Treasury boss Gabriel Makhlouf says state sector changing from 'holding company to conglomerate' with 'knock down walls, re-wire and put in new plumbing' style transformation

Treasury boss Gabriel Makhlouf says state sector changing from 'holding company to conglomerate' with 'knock down walls, re-wire and put in new plumbing' style transformation
Big in the '80s; Hair & NZ bureaucrats. Image sourced from Shutterstock.com

Secretary to the Treasury Gabriel Makhlouf says a “knock down walls, re-wire and put in new plumbing” transformation going on in the state service could see New Zealand's bureaucrats as "an exemplar for the world" again as they were in the 1980s.

In a speech at law firm Chapman Tripp in Wellington Makhlouf said the pace of change underway in the public service was fast and there were high expectations of meaningful, tangible results stemming from it. He said the bureaucracy was changing the way it does business to a degree not seen since the 1980s.

"We’re shifting the focus from delivering outputs to achieving results that matter for New Zealanders. We’re designing services around what people and businesses need," said Makhlouf. "We’re lifting efficiency and capability to deliver higher quality advice, analysis and services in better ways. And we’re trying to strengthen leadership within and across the system - not just to help drive change and raise performance, but to embed a greater level of stewardship needed to position us for the medium and long-term challenges ahead."

He said "fundamental system-wide changes" were largely designed to meet the government’s priority of delivering better public services.

"In essence, the changes are shifting the state sector from being like a holding company with subsidiaries that for the most part don’t work together, to being like a conglomerate with shared vision and purpose," said Makhlouf.

"As you’d expect, one of the big changes going on is the rallying of efforts across agencies to deliver results. The government has set out 10 measurable results where it wants action, covering the key areas of reducing long-term welfare dependence, boosting skills and employment, reducing crime, improving interaction with government for the public and business, and supporting vulnerable children."

"These are tough long-term problems that don’t fit neatly into any one portfolio or department, and Ministers have made it very clear that agencies need to step up to improve their collective impact. That’s why the ministerial and chief executive accountabilities for the 10 results cut across departmental boundaries. A report on progress against all 10 results will be published later this year," said Makhlouf.

Makhlouf's latest comments come after he used his first major public speech in March last year to call on public servants to speak up and seek change where it’s needed. And in a speech last November he said Treasury wasn't a bunch of white men in grey suits with a beige mindset as he responded to views such as one expressed in a comment posted on interest.co.nz, which said “Treasury are a pack of pencil-heads living in an ivory tower”. He said then his ambition was for Treasury to be an exciting and energetic hothouse of ideas.

A public service 'clear about results, works collectively and effectively to achieve them'

In his latest speech Makhlouf, the former Principal Private Secretary to UK Chancellor of the Exchequer Gordon Brown, rolled out some numbers. He noted in the year to June 30,  2012, core Crown expenditure was more than NZ$69 billion, equivalent to one-third of New Zealand’s nominal Gross Domestic Product (GDP). If you add the expenses of Crown Entities and State-owned Enterprises to that, he said total Crown expenditure rose to NZ$92.7 billion, or 44.4% of nominal GDP.

"To put that expenditure into perspective, it is double the value of New Zealand’s overseas merchandise exports for the year to February 2013. It’s imperative that this money - and all the time, toil and talent that goes with it - is used efficiently and effectively for all New Zealanders," Makhlouf said.

"The state sector’s performance matters for Kiwi businesses, whether it’s as a regulator, a contractor of services, a deliverer of services, an investor in human capital and a provider of physical infrastructure. It creates the business environment that can either help or hinder the private sector to succeed. And looking at the bigger picture, the state sector’s productivity and performance is critical to the growth of the economy as a whole," he added.

A state sector was being created that is "clear about results and works collectively and effectively to achieve them." It runs the ruler over impact as well as spending; has the tools to analyse what’s happening across the system so as to tackle big problems, and take on big opportunities.

