New Zealand PM Defends Government Spending on Consultants and Contractors

During an early March state-of-the-nation speech, New Zealand Prime Minister Christopher Hipkins defended his government’s spending on expensive private-sector consultants and contractors, citing a need for the opposing National Party to be more transparent about its proposed cost savings. The National Party’s Public Service spokesperson Simeon Brown has recently accused Hipkins’ Labour Party of irresponsible spending, claiming the party has “created a gravy train” for private-sector consultancies through the use of working groups and public sector restructures.

The National Party has put forward a plan to reduce spending on consultants and contractors by stopping public sector restructures and mergers, slashing working groups and task forces, and ending an alleged culture of over-relying on contractors to do the job of regular public servants, claiming a potential savings of up to $400 million NZD across a range of Crown entities and government departments. The party plans to leverage the savings to provide New Zealand families a 25% rebate on early childhood education, up to $3,900 a year.

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During 2018, in his role as Public Service Minister, Hipkins promised to reduce government spending on contractors and consultants. But, since then, government spend has increased to more than $1.7 billion NZD, surging during the COVID-19 pandemic as the government took on the extensive work of managing an unprecedented public health crisis that halted work, shook supply chains, and brought about tremendous economic uncertainty. The PM was highly skeptical about the National Party’s plan, arguing that almost all the projects that the party claimed as wasteful have already been cut.

“I'm not going to defend the consulting and contracting industry, you know, they can defend themselves,” said Hipkins in an early March state-of-the-nation speech. “I would prefer that more of that work was in-house, but I have to also acknowledge that where government departments are saying 'look, we've tried that, and we can't actually get the people to do the work'. If the work needs to be done, they have to do it somehow.”

Public sector consulting spending has been a sore political subject in New Zealand, Australia, and the U.K., with politicians in all three nations pushing back on the use of outside contractors to provide specialized knowledge and services to government agencies. Responses have ranged from efforts to establish best practices in hiring consultants and sharing learning across agencies to making better use of in-house talent and upskill existing civil servants. Despite these efforts, spending has continued to surge, with consultancies receiving more than $8 billion NZD in contracts spanning the three countries in 2022.