Post - Cabinet press conference

>>PM: Good afternoon. On Thursday of this week I'll be giving a speech setting out some of the next steps in the Government's public sector programme. Delivering better public services within tight financial constraints is one of our four priorities for this term. The other priorities are responsibly managing the Government's finances, building a more competitive and productive economy, and, of course, rebuilding Christchurch. Personally, I want a results-focused Public Service that embraces innovation and flexibility, and is accountable for delivering the results New Zealanders want and, of course, deserve. My speech this week will cover some of the next steps to achieve this and clearly set out the Government's expectations. I don't want to go into details today, but I can make a few general points. Firstly, improving the Public Service is important because the Public Service makes up about a quarter of New Zealand's economy, so it plays a big part in our overall economic performance. New Zealanders care about the quality of public services they receive: hospitals for their families, education for their children, and social services and justice for the most vulnerable. And taxpayers who pay the bills quite rightly expect their money to be spent carefully. With those things in mind, over the past 3 years we have focused on two things: reducing costs and increasing efficiency in the Public Service, and getting better results and improved levels of service. Instead of rushing in and making savage cuts, we've given Public Service chief executives time to prepare and plan for the new reality of delivering better public services with little or no new money - for example, through their 4-year budget planning process. We're making good progress in reducing costs and increasing efficiency as we focus on getting back to surplus in 2014-15. Now we want to focus *** delivering better results, improving public services for New Zealanders, and being more flexible and innovative in how we do that. We've always said that there'll be a high hurdle for structural change in the public sector. My speech is not going to be about mergers for mergers' sake. So we're not looking at wholesale restructuring, but there is one area of the public sector's operations where we think that structural change is needed. But I will talk more about that and how we will get better results in my speech on Thursday. Just in terms of ministerial activity, obviously it's a recess week. I'm in Auckland tomorrow, Wednesday I'm in Taupo, Thursday I'm in Auckland, and Friday I'll be in the Coromandel electorate. On Sunday I'll be at the start of the Round the Bays race in Auckland; I'll be going to the Warriors match and various other things on Sunday. >>Media: What's that area? >>PM: You'll have to wait till Thursday. >>Media: Is that the super-Ministry around economic develo>>PMent, science and innovation, labour, and immigration? >>PM: Well, I'm not going to rule that out, but I'm also not going to rule it in. >>Media: Why would that be a better way of approaching that area? >>PM: I'm not going to go into the particular areas that we're looking at. What I'm saying in the speech on Thursday quite clearly is that the public have high expectations of the Public Service, and that I don't think we should just have mergers for the sake of them. Where we've had mergers so far, in areas like the Ministry for Primary Industries, it's been very logical in what we've done. There's one other particular area we want to focus on in terms of where we think gains can be made and synergies can be found, and I'll be in a position to talk more about that on Thursday. >>Media: Do you think less money and fewer people means a better Public Service and better services? >>PM: I think we need to modernise the State service, and it's really important that we deliver on a number of things. Firstly, New Zealanders have high expectations of the results they get, so when we think of public services, some people think about how you apply for your passport; actually, I think about whether kids get a decent education, whether the justice system works for them. Secondly, a big driver of costs is headcount, and of course we're giving a lot of Government departments no extra money, so where they're having to pay for wage rounds, that's leaving them effectively out of pocket and having to make savings in other areas. Thirdly, there are synergies to be gained when you share back offices, when you share support services. We've also been wanting to move resources from the back office to the front office, and I think we've been quite successful about that. So, yes, the headcount has been falling in the State sector - I don't think dramatically, but it has been coming down. It's my expectation it'll probably go a bit lower. I'm not foreshadowing absolutely dramatic change, but I am foreshadowing sensible changes. >>Media: I think there have been about 2,400 jobs lost since you guys took office. Do you expect that similar level of job losses over the next 3 years to reach the $1 billion target that was talked about last year? >>PM: The savings for the $1 billion will come not solely through a reduction in headcount, although that is a part of the cost savings that we will receive. There are other areas like procurement where we can save money, and