'Sometimes you have to fail if you are to learn and improve'

The scale and pace of change had been "an exciting challenge" for the Treasury, and Makhlouf set challenges for his audience.

"For those in the state sector, I want to emphasise the importance of outcomes, results and our stewardship role. New Zealanders are not particularly interested in how we’re organised, what our accountability arrangements look like, what our four-year plans contain or what processes we’re following. What they are very interested in are results, things that will make a difference to their lives and their children’s lives," he said.

"And I know that’s what public servants come to work for: to make a difference. So all of us who have a leadership role in the public service need to have a relentless focus on results and have these results underpin how we design policy, implementation and incentives. We also need to evaluate the results and change our approaches if we need to, accepting that sometimes you have to fail if you are to learn and improve. It is part and parcel of stewardship."

"Our state sector has proven its capacity for far-reaching change before. New Zealand is a small, flexible country that adapts to make things work. In the 1980s we went through reforms that made the rest of the world sit up and take notice, and I believe we have the potential to be an exemplar for the world again," Makhlouf said.

And for those who don't work in the state sector, he said its reform isn't just an issue for the bureaucrats, rather it's an issue for all New Zealanders.

"The quality of our public service - whether it’s health, education, welfare or something else - has a huge bearing on our communities, on the quality and capability of the people who work for you and will work for you in the future. It’s in your interests to support the delivery of results in these and other areas, to take an interest in their quality and make your needs known," said Makhlouf.

"Our vision is a service that is trusted, high-performing and improves the lives of New Zealanders by delivering outstanding results and value for money. We know that our collective impact will make the biggest difference to raising living standards for New Zealanders."

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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For every complex problem there is a solution that is concise, clear, simple, and wrong
- H. L. Mencken
 
 

I'm from the Government and I have come to help you - Yeah Right!

Bit early Gabriel...give it more time...Sir Gabriel...got a sort of ring to it!

to much Gabbling in there  im afraid -  its a pity that the Principal Private Secretary to UK Chancellor of the Exchequer Gordon Brown didnt stop the UK get itself into the biggest deficit situation since WW2 !

Why do you think he came to NZ?  After his track record with Gordon Brown nobody in the UK wanted him, his only choice was to emigrate.  I'd like to know who actually appointed him and did they bother to look into his previous employment.

Oh Gabe, Gabe, Gabe..... only in a parallel universe.
 
Years and years ago Paul Krugman noted that massive corporate investment in IT in the early 90's did not bring about any improved productivity. His conclusion was that changes in inputs did not automatically lead to changes in outputs. IT insiders now understand that paving the cowpaths still leaves you with cow paths not highways.
 
Our public sector can "rewire", re-legislate, "re-" anything it wants but that does not automatically mean it will deliver anything more useful to the public. Currently our public servants are incentivised to do two things: (i) dream up new initiatives that (naturally) they will have to direct with appropriate funding and (ii) avoid being being blamed for anything preferably by following the rules to the letter. Until someone figures out a way to re-incentivise the public sectior to deliver services the public value it will be ever so.
 
Gabe, I laugh in your general direction

I would be keen to understand his evidential basis for this statement;
 
 [our public servants could become]... an exemplar for the world" again as they were in the 1980s
 
Was he working here in the 1980s - or what?  What was so 'exemplary' about what they did in the 80s that they aren't doing today? What made what they were doing so different/better than the public servants in other countries at the time? Why were ours world class; and by whom?
 
Is this his thesis - or is that a proven/known/recognised/accepted proposition?
 
Just curious what it was about the 80s that he romanticises about?
 
Can interst.co ask him?
 
I recall alot of bad advice being given in the 80s - like you know .. we sold the numbering system along with company .. sheeeee it took us, what, the best part of 15 years to get number portability out of Telecom.  And speaking of Telecom - what about all the litigation that Clear had to endure ... wasn't that the 80s .. you know the time when the courts said they were not prepared to write the competition policy for the government?
 
Lot's of stuff ups in the 80s - how old is this Gab guy? Perhaps he's just nostalgically recalling his own youth?

