Reforming the public sector for leaner government and improved performance: The New Zealand experience
| Published date | 01 October 1996 |
| DOI | http://doi.org/10.1002/(SICI)1099-162X(199610)16:4<353::AID-PAD883>3.0.CO;2-P |
| Author | BASIL WALKER |
| Date | 01 October 1996 |
PUBLIC ADMINISTRATION AND DEVELOPMENT, VOL.
16, 353-375 (1996)
Reforming the public sector
for
leaner government and
improved performance: The New Zealand experience
BASIL WALKER
Ministry
of
Research, Science and Technology, Wellington
SUMMARY
Over the
10
year period from 1984 to 1994 New Zealand has gone through an intense period
of
restructuring, both of the public sector and of the wider economy. In the process New Zealand
has been transformed from a highly protected and regulated economy with a range of intrusive
and expensive interventions, to an open and deregulated economy with an efficient and leaned
down public sector. The article presents the “New Zealand experience” in restructuring, not
necessarily as an example to be copied but as a benchmark to be
used
in examining the most
appropriate restructuring to apply in other circumstances. The stages in the reform are
described and the three key success factors set out. One of the key factors is the establishment
of a set of clear principles which are then applied with determination. The principles developed
in the New Zealand context are set out. The article examines the restructuring of the science
sector in New Zealand as one case study; in part because of the author’s personal involvement
but also because it is a particularly complete example. Areas where work remains to be done
are identified including the reforms in education and health and the need for collective action
across government. Finally lessons to emerge from the New Zealand experience are discussed.
These include especially putting time into fully understanding market characteristics before a
market oriented reform is started, carrying reforms through to their conclusion rather than
stopping partway, and establishing clear principles to guide the reform process.
INTRODUCTION
There are watershed points in the lives of individuals, organizations and nations
about which it can truly be said ‘life will never be the same again’. Often those
watersheds are dramatic in nature and they commonly (although not always) have
their genesis in crisis or catastrophe. Such a watershed occurred for New Zealand in
1984 with the election of the Labour Government led by David Lange. The
watershed had its genesis in the chaotic disintegration of the foreign exchange
market in New Zealand in the last days of the Muldoon Government although in
truth the seeds were laid probably a decade earlier. The immediate result was a
devaluation of the New Zealand dollar and its subsequent free float. The longer term
result was a decade of fundamental reform and change that has transformed the New
Basil Walker
was
Chief Executive, Ministry of Research, Science
&
Technology, P
0
Box
5336,
Wellington, New Zealand.
He
is
now
a private consultant.
Paper presented to
1996
CAPAM Biennial
Conference,
“The New Public Administration: Global
Challenges-Local Solutions”, Malta,
21-24
April
1996.
CCC
0271-2075/96/040353-23
0
1996 by John Wiley
&
Sons, Ltd.
354
B.
Walker
Zealand economy, and in the process, transformed both the organizational structure
and the mode of operation of the public sector.
The reforms have involved the application of deregulation, corporatization,
privatization, contracting, and statutory and institutional change. The effect has
been to reverse the nearly one hundred years of economic regulation, public
provision and ownership that had been a landmark of public policy in New Zealand.
The article briefly recounts the history and current status of the reform process, in
part in general terms but more particularly in the light of the experiences of the
author. Those experiences have spanned periods at top level in departments dealing
with Energy, Defence and most recently Science and Technology.
However, history by itself is of limited interest. More importantly the article
provides an analysis (from one point of view at any rate) of what worked and what
did not work, at least
so
well, and what in retrospect might have been done
differently. The analysis inevitably contains an element of personal judgement and
speculation. The evaluation of reforms at national level requires a perspective that
can stretch to decades to be sure of the results.
A
BRIEF HISTORY THE BARE BONES OF CHANGE
As
indicated in the introduction, the reform process began in late 1984 with the
floating of the New Zealand dollar in the first days of the incoming Lange
Government.
The floating of the dollar accelerated a process of general deregulation of the
economy that had been going on in the background for some time but at a leisurely
pace. The pace promptly accelerated and included the progressive removal of import
controls, and the progressive deregulation of every sector of the economy. The
deregulation process is now far advanced but is still not fully complete.
However, prime attention in the mid-1980s was given to the reform of the public
sector. The driving forces for that focus are discussed further below. In summary
they comprised a drive to reduce the size of government by corporatizing and/or
privatizing all those activities not fitting the prescription of the ‘core business’, and
an equally strong drive to improve the efficiency and performance of what was left
through institutional and statutory change. Three key pieces of legislation emerged
from this process.
The State-Owned Enterprises Act of 1986 created a basis for placing the state’s
service and commercial activities into a framework replicating as near as possible
that
of
a company in the private sector. The Act was immediately used to strip out
and reconstitute the state’s commercial activities in coal, electricity,
telecommunications and postal services amongst others and further blocks of
activities were similarly reformed over the following decade.
The State Sector Act of 1988 and the Public Finance Act of 1989 created a similar
basis
for
reform of the core public sector. The former Act empowered the heads of
government departments (now chief executives) to genuinely manage their
departments, through the stripping away of the machinery of government and staff
management powers previously held centrally by the State Services Commission. The
latter Act provided for empowerment of financial management in a similar way but
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