Political Roundup: Time for a big debate about Govt use of business consultants

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This week’s bonfire of policy was also a bonfire of cash. The Hipkins-led Government finally ditched the RNZ-TVNZ media merger, but only after wasting about $23m on consultants to design the failed project. Other ditched policies also incurred millions of dollars in business consultancy fees.

Much of this was spent on the “Big Four” management consultants: Deloitte, KPMG, Ernst and Young (EY) and PricewaterhouseCoopers (PwC). External contractors have become an increasingly large part of Labour’s public policy-making process. Critics say they are superseding the role of the public service in designing state programmes.

A Billion dollars a year on business consultants

In everything from health to water infrastructure, the Government has become reliant on these private sector consultants to come up with new ways to do things and tell the politicians how to sell it. And they’ve been charging huge amounts. We now know that the public broadcast merger consultants were being paid up to $9000 per week, per consultant.

The most recent figures released by the Public Service Commission show that the Government now spends $1.244 billion a year on such contractors. And it’s rising fast – last year the consultancy spend was up by a third ($300m). Much of this was spent on health reforms, the polytech centralisation, and Three Waters.

The latter is likely to be the next policy on the bonfire. The Three Waters reform programme has been particularly lucrative for the management consultants – three of the Big Four have been employed – PwC, EY and Deloitte together charged a big chunk of the $21m of consultancy work up until February last year, as revealed by the Herald’s Kate MacNamara. She found that EY was the biggest contractor, billing for $5.2m. In addition, consultancy firm Martin Jenkins – closely linked to Doug Martin, who chaired the water working group – charged $2.5m.

PR was also a big part of the Three Waters bill. The firm Senate Communications seem to be the main biller, receiving $616,281 for advice to the Beehive on selling the reforms to the public. Unfortunately, the PR campaign ended up being perceived as “propaganda” and garnered a telling-off from the Public Service Commission.

The advertising campaign using cartoons of slime-covered children and sick ducks failed to win public support, and had been concocted following the advice of another PR specialist that the Government should employ the use of “emotive marketing” instead of “information first” public service-style advertising.

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More money for “consulto-crats” than delivery of public services

There are other big Government reforms costing huge amounts of consultancy money that might also be headed for the bonfire. The Auckland Light Rail business case has now had over $50m spent on consultants so far. In fact, just before Christmas the Herald’s Thomas Coughlan revealed that the Government had so far contracted 200 different consulting firms in the five years since 2017 – such as: “law firms Chapman Tripp, Meredith Connell, Buddle Findlay, and MinterEllisonRuddWatts. They also include competing consultancies like PwC, EY, and KPMG.”

Transport Minister Michael Wood also spent about $51m on consultants to develop his Auckland Harbour cycling and walking bridge project, only to abandon it once it was obviously not going to work out.

Similarly, Wood’s Waka Kotahi and Let’s Get Wellington Moving have, according to journalist Andrea Vance, spent “$47m on consultants – and delivered only a pedestrian crossing. In eight years. And the walkway cost an eye-watering $2.4m.” More generally, it’s been reported that Waka Kotahi has spent almost as much on consultants as it has on actually building roads.

So, although many of Labour’s reform proposals have failed, they have been a real winner for the business consultants employed on them.

The “consulto-crats” have also become a big part of the health reforms. DHBs were already spending a lot on management consultants prior to Labour’s centralisation. But this has ballooned under the new model. According to health commentator and former executive director of the Association of Salaried Medical Specialists, Ian Powell, “In the over 30 years I’ve been involved in the health system I’ve not seen a government more dependent on and influenced by business consultants”.

Interestingly, the new head of the health bureaucracy – former Skycity chairman and veteran company director Rob Campbell, is somewhat more critical of business consultants. Back in 2021, before becoming the health boss, he told the media that consulting firms “tend to define and analyse problems in a manner which can only miraculously be resolved by themselves”. He predicted back then that various government department restructuring meant the big consulting firms would “be preparing to feast”.