Or perhaps he' recalling all the lavish lunches with the 'high flyers' (that eventually cost WE taxpayers dearly in the end;
 
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10687076
 
And the collapse also brought the Labour Government of the day into disrepute over its role in Equiticorp's illegal 1987 purchase of the Crown's 89.9 per cent stake in NZ Steel. In February 1998, after a 198-day trial, the government handed over $267.5 million to the statutory managers in an out-of-court settlement.
 
I 'spose he'd say that there we no TSY lads involved in that one.

I don't think the question is about 'bloated' bad - 'lean' good (i.e. numbers) - it's about the quality of the advice. But your comment makes me think that you are falling into the same assumption track .. that being you romanticise the neoliberal era of reform for some reason - as if everything and everyone that participated in the transformation was somehow 'more intelligent' than those of today's era. It's a reflection of your age I think. The younger folk - who weren't in their prime at the time form their opinions, not from experience, but from history.
 
I'm just pointing out stuff about history - or outcomes. Some of the legislation that came out of the era was very well written - but much of it was fast and loose. As Geoffrey Palmer said in his book Unbridled Power - NZ was at the time the 'fastest law in the West'. - and he wasn't being complementary.  

Okay - so did you get better results out of the bureaucracy during the 1980s and in what way? I'm just curious about specific examples as opposed to generalities.

I assume that is more a function of the associated legislation - as opposed to the calibre of the public servants administering it.
 
But I think the 'state' of our legislation and subsidiary instruments is in part due to the fact that we have become a much more litigious society.  How we unwind that clock I'm not sure. 
 
 

Yes I think he must be refering to the good old days of fast and loose 80's privatisation when a few bankers made off like bandits with the sale proceeds of SOE's. -That or he wants to bring back big hair maybe?
Whatever the platitudes and rhetoric...it sounds expensive for the taxpayer.

Gosh it all sounds wonderful. I hope my doubts are misplaced but having grown up in Britain I am a bit, well cynical, perhaps unfairly so. " Makhlouf, the former Principal Private Secretary to UK Chancellor of the Exchequer Gordon Brown" is scary. Very very scary.
Gordon Brown was the highly intelligent chap (but medicated depressive by all accounts) who sold off half of Britain's accumulated gold reserves for $250 an ounce.
The trio of Brown, Blair and Mandelson pulled off an Orwellian stunt and invaded Iraq, ignoring the largest protest in British history by all accounts, using carefully orchestrated media control.
It's a worry.
 
 

Roger are you trying to say the Labour trio were/are industrial scale psychopaths?

I think that sums it up rather well. I found the discussion about Mrs T rather interesting. How many Brits died or were injured in combat during her tenure? How many in the Blair/Brown era? Were these conflicts defensive or offensive in nature? Wasn't there something in the Nurembourg trials that highlighted military aggression as a central issue?
 

I struggle through daily with these so called civil servants.  They are in a different world.  With no awareness of delivering anything.  Costs and results are not concepts they work with.
I am sorry Mr Makhlouf.  I see no evidence of change at all.  I look for for that change every day.  It's not happening and no sign it's on it's way.

Good call KH - the expression talk is cheap comes to mind when reading on Makhlouf.
 
Public servants are tarred with a certain mindset and no amount of organisational change will alter that mindset.  You have to be a rational and conscience human to survive the real world and pubic servants lack these two factors.
 
If Makhoulf is serious then he should be conducting surveys of small and medium sized business and seeing what the business confidence levels amongst this group are in regards to bureaucracy. It would be imperative to leave out big business when conducting a survey as many of them have financial ties to Government and it's Agencies.
 
In fact to keep costs down Mr Makhoulf use a website where people can log in and respond to surveys.
 
Business is constantly looking at efficiency and productivity if you don't you sink. One of the bigger costs appearing in all business transactions is bureaucracy costs when these significanty reduce then we might be getting somewhere.
 
