With more job losses and funding for care providers and data projects slashed, here’s the latest on the spending squeeze in the public sector.
Stretch, squeeze and suck in: listen closely and you’ll be able to hear the pop of the government forcing its belt-tightening measures over an already under-pressure public sector. Despite falling inflation rates and a glint of economic hope on the horizon, the government remains laser-focused in its mission to cut costs across its agencies and adjacent services, leading to nearly 6,500 job losses in the sector, with more expected to come.
A recent Workforce Policy Statement has outlined further spending expectations for government departments, while providers are forced to let go of staff or else close operations due to minimised funding. Between job and service losses and new directives, here’s the latest from the public sector.
‘Restraint and moderation’
A Workforce Policy Statement issued by finance minister Willis on August 7 has effectively halted every ministry from increasing spending above baseline levels, requiring each department to find funding for pay increases and other expenses by cost-cutting. Speaking with Newstalk ZB, Willis had already warned public sector workers not to expect pay rises as the sector was in a period of “restraint and moderation”. The decision has been criticised by the Public Service Association, the union for the public sector, which argued pay increases should not be funded by job losses.
A separate directive said chief executives and deputies of high-performing agencies should receive pay reflective of the service’s performance, in the interest of maintaining success and to “ensure accountability”. The statement also outlined agencies’ duty to offer payments on top of a worker’s salary “to recognise skills or duties which are occasional, rather than core to the role”, including employees who use te reo Māori skills in the workplace. Despite Willis previously saying she did not support the bonuses, the directive specified these allowances “will be an effective way for the Crown to uphold its obligations including under Te Ture mō Te Reo Māori 2016/the Māori Language Act 2016 or any other Act or obligations”.
Further job losses and restructures
The Environmental Protection Authority, which oversees management of hazardous substances, new organisms and the Resource Management Act, will lay off 16% of its staff – or one in five employees – in a belt-tightening bid to find $2.1m in savings. The redundancies will affect 42 roles, up from the predicted 20 reported by Stuff ahead of the May budget. Meanwhile, the Ministry of Justice plans to cull 127 net roles, which the PSA said would affect 11% of the ministry’s head office workforce.
Kāinga Ora recently had its proposed staff cuts upped to 232, following proposals to slash its Te Kurutao Group Māori, responsible for supporting Māori clients and upholding Treaty of Waitangi obligations, from 48 full-time roles to 27. Kāinga Ora saw a $435m cut to its house-build programme, and $1bn from its maintenance fund in Budget 2024.
On Tuesday, Māori development minister Tama Potaka announced a major restructure for Te Arawhiti, also known as the Office for Māori-Crown Relations, and Te Puni Kōkiri (TPK), responsible for policy advice to the government on Māori wellbeing and development. Te Arawhiti will focus solely on historical Treaty settlements, while TPK will pick up new responsibilities, including leading post-settlement relationships on behalf of the Crown and monitoring its implementation of Treaty settlements, making it the leading agency for Māori development. Te Arawhiti had announced in July that 13 roles would be cut, but it remains unclear whether these roles could continue in the restructure.
Bad news for providers and projects
Contracts to 190 care providers receiving funding through Oranga Tamariki have been discontinued as the ministry for children undergoes a reprioritisation of funding, while 142 more providers will have their spending reduced. Compared to the $577m spent on 554 service providers in the 2024 financial year, Oranga Tamariki has reduced its spending to a minimum of $438m with 480 providers in the current financial year. The agency’s spending will be finalised within the next six months, expected to pass $500m.
The ministry began its annual review of contracted funding in March, targeting what it considered underspending and under-performing providers. Children’s minister Karen Chhour said she asked the agency to review its hundreds of providers “line by line”, accusing some providers of treating Oranga Tamariki as a “cash cow” and claiming there would be “no reduction in frontline services” caused by cuts. Her comments have led children’s commissioner Dr Clair Achmad to call for “documented evidence about how these decisions are being made … so that I have assurance that children are at the very centre of these decisions”. Achmad said she hadn’t been provided any information that children who were accessing services now cut may be transitioned elsewhere.
The review reportedly left many providers in the dark, with some contracts – one priced at $300,000 – cancelled with little warning. On Tuesday, Stuff reported that in June, Oranga Tamariki had cancelled Auckland counselling service Friendship House’s contract with just four hours’ notice, leading at least 70 people being turned away. OT apologised for “a lack of clear communication” and said a regional manager would now contact Friendship House and “support them in winding down the service and to transition any children or families to other services”.
Another provider facing funding cuts is Nelson-based Family Start, a home-visiting service for pregnant families or those with infants, where almost 40% of staff will lose their jobs following a 25% cut in funding from Oranga Tamariki. The New Zealand Association of Counsellors (NZAC), alongside other agencies and service providers, has criticised the funding cuts, arguing the $30m drop in contract spending will likely worsen mental health and disengagement from young people in schools and increase family violence.
Certain providers could instead turn to the government’s Mental Health Innovation Fund, which has had its own funding slashed from $10m to $5m just a couple of months after being announced in Budget 2024. Ingrid Leary, mental health spokesperson for the Labour Party, claimed tender documents from Health NZ required applicants to have a minimum of 80 staff and $250,000 in co-funding. She said these requirements would shut out many providers, and accused minister for mental health Matt Doocey of “once again pre-empting the outcome as he did with the Gumboot Friday procurement, and picking winners”.
Science is another area affected, with government agency Toitū Te Whenua Linz (Land Information New Zealand) pulling out of a group that works on marine geospatial data. Simon Upton, parliamentary commissioner for the environment, wrote to Linz minister Chris Penk that “the savings in question – effectively one FTE [job] – are tiny in comparison with the value that the MGI working group is providing to New Zealand”. Upton said that our marine landscape was “still poorly understood. Increasing the accessibility of marine environmental datasets is critical for environmental monitoring and the sustainable management of the ocean’s resources.” This followed Linz in June dropping a project to build a shared system for emergency management data.
In a written response to Upton, Penk said Linz’s decision to cease the marine data work was “considered carefully” in conjunction with the department’s cost-cutting goals. Penk said Linz needed to “find savings and reprioritise resources in line with government expectations”. The department has already disestablished 54 vacant positions and six filled roles.
Meanwhile, an email sent to staff at Wellington Hospital on Monday has stipulated there would be no funding for new projects and put a question mark over projects already in the works. The email, leaked to The Post, said projects with an approved business case would go ahead only if they had been through the procurement phase, while any other approved projects would need to be resourced from somewhere else. This has put a cloud over the future of a major mental health facility planned for Lower Hutt.
Where do we go from here?
As of August 12, job losses in the public sector were at 6,419 – not far behind the expected 7,500 roles Act leader David Seymour predicted would be lost last November. With further cost-cutting efforts, more roles could disappear from the sector. However, the PSA is taking the Ministry of Education to court over plans to disestablish 755 roles, and the union will also challenge funding cuts to Family Start.
Critics have argued that the immediate effect of these cost-cutting measures will be a loss of services for vulnerable New Zealanders, who depend on care provided by agencies such as Family Start. Already, job losses in the public sector have been linked to a significant rise in job applications, with people competing for fewer positions, while other former public servants have opted to leave the country entirely.