other things that we're doing. So we'll spell that out a bit more holistically on Thursday. >>Media: So how many jobs do you think will go across the sector? >>PM: I don't know precisely. I can see some areas where there's going to be structural change, and I can see some areas where there are some savings going on, but really every Government department is looking at them. >>Media: Is it hundreds or is it thousands? I mean, how are the public meant to get a handle on how big this is going to be? >>PM: Well, as I said, it's not change for the sake of change, and it's not driven by a magic number; it's driven by a better result in a more affordable environment. >>Media: You've already had pushback from MFAT and Ministry of Defence. Have you gone too hard and fast and maybe overreached in some of these changes? >>PM: I don't think you'd actually say we've had tremendous pushback in Defence. Yes, morale is arguably at a slightly lower level, but it's still from quite a high base, and actually if you look at Defence, one of the strong themes that came through when we did the Defence white paper was they want more money to spend on different assets and in different areas. So in the case of Defence, yes they're making savings, but they get to use all of those savings in other initiatives that they want to fund. So there may be some people that are unhappy, but I wouldn't necessarily describe the whole Defence Force as unhappy. In the case of MFAT, yes it's slightly different there. Obviously, there's been some pushback, but the important point to note with MFAT is we are going through a consultation process. The chief executive is legally required to do that, and he is legally required to take on board that feedback, and I imagine he will. >>Media: Are you going to back away from some of your proposals around MFAT or not? >>PM: I think it is really important to understand they're the chief executives. That is the responsibility of a neutral State sector. But I think he'll take on board the feedback, and I'd be amazed if he ends up delivering on all the things he's consulting on. I think there will be some change, but that is a matter for him. >>Media: Where do you think that change might occur? >>PM: I don't want to foreshadow that today. I mean, he hasn't even finished the consultation process. But, you know, we value the Ministry of Foreign Affairs and Trade, but we are trying to modernise it. >>Media: Are you concerned it was too aggressive by the chief executive, never mind the Minister, 305-odd jobs? Do you think it was too big too soon? >>PM: Well, firstly, it is clearly run by the chief executive. The State Sector Act is absolutely crystal clear in terms of whose obligations and responsibilities they are to reform the State sector. Are they too aggressive? Look, in some areas they may be a little bit aggressive and he might have to step back a wee bit I think. >>Media: So there was no Government direction at MFAT to find cost savings? This was completely of their own initiative? >>PM: No, they need to find cost savings. That is not the directive; the directive is how you find those cost savings. We are the purchasing agent. So it is quite within the State Sector Act for a Minister to give an indication of where the Government's going. We've been doing that for quite some time, telling chief executives they need to live within their baseline. That is no different from us going to police and saying to the Police Commissioner that there'll be no extra money for this budget cycle, as we have said to the Police Commissioner. But it is for the Police Commissioner, rightfully, to identify where those savings might be found to fund the other cost increases that he faces within Vote Police. >>Media: You just said that you didn't want to foreshadow areas where MFAT might draw back but then saying it is totally up to them as a neutral chief executive. So are you aware of where they might draw back? >>PM: Well, I'm well and truly aware of the feedback. I mean, anyone can see that, and there is an intranet site where MFAT employees are being encouraged to go out and give their feedback. I think the spouses of MFAT staff have released an open letter today, as I understand it. I would be absolutely amazed if the chief executive doesn't take that on board, because he has a legal obligation to do that. >>Media: But there'll be no direction from the Government? >>PM: The Government is the purchaser, and we want to see an efficient Ministry of Foreign Affairs and Trade that works well, and we want to see one that achieves the objective we have got, which is to reduce their costs and be modernised. How that is carried out is a matter for the chief executive. >>Media: You said some of the proposals might have been too aggressive at MFAT. What areas are you talking about there? >>PM: I think some around compensation are likely to be a bit aggressive. I mean, at the end of the day, there are genuine issues there. Spouses do accompany their partner, more often than not, on a foreign posting, and they don't always get the opportunity to take up employment in the locations they go to, so I think that is one area where he'll have a look. But, as I say, I've had lots of anecdotal feedback to me as well. I'm sure that same feedback has been fed into the system. In the end, I'm sure John Allen will go and work his way