 
 

I think you are coming to heart of the matter. Welington has been filling up on UK Bureacrats, Makhoulf, Fletcher, Livingstone who lets face it are unemployable in the UK right now. The Blair Brown Government and anyone who had anything to do with them are almost untouchable in the UK. Them and their ideas are toxic. So we end up with Makhoulf running our Treasury Dpt. It is kind of laughable. The UK is essentially a giant experiment in what not to do, and how not to do it. If he renouced his past , asked for forgiveness and said he was just here to learn, then maybe he could be allowed to stay.

Assuming you're an owner and/or manager in a SME - can you solemnly promise that if a Government official were to approach you and ask you to take part in a survey about your concerns as regards bureaucracy, you would do so - rather than saying get lost pencil head, here in the real world I've got no time to waste on your stupid surveys?
 
Do you really want to give your views and help those clueless officials to get a clue, as opposed to moaning about them on an internet discussion forum ?
 
Here you go, then.   Took me about two minutes to find these.
 
http://newzealand.govt.nz/participate/have-your-say/consultations/
 
https://www.business.govt.nz/laws-and-regulations/shaping-government-policy/business-consultation

MDM - I think you may be missing the point here, If you think SME's have time to participate in numerous surveys/consultation processes that the bureaucrats might conduct then you are mistaken. That is why I stated a specific business confidence survey could be more appropriate. I used the wording "business confidence" as it defines the risk/reward element that allows for business to be confident or not in the competence of State to deliver efficiently and productively in regards to services. Everything the State does delivers a cost on business via taxation, levies etc. A simple online survey with a handful of quality questions would suffice. Yes/No tick boxes with a comments/suggestion box to write in.
 
NZ Politicians and bureaucrats should not be making any decisions that breach the foundations of the Universal Declaration of Human Rights and the NZ Bill of Rights. These documents exist for a very important reason and yet Politicians and Bureaucrats show very little regard for them in their decision making processes.
 
These two documents above are the contracts between the State and the People! They outline the responsibilities that we all have to each other. It seems the State has problems interpreting what these two documents set out and how to achieve the principles.
 
I wonder how many Politicians (at all levels) and Bureaucrats actually keep these two documents at the front of their mind while making decisions. When State employees do not uphold the principles the people are the losers.  I also wonder how many bureaucrats keep the "purpose" of any legislation that governs their undertakings in mind when making policy and decisions?
 
NZ'ers pay taxes and levies for services that are meant to be provided then they pay again to use many services. This is an inefficient and unproductive use of resources.
Example would be Councils who levy rates and then charge for many administrative services or Doctors who receive payments from ACC and then part charge their customers, education is another area where there are many anomalies, the justice and legal systems are bordering on dysfunctional as the cost of obtaining justice frequently prohibits people from taking action. Then there are State organisations like EQC who failed to have efficient delivery systems in place for incidents of a significant size. If you’re farming you now have the ridiculous bureaucratic system of NAIT to implement – more levies, increased tag costs, time costs of tagging and submitting data to the NAIT website. Having to place every cow in the head bail, while she snorts, shakes her head and bellows indignantly while receiving her tag is a slow job with an element of injury risk which OSH says must be isolated, minimised or eliminated. Then of course there are the bulls – well if those shiny pants sitting in Wellington want our run country bulls tagged they can come and do them.
Farmers still have obligations under the AHB and still have to file an ASD why the heck they couldn’t implement one system I will never know. Did the bureaucrats ensure the system would be economically beneficial to Farmers – no they only looked at the economic loss if an event occurred that jeopardised the export market. It is this kind of stinking thinking that is placing strain on all business.
The IRD places enormous costs on business in fulfilling tax obligations of both the business and the employee. It is inefficient and unproductive for business to be spending so much time, resources and money in complying with so many obligations.
How about the IRD having one tax type? How about abolishing all the endless costs and form filling and compliance? The real cost of Government and bureaucracy is worn by the few in business for the benefit of all. Most employees have no idea of the costs of compliance as it does not directly affect their pocket. What about implementing an electronic system that deducts or credits the GST component at point of transaction into the registered holders account? Credit and eft-pos cards could be pre-loaded with GST numbers. You hit expense or income button and the transaction is completed. You could add in a splitter percentage button and do one annual check up while completing the books at the accountants.
 