Conflicts of interest abound. There are just so many links between the different consultants used in government. Just one example – Labour contracted former New Zealand director-general of health Stephen McKernan to head its health reforms Transition Unit. Kate MacNamara reports that EY, where McKernan is a partner, then became the “single largest beneficiary of the contractor spending”. Apparently, 80 per cent of the Unit’s consultancy spending of $2.27m went to EY.

Management consultants are the new powerful vested interests

Political writer Danyl Mclauchlan recently summed up the 2022 year in politics, pronouncing management consultants as the notable winners: “KPMG and EY are literally constructing buildings in the parliamentary precinct. The metaphor for the partial privatisation of the core public service over the last five years couldn’t be stronger, and this has been their best year yet. Hundreds of millions to restructure the health, education, media and water infrastructure and sell these projects to the public.”

Mclauchlan points to the fact that business consultants are typically part of the Wellington political class, having developed their networks and skills being employed by the taxpayer: “Almost exclusively former public servants and parliamentary staffers, who facilitated these historic transfers of wealth to the private sector and got to clip the ticket.”

He’s also questioned whether society is well served by the new layer of private sector bureaucracy having such influence and taking so much taxpayer funding: “It’s almost as if the primary role of the administrative state is shifting from serving the people to the redistribution of wealth to the staffers, lawyers, PR companies, managers and consultancy firms that work in them, or for them. A billion dollars a year in public sector consultancy is an awful lot of money when you’re running out of teachers and nurses because you don’t pay them enough, and the fire trucks are breaking down.”

The “Big Con” of consultancy

So, is the new consultant-bureaucratic industrial complex good for democracy? Is it in the public interest? And what does it mean for our political system to be so strongly dominated by private sector management consultants?

In New Zealand, journalist Dileepa Fonseka wrote last year that “Consultants have become an entrenched part of the machinery of Government.” He says that there’s a Wellington joke about the modern structure of government: “There are three branches of government: the legislature, the judiciary and MartinJenkins.”

Although this trend seems to be particularly well-advanced in this country, it’s part of a global problem. Next week, a new book is set to be released that will shed more light on the role of consultants in governing. Economist Mariana Mazzucato has co-written with Rosie Collington, “The Big Con: How the Consulting Industry Weakens our Businesses, Infantilizes our Governments and Warps our Economies”.

They argue there are major conflicts of interest in the way that the consulting industry and business is entrenched in contemporary governments. Here’s the blurb for the new book:

“The ‘Big Con’ describes the confidence trick the consulting industry performs in contracts with hollowed-out and risk-averse governments and shareholder value-maximizing firms. It grew from the 1980s and 1990s in the wake of reforms by both the neoliberal right and Third Way progressives, and it thrives on the ills of modern capitalism, from financialization and privatization to the climate crisis. It is possible because of the unique power that big consultancies wield through extensive contracts and networks – as advisors, legitimators and outsourcers – and the illusion that they are objective sources of expertise and capacity. To make matters worse, our best and brightest graduates are often redirected away from public service into consulting. In all these ways, the Big Con weakens our businesses, infantilizes our governments and warps our economies.”

Hopefully, this book will spark a lot more debate and scrutiny about how countries like New Zealand have come to install consultants at the centre of policy-making, and what the problems are with this approach.

Of course, the current government won’t welcome debate. Prime minister, Chris Hipkins, once railed against the use of consultants by the last National Government – criticising what he saw as the ballooning use of business contractors. But since he became Minister of Public Services in 2017, their use has only skyrocketed.

Part of the increased use of contractors has been due to the arrival of the Covid pandemic, which stretched the public service in certain areas. But this lucrative new opportunity shouldn’t be simply allowed to turn into a permanent state of affairs.

The “bonfire of policy” occurring at the moment is a good time to examine the dominance of business consultants in government. Some say the public service has become bloated, and others that it has been hollowed-out by the entry of management consultants. Either way, this culture of consulto-crats poses huge questions about vested interests, and brings the integrity of policymaking into question.

