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Chapter 8: Age of reform: 1984-1998

As the 1984 election year began, Labour opposition leader David Lange called for the resignation of any departmental chief refusing to administer government policy. Labour MP Roger Douglas had asked: ‘Are government departments necessary? ‘Are they doing the job? Can they be trimmed? Be ruthless with the answers.’ 36

As Finance Minister in the 1984 Lange administration, Douglas and his fellow Ministers would be ruthless, even revolutionary, pushing ahead with root and branch restructuring that swiftly and fundamentally altered the machinery of government and the nature of the State sector.

In 1986, Reserve Bank deputy governor Roderick Deane replaced Probine. At the time the Public Service workforce totalled 88,507 (70,240 permanent and 18,267 temporary). Deane and fellow officials drew up the State Owned Enterprises Act, which was to strip government trading departments of their social objectives and turn them into profit-making standalone businesses. (Some were later privatised and sold off.)

On 1 April 1987, 5000 State servants shifted to State corporations given freshly-minted identities such as Electricorp, NZ Post and Tranzrail. Some 5000 more staff, chiefly in the new Forest Corporation and Coal Corporation entities, had been made redundant. Many more would go. Deane also oversaw the rewriting of the NZ Public Service Manual, a process that eliminated 90 percent of its 2000 individual instructions built up over 75 years.

A Social Impact Unit established inside SSC worked to minimise the negative aspects of widespread job losses, especially in rural areas. After fourteen months, Deane’s deputy Don Hunn, a seasoned public servant and diplomat, replaced him as commissioner.

Soon after its re-election in 1987, the Lange administration introduced a radical State Sector Bill designed to remake a Public Service the new government saw as highly centralised and hidebound. A NZ Herald editorial crowed ‘Gliding On is Gliding Out’. 37 Sir Thaddeus McCarthy, architect of the 1962 and 1968 reforms, however, warned of ‘the destruction of the State sector as we know it.’ 38

The 1988 State Sector Act made government department heads directly accountable to their Ministers through a system of annual ‘purchase agreements’ delivering outputs. No longer would heads have permanent jobs. Instead they would have five year fixed contracts.

The new chief executives gained greater autonomy to manage their departments as they saw fit, hiring their own staff and negotiating pay and conditions.

The SSC would no longer serve as employment bureau and pay-fixing body for the whole sector. The Commissioner however retained oversight of the new system, appointing heads of core departments and ensuring that chief executives were delivering on their employment contracts.

The College of Cardinals vanished. A single commissioner and deputy replaced the multi-member SSC. The commission was lucky to survive. Elements within the Lange administration, keen to reclaim Ministerial power in the reformed State sector, pushed unsuccessfully for its abolition. 39

A blizzard of legislation, restructurings and efficiency drives continued to affect the public sector. In 1989 came reports that a total of 40,000 State jobs had gone in three years. 40 As SSC staff numbers dropped from 360 to 130, functions like the Social Impact Unit were dropped.

Probine emerged from retirement to warn publicly of the risk of a politicised service under the new regime. 41 In 1990, Hunn drew up a comprehensive code of conduct (or what he called ‘Ten Commandments’) for all public servants. Founded on an ideal of impartial service and required under the 1988 Act, the code was distributed widely within departments.

Election of a Bolger administration in 1990 saw continuation, even extension, of Labour’s reforms. Hunn said the commission’s role was evolving to that of a ‘quality assurance agency – reviewing, observing and auditing departments.’ 42

Passage of an Employment Contracts Act in 1991 impacted heavily on the sector and State servants were employed on contracts, whether individually or collectively.

In 1993, further change arrived as Kiwis voted in a new electoral system. The public sector itself looked different: in 1993, the core Public Service comprised 36,374 State servants, close to half the 70,240 employed in 1986. 43

An officially commissioned review of the State sector reforms in 1996 by Allen Schick, an American professor of public policy, concluded there was cause for concern. He said the reforms had delivered accountability, but at too high a cost, with fragmentation and inflexibility. ‘I wonder whether management-by-checklist unduly narrows managerial perspective and responsibility. Some managers seem to take theview that if it is not on the list, it is not their responsibility’. 44

The 1995 Cave Creek tragedy in a national park on the West Coast, where 14 died, underlined that at times accountability remained diffuse. No one person was held responsible for the collapse. Instead, the system had failed.

The report of inquiry into Cave Creek led to Hunn predicting in 1997 that henceforth chief executives would have to resign, or as he put it, ‘swing from the gibbet’ if something went wrong in their department. 45 He wrote to all new chief executives reminding them they had a “duty of care’ to the wider State sector. Hunn stood down that year, having led through a decade of dramatic, relentless change.

36:  Roger Douglas, There’s Got To Be A Better Way! Wellington, 1980, p 35.

37:  NZ Herald, 11 December 1987.

38:  NZ Herald, 11 January 1988

39:  Don Hunn, comment to author, 30 November 2012

40:  Dominion Sunday Times, 22 January 1989.

41:  Dominion, 13 July 1989,

42:  Service, October 1990.

43:  Evening Post, 10 June 1993

44:  Allen Schick, The Spirit of Reform: Managing the State Sector in a Time of Change, Wellington, 1996, p 81.

45:  NZ Herald, 24 February 1987.

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