There are far too many inefficient unproductive bureaucracies in NZ. The expertise in these bureaucracies is limited. Working for the State in any capacity should require a very broad knowledge and wide experience in Private enterprise. A degree/qualification from a tertiary provider is insufficient as it cannot provide the broader expertise and knowledge  that is necessary.
Civil servants are too slow to react to problems. By the time they react and make changes a vast amount of time has passed and enormous damage has been done.  Civil servants need to learn to serve the country but they frequently see themselves as leading the country. If I run a business and didn't serve my customers I would face the hard cold reality that I would soon be out of business. Politicians and Public servants feed the rest of NZ with a lot of glossy nonsense on their performance.
 Most people in business know the slogan "pride before a fall" and rarely gloat about successes or achievements in fact they are usually shy to talk about their achievements.
 
I didn't create this hideous, egotistical nanny-state, the politicians and bureaucrats did and the system they created needs the biggest overhaul and cleanout and stripped back to people who can serve the people efficiently and productively.  The size and cost of State is an enormous burden on business that has to generate the income to start with. Politicians and bureaucrats need to remember who’s supplying the money they are spending at all times.
 
Those people who receive the benefits of our overly generous welfare state need to take some responsibility as well. It is not Government money they are receiving it is money that was generated by business activity in the first place. Politicians and bureaucrats need to fairly reflect where the source of income that funds the system is derived. There should be a plaque over every State/Local Governments, bureaucrats or other civil servants, or aligned agencies door stating “funded by private enterprise”.
 

You might then be interested to take a look at Stats New Zealand's  Business Operations Survey:
http://www.stats.govt.nz/browse_for_stats/businesses/business_growth_and_innovation/BusinessOperationsSurvey_HOTP2012.aspx
Of course the public service doesn't do its job well enough.  Which individual or entity in the world can truthfully state that he or it is doing its job so well that no improvement is possible?  And the bigger and more complex the entity is, and the more numerous and heterogeneous its customers, the more likely that some of those customers wil lexperience dissatisfaction. 
I trust you would agree that you can't please all of the people all of the time?  And yet that is the standard that governments are held to.  That is right and proper, since all of the people all of the time are stakeholders in the performance of governments - and they don't have a choice in the matter.  It's also by a standard that no government can ever meet.
Running a country really isn't like running a business.  Ultimately a businessman faced with a choice has only one bottom line:  will it or will it not increase profits?   Whereas for a politician, the questions are many, often in conflict and capable of different answers, and different customers - with equally legitimate rights and interests - will have different views as to what should take priority, what constitutes "efficient" or "successful" or "productive". 
For example:
- what exactly is the problem?  what is causing it?  is regulation really the only or the best way of dealing with it?  evidence?
- what will be the costs to business of compliance?  (This one apparently has to be answered without actually asking any business people, since they are far too busy to respond).  What about the costs to government itself of administering, monitoring, enforcing the regulation?  How do those costs compare with the expected benefits, eg in terms of improved worker or consumer safety, healthier children, a cleaner environment, better informed and more confident consumers, less congested traffic or other policy objective?
- what impact on the environment?  local, global, short and long term
- impact on equity?  For example, between rich and poor, old and young, different ethnic groups, healthy and unhealthy, financially literate and not, present and future generations,  those who use a particular Government service and those who don't, those who live in an area that will benefit from a particular Government investment and those who don't
- what are the risks and who bears them?  Are they well placed to bear them?
- does it encourage innovation?  is it flexible enough to allow for technological development, while also being clear and specific enough to enable everybody to be sure what they need to do to comply?
- compatibility with international and Treaty obligations?  compatibility with human rights legislation?
Do you really think it quick and simple to identify an approach which gives answers that everybody would consider satisfactory to all of these points?  Or perhaps you think some of these points, or some people's concerns, should not be taken into account, or given lower priority than others?   Which ones?
Finally, to take one example from the concerns you list above.  If you really want to know what the bureaucrats were thinking when they developed the NAIT regime then Google "NAIT regulatory impact statement".   The same process is gone through every time with every significant regulatory proposal, so you can find similar information for any and every regulation that concerns you.  That isn't something that could be said in every country.
 
