Peter Hughes and the-then State Services Minister, Chris Hipkins, before a Select Committee before Hipkins became PM.

Public Service Commissioner Peter Hughes yesterday found himself head-on up against National’s Simeon Brown, who was pushing his party’s claims that there has been a massive blowout in the size and cost of the public service under Labour.

The pair clashed at Parliament’s Governance and Administration Committee, but what they are arguing about is critical to this election campaign.

National Leader Christopher Luxon includes in virtually every one of his speeches the claim that the 14,000 extra workers he says Labour has added to the public service since 2017 is a prime example of how Government spending is out of control.

Last Thursday, speaking at the University of Waikato Economics Forum, deputy leader and Finance Spokesperson Nicola Willis was beating the drum.

“We see plenty of evidence that this Government’s largess has enabled an ill-disciplined approach to Government spending,” she said.

“Here’s a few examples I think of the huge growth in the core public service, with 10,000 plus additional public servants being hired into non-front-line roles such as policy advice, HR and communications, even while consultancy fees have risen to over $1.7 billion per year.”

National is right about the increase; from 2017 to 2022, the public service has increased its numbers by just over 14,000 workers, an increase of 31 per cent.

But most of that increase has been since Covid, and the numbers appear to have now peaked.

Brown argued that not only had the workforce increased, but so had pay rates.

“The amount spent on salaries has increased even faster,” he said.

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“The reality is you’ve had a blowout in both areas, meaning that the taxpayers are now paying a significant amount more for the functioning of the same public service.”

Hughes disputed this.

“I don’t agree with that analysis,” he said.

“On workforce;  that was expanded very rapidly to deal with Covid.

“At the peak, 50 per cent of the increase was Covid related.

“Now that is coming back onto a different pathway as well. So I think the issue we’ve got in the immediate past is the Covid effect.”

Whilst the graph above clearly shows the huge bump that erupted in 2019 as Covid struck, there has still been steady growth in the overall public service since Labour gained power in 2017.

This is evident in the growth of that most basic of bureaucratic jobs, policy analysts.

But Hughes argued that as the population grew, so did the public service.

“What drives public service growth are these things;  demographic growth, and that has always been the case,” he said.

“So over the last decade, we’re looking at public service broadly defined, sitting around one per cent of the population.

“That has ebbed and flowed, but not by too much.

And then there is the Government’s work program.

“There has been a very heavy program to date supporting the Government’s various initiatives. “

Hughes said an example was the health restructuring.

“It’s a government initiative to reorganize the health sector, and yes, that is involving some consultancy and contract spend.”

National has been attacking Labour all week over its spending on contractors and consultants working for the public service.

Hughes has previously been critical of the public service’s level of use of contractors and consultants, he told the Select Committee there was nothing wrong with using consultants or contractors.

“The alternative is the public service raising a standing army to sit around and wait for work to arrive,” he said.

“So often, that’s the best way to get the job done.

“Now, if the Government’s work program is big and expansive, we might need to bring additional resource in to support that.

“But a government work program tends to be a peak, and it’s not the ongoing, base level business as usual work that we have to employ full-time public servants.”

Hughes said that what was important was getting the balance between what was “insourced” and “outsourced”.

“We think that’s around 10 to 12%, maybe 13. In some jurisdictions,” he said.

“We’re on track. I’m confident we’ll get back on track.

“You know, we’ve had a huge event in this country, which was the Covid pandemic, two and a half years of thousands and thousands of additional staff thrown at that thing to manage it for New Zealand.”

The Public Service Commission changed the way they present the figures on contractors and consultants in 2018, so it is really only valid to go back that far for direct detailed comparisons of where the money went.

But what is evident is that not all the big increases were for departments or agencies directly involved in the Covid response.

Contractors and Consultants2018 $mill2022 $millIncrease
Ministry for Culture and Heritage1.310.0671.85%
Ministry of Health27.8154.0453.84%
Department of the Prime Minister and Cabinet3.214.8361.46%
Ministry of Transport5.617.8217.52%
Public Service Commission1.43.4144.89%
Crown Law Office1.12.7142.61%
Ministry for Pacific Peoples0.61.4139.60%
Ministry of Defence2.24.9123.64%
Education Review Office0.91.9113.20%
Ministry for Women0.71.4100.27%
Pike River Recovery Agency0.51.093.06%
Department of Internal Affairs58.5112.492.21%
Ministry of Education132.1237.079.41%
Ministry of Social Development69116.068.13%
Ministry for the Environment17.728.661.71%
Oranga Tamariki-Ministry for Children23.937.155.16%
Department of Conservation12.818.242.36%
Ministry of M?ori Development-Te Puni K?kiri15.120.233.55%
New Zealand Customs Service19.324.325.68%
Ministry of Foreign Affairs and Trade22.927.520.06%
Ministry for Primary Industries37.243.717.46%
Ministry of Business, Innovation and Employment95.1109.114.68%
The Treasury10.610.4-1.69%
Department of Corrections44.241.8-5.44%
Land Information New Zealand26.323.1-12.18%
Statistics New Zealand31.427.4-12.66%
Ministry of Justice36.628.3-22.64%
Serious Fraud Office1.70.9-48.22%
Inland Revenue Department19596.6-50.48%
Social Wellbeing Agency5.71.0-82.98%
Cancer Control Agency0.7
Ministry for Ethnic Communities01.6
Ministry of Housing and Urban Development019.1
National Emergency Management Agency01.8
Office for M?ori Crown Relations-Te Arawhiti04.8

Luxon has been highly critical of the use of consultants and contractors.

“Labour has created a gravy train for consultants through its obsession with working groups, wasteful spending, and expensive public sector restructures that are a boon for partners at the big consultancy firms but are not delivering better results for Kiwis,” he said in his State of the Nation speech on Sunday.

To remedy that, he said that under National, public sector agencies would be required to report their spending on consultants and contractors every quarter instead of annually.

Brown picked up the theme at the Select Committee.

“The impression I get is that at the end of each year, as the reporting comes through around how much has been spent, and it’s basically that’s what it is,” he said.

“There’s no built-in accountability mechanisms to actually ensure throughout the year that there’s this figure has been kept track of.”

As it turned out, he was wrong; the PSC was already doing precisely what National was proposing.

“I require public service chief executives to report to me quarterly on a range of things,” said Hughes.

“This is one of them.

“They do that, including the forecast spend.

“The assistant commissioners in the commission assigned to each agency review that and are in regular contact with chief executives about those spends.

“Again, this is about right-sizing the outsourcing insourcing that is done in public service agencies.”

The problem for both Brown and Hughes is that the figures about the public service are still distorted by Covid, so that it is not really possible to know how fast it is really growing or whether Hughes has managed to clip the wings of the big consultancies.