Other items of interest and importance today

GOVERNMENT, PARLIAMENT
Matthew Hooton (Herald): We need to talk about Christopher (paywalled)
Brent Edwards (NBR): A bonfire of policies, Waitangi, and the year ahead
Thomas Coughlan (Herald): National ahead of Labour in latest poll, but Labour could form government
Rachel Smalley (NBR): Blistering pace for new PM Chris Hipkins (paywalled)
Kate MacNamara (Herald): The caches of unspent Covid money paying for fuel tax reductions (paywalled)
Matthew Hooton (The Australian): Chris Hipkins’ bonfire of the policies proof ‘perfectly competent’ is the new black (paywalled)
Mike Hosking (Newstalk ZB): The ‘policy bonfire’ is smart politics
Lloyd Burr (Today FM): Chris Hipkins’ fronting up leaves Jacinda Ardern in the dust
Russell Palmer (RNZ): Chris clash: Leaders flare up over policy purge, climate
Anna Whyte (Stuff): National ‘whinge and moan’, says PM, Hipkins ‘rather disingenuous’, says Luxon
Kiri Gillespie (Bay of Plenty Times): Prime Minister Chris Hipkins on Tauranga’s growth woes, $10 Tauranga tag, and $960k funding boost (paywalled)
Kiri Gillespie (Bay of Plenty Times): Prime Minister Chris Hipkins visits Tauranga slip-affected residents and economic development agency Priority One
Newshub: ACT’s David Seymour rejects racist rhetoric allegations in heated AM clash with Te Pāti Māori co-leader Rawiri Waititi
Tumamao Harawira (Whakaata Māori): Big year ahead for Māori Party
Will Trafford (Whakaata Māori): Māori party adopts Swiss neutrality policy
The Facts: 99.0% of submissions opposed the Water Services Entity Bill
David Farrar: Why the RMA replacements bills should also be added to the bonfire

EMPLOYMENT, MIGRANT WORKERS
Josie Pagani (Stuff): Different standard applies when the low paid are given more
RNZ: ‘The struggle is real’ – Auckland cleaner explains life on minimum wage
Heather du Plessis-Allan (Newstalk): We’ve got high minimum wage and low productivity
Herald Editorial: Government’s canned social insurance scheme had best intentions but was too complex (paywalled)
1News: Minimum wage: Opinion mixed on 7% hike
RNZ: ‘More modest’ minimum wage hikes possible if inflation cut – National
Jenée Tibshraeny (Herald): Minimum wage hike could make it harder to hire migrants – restaurant owners (paywalled)
Jie Pang (Herald): Local Focus: Inside RSE worker accommodation, where four bedrooms can earn landlords $3500 a week
Vaimoana Mase (Herald): New documentary series highlights realities of Pacific seasonal workers (paywalled)

MEDIA AND TVNZ-RNZ MERGER
Graham Adams (The Common Room): Has government money corrupted journalism?
Peter Thompson (The Conversation): ‘Let them watch Netflix’ – what can be salvaged from the wreckage of the failed TVNZ-RNZ merger?
Tom Pullar-Strecker (Stuff): Media policy mustn’t become a toxic issue after merger u-turn, says expert
Damien Venuto (Herald): The slow, painful death of the TVNZ-RNZ merger leaves media vulnerable (paywalled)
RNZ: Finance Minister Grant Robertson disputes millions spent on TVNZ-RNZ merger were ‘wasted’
Dita De Boni (NBR): Phew, says advertising industry about canned RNZ-TVNZ merger(paywalled)

HATE SPEECH LAW
RNZ: Hate speech law ‘too important to rush through’ – Islamic Associations’ Abdur Razzaq
Tess McClure (Guardian): New Zealand government under fire after shelving Christchurch hate speech reforms
Tova O’Brien (Today FM): Chris Hipkins cowardly picked the wrong side of the hate speech debate
Zarina Hewlett (Today FM): Government slams brakes on hate speech law leaving Islamic community frustrated