 
 
 

I certainly agree that neither a business nor a country should do things that they can't afford. 
 
But that's only considering half the equation.  Even if you can afford it, that still doesn't necessarily mean you should do it - you  should do it only if it will bring a benefit which is greater than the cost.  I would define that as making a profit.
 
Thus, should a business give its staff free coffee.  Can we afford it?  Yes, we make enough profits to be able to absorb the cost on an ongoing basis.  But that does not in itself mean yes, we should do it.  If the staff don't actually like coffee, then there is no benefit to the proposal - it won't encourage them to work better, raise their morale or engender feelings of loyalty and love for their employer. 
 
 
 

MDM - of course you cannot please all the people all the time. If a Government tries to attempt this the economy will face problems. But what a Government can do is promise the people it will abide by the contracts it has with the people, i.e. the Declaration of Human Rights and the Bill of Rights.
This sets a clear path between State and people. The easy option for some people is to whinge at Government for handouts. My kids used to do this to me too.
A bit of tough love is necessary to set people on the right path. If you help people all the time they will not learn to help themselves. You are not teaching people self-responsibility if you provide for them constantly.  You lay a good foundation and let them make their own mistakes. 
 
If you help one group of people at the expense of another group you create bigger problems and resentment.  All stakeholders need to be treated the same.
 
Government and bureaucrats need to be mindful of not misdirecting investment into areas where there are lesser compliance issues and costs. For example the trend of investing in housing as has significantly less ongoing compliance issues/costs than other types of business.
When compliance becomes burdensome people simple change where they put their money.  The shortage of property developers is because compliance costs are high.
 
In regards to NAIT I was one of the people who was interviewed during the consultation process. As we were large scale buyers of beef cattle we knew the industry and the problems. 
 

I completely agree that there are costs to regulating, not only in terms of the compliance costs for business but also in terms of the effect it has on people's motivations, willingness and ability to learn, etc.
 
However, there are also costs to not regulating.  Consider areas such as worker safety (coalmines, building sites), environmental protection, food standards.  If you leave people to find their own way and mistakes are made, the consequences could be very severe, even irreversible, and they may fall on people, or things, other than the individual who made the mistake.
 
These potential costs and risks are difficult to assess, but they have to be balanced against each other and the equation doesn't always come out the same way.  Add in subjective concepts such as social welfare, natural beauty and consumer confidence, and different stakeholders won't always - in fact they always won't - come to the same conclusion as to where the balance lies.   In such circumstances principles such as treating all stakeholders the same are impossible to apply.
 
 
 
 

I'm very sorry if I gave any impression that I thought anybody was lying.  I'll try to make my point in a different way.
 
Yes, bureaucrats should consider how their regulatory proposals will affect business costs, small businesses in particular.  Indeed, they are required to do so.   But small business owners don't have the time to talk to them.   How then would you suggest that bureaucrats gain an understanding of how regulation will affect small businesses?
 
 
 
 
 

Government and big business often are the same.  And about as inefficient as each other.  Their survival and success does not lie in productivity or relevance.  Survival and success for them depends on their control of their own situation.   Both sectors focus on controlling their enviroment and focus on that to the exclusion of anything else.

And here's what Gabriel Makhlouf had to say about poverty at an IMF/World Bank meeting over the weekend - http://web.worldbank.org/WBSITE/EXTERNAL/DEVCOMMEXT/0,,pagePK:64000837~p...