Renewing Government Reform

Although no one interviewed during the study favours a return to the old ways, many gripe about one or another practice. Some managers complain about the sinking lid on operating budgets, with no adjustment for inflation and across-the-board cuts. Some, as noted above, complain about having to work harder in a more competitive and less stable environment and without sufficient resources to accomplish all that is expected of them. They feel that the government is indifferent to rising workloads and that doing more is not compensated in the budget. One widely heard complaint is that despite cost and performance data, budget levels still are set arbitrarily, without genuine analysis of what it takes to complete assigned tasks. Quite a few officials, especially those in small departments, commented on the burden of complying with burgeoning information and reporting demands of central agencies and Parliamentary committees.

The litany of complaints voiced during interviews ranges across the gamut of reforms. Outputs are not properly specified, especially in activities involving policy advice; the assessment of chief executive performance is not sufficiently challenging, and their pay does not sufficiently recognise differences in performance; the central agencies have not truly forsaken the old control habits; narrow interests crowd out the collective interest and short-term considerations are favoured over longer-term interests, especially in allocating budget resources; outputs are not sufficiently contested to ensure that the government is paying a fair or market price; Parliament still questions department budgets in terms of inputs and demands vast amounts of information that have little bearing on what the money is buying by way of output; little headway has been made in specifying outcomes and in relating them to the outputs purchased by government; the government lacks an investment strategy and is running down its physical and human capital; the Department of the Prime Minister and Cabinet is not adequately resourced to provide strategic direction and to ensure that Ministers and departments uphold the collective interest; Crown entities spend a sizeable portion of State financial resources but are not sufficiently accountable to the government.

The length of this list - other items can be added - does not mean that complaining managers want to dismantle the reforms. Complaints are a normal and expected by-product of reform, especially when money is involved. Although most complaints should be taken seriously they should not call into question the logic or sturdiness of reform. There is near universal agreement that New Zealand government is much better managed now than before. Many of the complaints derive from the elevated standards and expectations set into motion by the reforms. Once there were few output measures; now managers question whether the measures in use are the right ones and whether they are sufficiently linked to the budget and appropriations. Once there were no performance or purchase agreements; now managers wonder whether the terms can be more clearly specified and enforced. Managers concede that capital should not be free, but they argue over the level at which the capital charge has been set.

One need not subscribe to every claim made on behalf of the reforms to conclude that they have brought enormous gains in government management, nor need one accept every complaint about the reforms to concede that additional improvement is within reach. In managing organisations and resources, there never is a point at which the process of reform is completed. Even when they work as expected, reforms have to be freshened and revitalised. If they are not, the new practices become hardened into routines - the things that have to be done to get through the year - and those who carry out the procedures lose sight of the purposes the reforms were intended to serve.

Three clusters of issues warrant in-depth attention. The first pertains to the capacity for strategic management, the second to the resource base for government operations, and the third to accountability for outcomes, outputs, and resources. These issues are briefly summarised below and are considered in later chapters of this report.

(1) Strategic capacity refers to the capacity of government to define objectives and specify desired outcomes, establish priorities and reallocate resources to achieve them, and evaluate programmes and assess outcomes. It is evident that strategic capacity was inadequate in the early implementation of the reforms, but substantial adjustment has been made through the promulgation of medium-term budget goals, government strategy statements and the introduction of strategic and key result areas. But the government still has some difficulty in identifying outcomes and monitoring progress in achieving them, as well as in evaluating programmes in terms of specified outcomes. These issues are examined in chapter 5.

(2) The resource base is essential for the efficient operation of departments and the effective pursuit of government objectives. This base is determined through annual budget decisions, but its adequacy depends on the ability to allocate resources in terms of the outputs to be produced. To assess the adequacy of resources, one must consider the capital charge, the accounting basis for costing outputs, the use of net appropriations, and the capacity of the government and affected departments to adjust to variable workloads and outputs. Chapter 6 is devoted to consideration of these issues.

(3) Accountability is critical to the continuing success and acceptance of the reforms. It includes not only the reliability of financial statements, compliance with budgets and purchase and performance agreements, but also the robustness of internal control systems and the inculcation of an ethic of public responsibility throughout the departments and other public entities. These and related matters are considered in chapter 7.

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