CLIMATE CHANGE
Danyl Mclauchlan (Listener/Herald): Finally, Kiwis care about climate change. Are politicians prepared? (paywalled)
Rebecca Stevenson (Interest): Insurers are waving the climate change red flag. We all need to pay attention
Rob Stock (Stuff): Owners of flood-prone homes will pay more for insurance
No Right Turn: Climate Change: Labour’s dismal record
Greg Hurrell (BusinessDesk): Axing the biofuels mandate was ‘no surprise’ (paywalled)

AUCKLAND
Matthew Scott (Newsroom): Auckland scathing of minister’s powers in planning changes
Bernard Orsman (Herald): Auckland floods: Auckland Council launches investigation into impact on infrastructure and planning issues
Matthew Scott (Newsroom): Councillors navigate Auckland’s watershed moment
Katie Ham (Stuff): ‘No one came for me’: Elderly woman left alone in the dark as floodwaters rose
Sharon Brettkelly (RNZ): Missing the messenger? Communication and the Auckland floods
Tim Murphy (Newsroom): Desley the deputy steps into the breach
Lianne Dalziel (Newsroom): Christchurch offers waterlogged Auckland three blunt lessons in resilience
Erin Johnson (Stuff): Council budget cuts could hit first responders to flooding
Erin Johnson (Stuff): Two-thirds of people ‘would walk or cycle’ over Auckland’s Waitematā harbour

LOCAL GOVERNMENT
Erin Gourley (Stuff): ‘We’ve done what we can to rein it in’: Wellington’s rates jump was originally 17%
Herald: Wellington streetlamps at risk of plummeting to the ground, could cause serious injury
Erin Gourley (Stuff): Demolition once again on the cards for heritage-listed Victoria University flats
Erin Gourley (Stuff): Council staffer allegedly continued working with kids after claims of inappropriate sexual behaviour
Nicholas Boyack (Stuff): Council’s share of Eastbourne harbourside pathway jumps by $18m
Phil Pennington (RNZ): Single consultant on failed Horowhenua landfill paid nearly $1 million
Glenn McLean (Taranaki Daily News): Council could defy Government legislation to safeguard New Plymouth ratepayers
Stephen Ward (Waikato Times): Waikato Regional Council suggests planned 6.1% rates rise not so big for most
Max Frethey (Local Democracy Reporting): Voters unhappy with STV and revamped ward system, says poll

ENVIRONMENT
Andrea Vance (Stuff): Environmental Protection Agency steps in over lake polluted by shuttered paper mill
RNZ: ‘We know better now’: Waitaki council to find long term solutions for historic waste
Katy Jones (Stuff): Taskforce with former environment commissioner to consider future of council forestry

HEALTH
Jessica Roden (1News): Hospitals hit 100% occupancy more than 600 times last year
Rachel Thomas (Stuff): Professor Michael Baker launches public health communication centre
Stephen Forbes (Local Democracy Reporting): New health minister at odds with frontline healthcare workers over staff shortages
Megan Wilson (Herald): Lakes district: Elective surgery waitlist jumps from 11 to 762 patients in five years
Oscar Jackson (Today FM): Pharmac reported to receive one-off $66 million injection
Ian Powell: Māori child health inequities research reinforces case for a Māori Health Authority
Samantha Gee (RNZ): Councillors to now decide on using coal to heat and power Nelson Hospital
Catherine Hubbard (Stuff): Hospital coal consent decision now in hands of councillors
RNZ: Covid-19 vaccine available for some children under 5

CO-GOVERNANCE, TREATY
Chris Trotter: A Real Revolution?
Arena Williams; Stuart Smith (Stuff): Far from dividing us, co-governance brings us closer and reduces inequalities