through all that and eventually come up with a set of proposals that he thinks fits what is required. >>Media: There's a sense that the process to appoint a new chief executive to the Department of Labour has been suspended. Is that due to the proposed changes in terms of likely mergers? >>PM: No, I don't think so. I certainly haven't seen any new recommendation, but they'll work their way through that. There have been one or two other recommendations, but they haven't got to that yet. >>Media: There has been quite a lot of speculation about a super-ministry around economic develo>>PMent, immigration, labour. You said that you didn't want to talk about that. Is that because it's not happening or because you want to announce it on Wednesday? >>PM: I'll just repeat what I said earlier, which is that I am not ruling anything in and I'm not ruling it out. I am happy to talk about it on Thursday. If you want to speculate before then, I can't stop TV3 doing that. >>Media: Isn't it a bit of a cop-out to say the responsibility lies, on the whole, with the chief executives? Because they can only play the cards that you deal them, and you're not giving them any more money. In fact, you're effectively giving them cuts because they're getting no inflation-adjusted rises. >>PM: No, and I'd encourage you to go and read the State Sector Act. It lays out quite clearly whose responsibilities they are and who is required to carry out any reforms that take place. I mean, if Ministers are going to do that, then they will very quickly find themselves in breach of the State Sector Act. It is quite clear that the Government has less money and is either asking some departments to live with less money or the same amount of money. That is absolutely within our prerogative. It is also within our prerogative as the purchaser to make it clear what our objectives are, but it is the responsibility of the chief executive to come up with that plan and to execute that plan. >>Media: So when Mr McCully says that he didn't want to see any cuts to the UN, for instance, that's part of the Government's definition of what its priorities are? >>PM: That's his definition as the purchaser of what he thinks is important. It is the responsibility, I would have thought, of any and what do you see as a priority?”. That is why there is a briefing to the incoming Minister. That is why Ministers meet with chief executives on a weekly basis. But the actual plan and how that plan is executed is the legal responsibility of the chief executive. >>Media: But isn't it stretching credulity a bit far to think that the Minister, especially one as active, if you like, as Mr McCully, would allow a proposal to get as far as this without at least having some input into what it said or the direction it was taking, beyond the level that you're talking about? >>PM: Well, you need to take that question up directly with the Minister, but certainly in terms of discussions I have had with the Minister, he has certainly given clear indications of what his purchasing requirements are. But my understanding is the programme and plan that have been put together were formed by the chief executive with the change consultants that he employed. >>Media: Prime Minister, just changing the subject - just looking at the Investor Plus category for immigration with just 10 people, including Kim Dotcom, coming in on that, are you happy with the way that that scheme has been working? Has that been as effective as you would have liked? >>PM: Well, it is more successful than the previous scheme was, and it is seeing, for the most part, people coming to New Zealand that are making a real contribution. You know, whether ultimately Kim Dotcom has breached international law is not a matter for me to opine on; that is a matter for the US authorities who are taking that case. But in terms of the general category, actually, having high - net worth individuals coming to New Zealand, in my view, adds value. You have seen that with Julian Robertson, and I think you will see it with James Cameron when he comes. In fact, the Herald today ran I thought quite an interesting piece on the number of high - net worth individuals that are coming and what they are doing in New Zealand. >>Media: What about the fact that most of them have just invested the $10 million and no more - effectively, they've just stopped once they've done enough to come in on the category? >>PM: I think that is a very narrow definition of what they are actually doing. So they might have invested that in their bonds, or whatever it might be, but in fact their overall activities are usually significantly greater than that. >>Media: So that goes with the fact that lots of them have invested 77 percent of the moneys in bonds - a very passive form of investment. >>PM: Yeah, but they more often go off and do a great many other things. I mean, look, it is not for me to go into the individual activities of a person, but if you take Peter Thiel, for instance, from Facebook, who has spent some time in New Zealand, it is very well known he made a significant donation to Christchurch. He has been undertaking a number of, as I understand it, private investments >>PM: I don't think that is right, actually. I think the Minister actually said it would process has been followed in Dr Mapp's appointment? >>PM: Absolutely. OK. See you Thursday.