Matthew Hooton’s recommendation that Nicola Willis cut the cost of the Public Service by 25% (NZ Herald 22nd December) reminded me of a story.
Years ago, the engineering community was getting fired up about new Japanese business and manufacturing efficiency methods, and “kaizen” (continuous improvement) and “just in time” were being bandied about. At the time there was a current joke about an apocryphal underperforming New Zealand rowing eight who had just lost against a Japanese crew. The NZ team figured that performance would be enhanced if they added a rowing manager to the crew, but this meant one oarsman had to go. They trained hard but lost in a return match the following year by an even bigger margin. The team then brought in a highly paid consultant who recommended that an additional rowing manager would do the trick. The following year, the result of competing voices from the cox and the rowing managers, and a huge effort from the fit but further depleted oarsmen, was that the Japanese eclipsed the NZ team. And so on the story goes. Eventually the NZ team withdrew from the competition, the racing shell was sold, and the proceeds used to fund service recognition awards for the (now seven) rowing managers.
This illustrates what happens when organisational overhead costs overwhelm productive activity, and the parallel in our public and tertiary education sectors is worrying. Mid-December we saw the announcement of Massey University’s 71 academic staff losses, and programme closures across Food Technology, Engineering, Plant Science and Zoology, and the intention to put their Albany campus buildings, and some at their Palmerston North HQ and Wellington campus, up for sale or lease. New Zealand needs graduates in all these target areas, and scaling back at Albany is illogical when this campus is surrounded by decile 10 schools on Auckland’s growing North Shore. Still, Massey has had a perfect storm with the loss of international students through Covid border closures (like all universities), and with its historical distance education business eroded by the other universities leaping into online degree delivery during the lockdowns.
On the other hand, I understand that Massey currently has a general (indirect cost) staff to academic (direct cost) staff ratio well above the NZ university average of about 1.5:1 - lots of “rowing managers”. Of course, these institutions need administrative staff but must focus on revenue-driving activity, in this case mostly teaching and research, and NZ universities’ non-academic to academic staff ratio, and student fees charged, are both high on international comparisons. In this context, how can Victoria University of Wellington justify an expected $60m spend on their Living Pā (largely buildings) project to demonstrate its Māori centredness, when as of September 2023 they were laying off 140 staff and closing revenue-earning degree courses across Education, the Humanities and the Sciences to address high financial deficits?
All our universities have built massively expanded central service directorates since they changed to a market-oriented model in 1990, and it would be unsurprising to find that most or all of the fees now paid by students themselves are used to fund ballooning services in areas such as student learning support and pastoral care, HR, marketing and outreach, diversity equity and inclusion, health and safety, and the more recent burgeoning Māori and Pasifika directorates. Many of these had little or no presence prior to 1990. After 30 years of Government support not keeping pace with inflation, this sector needs to be better funded, but internal efficiencies would enable the retention of many important degree programmes currently being dropped, especially in the Sciences and Engineering.
The creation of the Te Pukenga centralised polytechnic behemoth is another example – the Labour government figuring they could fix the malaise in the system by adding a team of rowing managers in Wellington, tens of millions of dollars spent for nil useful result.
Tertiary education sector examples replicate in microcosm what happened in the Public Service between 2017 and 2023, with employee numbers ballooning from 48,000 to over 64,000, not to mention huge sums being spent on consultants. This crowd was pretty much able to keep themselves busy just talking to each other. They did make time to push out some whacky policy though, some of it just stalled in time, like the cultural re-shaping and politicisation of the Schools maths and science curricula. And, in the Health System we can hope that the National/Act/NZ First Government will ditch a bunch of rowing managers and direct more investment into front-line medical staff, drugs and equipment.
Strangely, taxpayers have made little noise about our bloated Public Service. Crown spending blew out from $76Bn per year to $139Bn per year between 2017 and 2023. We paid for all of this, and looked on while money was thrown around by the last Government, put in frightening perspective by Alex Holland [1]. Bryce Edwards adds a wide-ranging view on this in his December 23rd opinion piece in Breaking Views NZ [2]. Three cheers also for the Taxpayers Union in chasing down the big spenders and listing the boondoggles we supported.
The politicisation of our Public Service seems to have gone hand in hand with its expansion. Our Ministry of Education and MBIE, for example, have pursued critical social justice agendas and lost their political neutrality along the way. Life has likely not been comfortable for employees who did not align with the prevailing narrative. Over the Tasman, it is interesting to read in “Victoria: rotten to the core” (Spectator Australia, 19th December [3]) that after the departure of Premier, Daniel Andrews, the State of Victoria has been recommended to implement greater openness of process and deal with a culture of “fear and secrecy” that prevailed in Andrews’ bulging administration - a vast bureaucracy twice the size of NSW’s and the Australian PM’s combined.
Minister of Regulation, David Seymour, Finance Minister, Nicola Willis, and ministerial colleagues, must get stuck in and reduce the cost of central government in Wellington, and incentivise cost reduction and political neutrality across all our large public institutions. Tackling the huge bureaucracy in our public entities will help direct taxpayer funds towards productive work where they can really lift our nation’s health, education, housing, and the wider economy.
On the last of these, much can be done to lift NZ’s productivity with or without a Productivity Commission. I addressed this earlier [4] around the role of the Research and Education sector. Many others have authoritatively stamped this ground, including Former Treasury Director, and Senior Fellow at the New Zealand Initiative, Bryce Wilkinson (in Breaking Views NZ and elsewhere), Bruce Cotterill (https://www.brucecotterill.com/), and Rob MacCulloch (https://www.downtoearth.kiwi/blog).
Mixing the metaphors, we will raise a cheer as Seymour, Willis and colleagues throw out some old furniture in the spring cleaning, get rid of the rowing managers and get New Zealand working as a super-fit rowing eight.
References
1. Alex Holland, “Labour’s Spending”. Bassett, Brash and Hide 27th September 2023.
2. Bryce Edwards, “Dark Clouds before Christmas”, Breaking Views NZ, 23rd December 2023. https://breakingviewsnz.blogspot.com/2023/12/bryce-edwards-dark-political-clouds.html
3. Dight Canning https://www.spectator.com.au/2023/12/victoria-rotten-to-the-core/ Spectator Australia, 19th December 2023
4. John Raine “Education, R&D, and a High Productivity Economy”, National Business Review, New Zealand, 15th July 2023.
John Raine is an Emeritus Professor of Engineering and held Deputy or Pro Vice Chancellor roles in three New Zealand Universities.
This opinion piece first appeared in Breaking Views NZ.