HOUSING
Damien Venuto (Herald): Why is it so slow and expensive to build in NZ – and how do you fix it?
Tina Law (Press): Plans for housing intensification in Christchurch scaled back
Rewi Newnham (Newsroom): Shelly Bay primed for coastal flooding
Hamish McNeilly (Stuff): Up to 1000 new homes possible in new greenfield zones approved for Dunedin
Thomas Coughlan (Herald): Few landlords putting up rents, despite interest rate hikes costing them thousands – survey (paywalled)
Miriam Bell (Stuff): Meth in rentals debate ignites again: Is Govt’s proposed standard too high?
RNZ: First home buyers make up record quarter of market – CoreLogic
Hayden Donnell (Spinoff): The truth about new housing and the Auckland floods

ECONOMY, COST OF LIVING
Susan Edmunds (Stuff): Here’s how much you’d save in tax if brackets had moved with inflation
Sandran Conchie (Herald): Christopher Luxon says ‘five-point inflation-fighting plan’ will put more money in pockets
Toby Morris (Spinoff): How much does the cost of fuel impact the price of bread and butter?

BUSINESS
Tom Pullar-Strecker (Stuff): Big power companies tipped to increase operating profits by 22%
Victoria Carter (Newsroom): Bringing banks to social account
Ian Llewellyn (BusinessDesk): The government inflames mining sectors’ sense of grievance (paywalled)
Dileepa Fonseka (BusinessDesk): $2m over six years for regenerative farming (paywalled)
Guy Trafford (Inerest): Farmer confidence continues to fall amid scepticism any RMA reform will improve things. Fed Farmers weighs in on RBNZ mandates
Phil Pennington (RNZ): Government hopes for aerospace boom but CAA says inspectors ‘overworked’
Paul McBeth (BusinessDesk): Keep space above it all, Rocket Lab says (paywalled)
Marc Daalder (Newsroom): IRD wants visibility of crypto assets
Lois Williams (Newsroom): Franz Josef ‘held to ransom’ by hotel company

FOREIGN AFFAIRS AND DEFENCE
Samuel Hume (Arena): “Fiercely independent”: Aotearoa New Zealand and US empire
Alexia Russell (RNZ): The air force’s new flying machines
Jenna Clarke (The Australian): Chris Hipkins welcome all very nice, but it’s more LinkedIn than Instagram (paywalled)
Rituraj Sapkota (Whakaat Māori): Ex refugee Behrouz Boochani on asylum seekers, issue PMs Hipkins, Albanese ignored
Adam Pearse (Herald): NZ Minister offers reassurance after Chinese surveillance tech found in Australian government buildings
Herald: Rescue mission launched for Kiwi pilot held hostage in Papua by separatist fighters – report

EDUCATION
1News: NZ facing ‘cost of learning crisis’ – experts
John Gerritsen (RNZ): Year off to a good start despite Covid and weather, some principals say

OTHER
Matthew Rosenberg (Local Democracy Reporting): ‘Why do we have to buy back our own land?’: Perpetual leases battle continues
Denise Piper (Stuff): Russell locals already calling the town Kororāreka, as name ‘restoration’ proposed
Maria Baker (Herald): It took a wāhine Māori to pioneer the creation of a strategy to eliminate family and sexual violence
Moana Ellis (Local Democracy Reporting): Whanganui River Māori offer support in Colorado River crisis talks
Charlotte Graham-McLay and Tess McClure (Guardian): Australia and New Zealand best placed to survive nuclear apocalypse, study finds
Benn Bathgate (Stuff): Price of seismic safety could cost NZ its iconic tourism buildings

7 COMMENTS

  1. Just wait until you see how much money the Firearms Registry will burn through…

    Below is from the failed Canadian Firearms Register, initial cost estimate $2,000,000, actual cost… over one billion dollars before it was scraped.

    https://en.wikipedia.org/wiki/Canadian_Firearms_Registry

    “The registry again became a political issue in the early 2000s when cost overruns were reported.

