the Banking Ombudsman and the Commerce Commission.

The question that arises is whether, as a matter of public policy, companies that may have transgressed the regulatory framework they operate under should be allowed to make a settlement conditional on these terms.

There is no problem making a settlement conditional on not proceeding with a civil cause of action, but where a regulator has identified a breach of the very rules designed to protect investors, no such agreement should be allowed to stand. It simply exacerbates the wrong should it transpire that these rules were broken.

Over half a billion dollars were stranded in the ING product funds, with a lot of it representing the life savings of elderly people who continue to be angry and confused at the way they were treated.

It is not fair that people were forced to take their chances on accepting a deal that would prevent them benefiting from any action that could follow a finding that ING had breached its statutory obligations.

If the Commerce Commission inquiry produces no findings of wrongdoing on the part of ING or those offering investments in the two Funds (DYF & RIF) then there is no problem. If on the other hand they are found wanting by the Commerce Commission in terms of their legal responsibilities to their investors, this Bill will have retrospective application. A public statement was made prior to the closing of the settlement offer, making it clear that a private member’s bill with retrospective application would be introduced.

The question now is why John Key didn’t take decisive action earlier. He promised to set high standards for his ministers, yet yesterday he was claiming Smith had done nothing wrong.

As late as this morning Keywas reported as saying if he sacked every Minister who made an error of judgement he wouldn’t have many left. Hardly a way to show his confidence in his own team…

1. Setting targets for the public service

It’s a good thing to set clearer targets for the public service, but Ministers can’t abdicate all responsibility by placing all the onus on departments to achieve them. Ministers set the budgets, sign-off the strategies and plans, and have a huge amount of say over the directions the public service will take when seeking to achieve those targets. They are still responsible. We also need to recognise that some of the targets we set will have long lead-times. For example, getting more 18 year olds with at least NCEA Level 2 starts when those very same kids are 2 and 3 years old, if not before.

2. Capping the core public service at a lower level

As I’ve noted before, this is an ‘input’ measure and cuts against John Key’s stated intention of focusing the public service on ‘outcomes’. It’s also pretty arbitrary and can lead to unintended consequences. For example, if a govt agency needs to take on new people in order to deliver on one of the outcome goals, but they’re up against their quota of staff, they could end up hiring external contractors or ‘outsourcing’ at a higher price than they could deliver the same outcome for internally if they didn’t face such an arbitrary constraint.

3. Creation of a new ’super-ministry’

Restructuring is often seen as something you do when you don’t have a clear sense of what you’re trying to achieve but want to look like you’re ‘doing something’. I agree with what John Key said “Few problems are solved by significant reorganisations – in fact, many more tend to be created. It is easy to underestimate the amount of energy and inspiration soaked up by institutional change, as well as the loss of personal and institutional knowledge”. Shame he didn’t stick to that.

The public service can continually be sliced and diced in the never-ending search for ‘natural synergies’ but what we should really be focused on is getting the whole of government working more effectively together. Constant uncertainty and restructuring doesn’t achieve that.

So overall impressions? We’ve seen enough action plans, strategies, and targets from National. This latest list follows on from the six-point plan in 2010, the revised six-point plan in 2011 with 41 actions, and 2012’s 120-point plan. Time to start making some progress. About the only ‘progress’ they can point to so far is more people out of work.

I know that there will be some who argue David should have set out a detailed policy agenda for the next Labour government, just 3 months after an election we lost. Here is what David has to say about that:

I want to arrive in government on Day One with a detailed plan that will actually achieve a shift to a new, job-rich, high-value economy. We won’t be waiting around for officials to give us cautious ideas and suggest a few adjustments. We will be presenting them with detailed and far-reaching policies. Labour will spend the next two years listening, drawing up our plans. We will accept the best ideas wherever they come from. On Day One in office we will be ready to go.

That highlights a huge difference in approach between John Key and David Shearer. David resisted the temptation to rattle off a gimicky “action plan” that ticks a few boxes but doesn’t deliver the real change that New Zealand needs. Instead he set out a vision, and committed Labour to building a comprehensive plan based on the best advice and the best evidence available. That’s real leadership.

Tonight TV3 have gone one better and unearthed video footage of him speaking to the PSA Conference back in September 2008. Not only does John Key rule out asset sales, he makes a compelling case against them.

“There’ll be no asset sales in the first term of a National government, and there may never be asset sales in the years ahead… Nor am I hell-bent on selling assets actually. I personally think it’s not the issue that the current economy faces. In the world of making the boat go faster, actually I don’t think selling off state assets is going to make the boat go faster.

Labour has been arguing all along that asset sales will not make us a richer country. We’ve been consistent. John Key and the National government have done a complete u-turn and have now placed asset sales at the centre of their economic strategy.

“The Crown’s dividend streams from the Meridians, the Mighty Rivers of the world is large, so on both motivations we don’t have a debt problem, they’re acting, I think, highly effectively as companies, and they’re making money. There is no motivation to sell assets.

Once again, Key is borrowing the line that Labour has been consistently arguing for over a decade. The SOEs are highly profitable. They make more money than we would save in debt repayment costs if we sold them. Also note Key arguing we don’t have a debt problem (Bill English also made similar comments both before and after the 08 election). Interesting how after 3 years of a National government debt seems to be the biggest issue we face…

“So there’s no agenda to sell assets.

This is perhaps the most damning quote. Although Key was careful before the 2008 election to qualify his no asset sales pledge with “during the first term” he gave New Zealanders the very clear impression that he wouldn’t be selling assets long-term either.

“What we are saying is we’re not going to cut jobs, we’re simply capping at 36,000.

That commitment didn’t even last a term. Now he’s promising even more job losses during National’s second term. Nothing about that in their manifesto for 2011.

“The second point is, no we’re not borrowing for tax cuts.

So if they’re not borrowing for tax cuts, and New Zealand didn’t have a debt problem when they took office, why are they now arguing we have a major debt problem and need to sell assets to fix it?

John Key has built his political career on telling people what they want to hear. Eventually that strategy always catches up with people, and it’s catching up with Key big-time.