    In early 2000, the Canadian Firearms Program released a report that showed that implementation costs were rising. Major backlogs in registration—largely as a result of firearm owners waiting until the last minute to apply—general increase in costs, fee waivers for early applications, and high error rates in applications submitted by firearm owners were all cited as contributing factors to the rising costs.[9]

    In December 2001, the cost rose to an estimated $527 million for the whole gun control program which included the long-gun registry. The Canadian Firearms Program reported that a major factor behind the rising costs was the difficulty it had keeping track of licence fees collected. This was blamed, in part, on the computer system used to process applications. The audit said that the problem could not be resolved without “massive change,” including “significant investment” in the computer system.[9]

    In April 2002 the tab for implementing the whole gun control program rose to $629 million. The costs were $2 million to help police enforce legislation; a minimum of $60 million for public-relations programs, including television commercials ($18 million of which went to GroupAction, the advertising agency at the center of the 2004 Canadian sponsorship scandal); $227 million in computer costs, including complicated application forms that slow processing times; and $332 million for other programming costs, including money to pay staff to process the forms.[9]

    In December 2002, the Auditor General of Canada, Sheila Fraser, reported that the project was running vastly above initial cost estimates. The report showed that the implementation of the firearms registry program by the Department of Justice has had significant strategic and management problems throughout. Taxpayers were originally expected to pay only $2 million of the budget while registration fees would cover the rest. In 1995, the Department of Justice reported to Parliament that the system would cost $119 million to implement, and that the income generated from licensing fees would be $117 million. This gives a net cost of $2 million. At the time of the 2002 audit, however, the revised estimates from the Department of Justice were that the cost of the whole gun control program would be more than $1 billion by 2004-05 and that the income from licence fees in the same period would be $140 million.[9]”

  2. Just wait until you see how much money the Firearms Registry will burn through. It will make the $200,000,000 wasted on the BuyBack look like chicken feed. With no discernible public safety benefit.

    • How quickly the delusional forget…. Case in point…John Key’s wasting in excess of $30millon taxpayer dollars on a i’ll build my own memorial legacy by trying to change the New Zealand flag.
      Remember all those consultants , graphic designers etc…not to mention 12 or so ‘handpicked’ mates he paid with our money to travel around N.Z and try to sell his idea and convince ‘everyday’ Kiwis that changing the flag was essential …
      Of course none of these ‘experts’ knew anything about flag design which became patently obvious when the chosen design looked like a cheap tea towel a tourist might buy in one of those cheap foreign owned souvenir shops.

      This was not trying at least to build better infrastructure or something useful for the betterment of the country..
      Oh no…This was purely a vanity project at the taxpayer’s expense . $30 million on trying to change the colour and design of a piece of cloth just so he could say….”I did that. Aren’t i amazing”…

      A legend in his own mind that boy!

  3. Came looking for this article from reading about it in Bryce’s democracy project.

    I have to admit I don’t fully agree with the facts presented here. Not because they are incorrect, but rather because they are a very skewed presentation of the problem. Government relies on, and has relied on, contractors for a long time. Any doubt about that shows a lack of engagement in the political space. (Just like anyone who is shocked by the $9000 a week doesn’t understand the price of consultants normally.)

    The issue that Bryce has touched on, however, is that in recent days the government has been much more concerned with centralization and pumping out strategies than actually delivering outcomes.

    The problem is not that a strategy/roadmap/etc has been written… but the fact that nothing gets done with it. And then they go ahead and write some new strategies. There has to be actual implementation but government loves the bureaucracy of planning and hates to actually do any work.

    P.S. – A large part of government consultant spend is audit requirements. To suggest external regulators are not needed is funny and I will laugh a little.

  4. i’m making another request for the featured lead articles in this regular section to have their source or authors clearly identified.

  5. Great article. 1.2B can buy a lot of teachers police or nurses. This waste and misdirection of our taxes along with housing are 2 key things we need to change if we want to reduce poverty in this country.

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