"Today it's official, Labour has led New Zealand into recession and most worryingly Helen Clark is still failing to articulate any plan to get our country's economy growing again," says National Party Leader John Key.

He is commenting after the release of the June quarter GDP figures, which confirm the economy is shrinking.  There's also a developing view that there will now be a third quarter of negative growth.

"For many people it is becoming very tough.  Labour's tax cuts are years too late and there needs to be more to the economic plan. 

"Regardless of who makes up the next government, the fiscal context will be quite different over the next five years than it has been over the past five.  National recognises this.

"Michael Cullen has spent the windfalls from yesterday, but there is no plan for tomorrow.  He has been a fair weather Finance Minister.  And when things were good, Helen Clark was happy to take the credit.  Now there's an economic headwind, they look for others to shoulder the blame and remain silent on any plan for growth. 

"At times like these, people look to the government for a sense of direction. People can get through a recession if they see the path ahead to better incomes.

"The reality is that fiscal initiatives at this point must be targeted at strengthening the economy for the future. Only a strong economy can provide continued improvements in public services and security for older people, the sick, and the vulnerable.

"National will implement an economic package that will set the course for a return to growth and strengthen our economy."

• We will put the right incentives in place to encourage people to work and save and get ahead under their own steam.
• We will bring discipline to government spending and devote more resources to frontline services like doctors, nurses, teachers, and police.
• We will stop the massive rise in bureaucracy and red tape.  We will cap the number of bureaucrats in the core public service, and we will reform the Resource Management Act and the Building Act.
• We will have an unwavering focus on lifting education standards.  We will improve literacy and numeracy, boost trades in schools, and encourage teenagers to get the skills they need.
• And we will invest in the infrastructure we so desperately need to help get this country growing again.

"Now is not the time to shut up shop and blame the world economy.  Now is the time to think smart, act rationally, and start building a dynamic economy that is resilient in the face of future uncertainty.  National will do just that."
 

National Party Leader John Key is saddened at the death today of former New Zealand First MP Brian Donnelly.

"Brian's death will be mourned by many, many people including his former Parliamentary colleagues from across the political spectrum. That is testament to the man that Brian was.

"He will be remembered for his genuine warmth and tolerance, for the tremendous contribution he made to his country before he entered politics, and for his invaluable contribution as an MP over 12 years.

"Despite his tenure being cut short by his illness, Brian was also an excellent High Commissioner to the Cook Islands.

"My thoughts are with his wife Linda and his family. Brian will be greatly missed."

National will establish an international centre of research dedicated to the reduction of on-farm greenhouse gas emissions, says National Party leader John Key.

"This centre will be a 'virtual centre' – a multi-institutional research network with scientists and researchers from Crown and private sector agencies working together on a commonly agreed work programme.

"National is committed to boosting research and development into emissions-reducing technology, especially in agriculture. Around the world, countries will be focusing their research dollars on the main causes of their own emissions, and so should we."

Mr Key says National will also investigate options for reducing compliance costs and unnecessary bureaucracy within the science system. In particular, National will work towards:

• Developing accountability mechanisms with the lowest compliance necessary for the size and risk of the project.
• Reducing product clutter and the proliferation of funding pots.
• Developing best-practice mechanisms for funding proposals and contracts, including common templates for equivalent information, common contract formats, and common sign-off requirements across the different public funding agencies.
• Developing a nationally co-ordinated calendar of the RS&T funding cycle that spreads the activities of all participants predictably through the year.
• Avoiding one-off or ad hoc funding processes for small sums of funding out of the normal cycle.
• Using common terminology and definitions across the sector.
• Reducing duplication in administrative functions across funders.
• Facilitating common electronic transfers of information rather than paper-based transfers.

National will also reduce the size of the recently introduced R&D tax credit and use the resulting savings to boost funding for research and science by $315 million in the next three years. National will:

• Reduce the R&D tax credit to a 10% credit. This will still be more generous than the standard Australian R&D tax incentive.
• Redirect the savings from this reduction into directly funding science and research. Funding will go into research at both universities and CRIs, by being split 50:50 between:

- An increase to the Performance Based Research Fund, Marsden Fund, and Health Research     Council funding allocations.
- The creation of a new secure funding allocation system for CRIs.

National will establish a new secure funding allocation for CRIs. This will allow CRIs to develop and maintain a nationally significant research capacity in their core areas of science, without having to constantly compete for funding.

This funding will be made up initially from:

• Half the savings from reducing the size of the R&D tax credit.
• The funding currently in the CRI Capability Fund.

National will wind up the Fast Forward Fund, so minimising the need for extra bureaucracy. Where R&D initiatives have already been established through Fast Forward, consideration will be given to continuing them. National will continue with the same quantum of new funding but we will spend it in a way that ensures better research outcomes.

National will:

• Establish the international centre for research into on-farm greenhouse gas emissions and fund it with $20 million a year.
• Boost funding within Vote RS&T for primary sector and food research by $25 million a year.
• Boost funding for research consortia in the primary and food sectors by $25 million a year.

NOTE: Please see the updated policy document for PREFU-related changes to the R&D tax credit provision.

For policy and background documents visit:

http://national.org.nz/files/2008/RSandT.pdf

The threats levelled at the Maori Party over the Winston Peters Privileges Committee case are serious and concerning, says National Party Leader John Key.

"Helen Clark should explain why a Minister of hers told the Maori Party there would be 'unpleasant repercussions' from the Maori people if the party voted against Winston Peters in the Privileges case.

"Helen Clark said the Privileges Committee process was tainted.*

"She was right that it was tainted - but by Labour tactics.

"This is a serious issue.  The Privileges Committee is an important institution. 

"It is concerning, as it appears that one of Helen Clark's Ministers tried to influence the outcome of the committee's deliberations.    

"The question for Helen Clark is whether she condones or endorses this kind of underhand tactic.

"In the past three years the Maori Party has proved to be passionate advocates for Maori.  Their supporters will be concerned by this course of events."

Speech to the PSA Congress
Wellington

The question you no doubt want me to address is this: what does the future hold for the public service if National becomes the next Government?

This morning I am going to talk about some areas of change. Before I do, though, let me say that when it comes to the public service, our ultimate focus will be on increasing the quality of services for the public.

If we lead the next Government, our responsibility will be to the end users of public services – the elderly people who need a hip replacement, the parents whose kids have just started school, the community members whose safety relies on an effective police force, and so on.

Public services touch all our lives in very real ways. National is committed to the delivery of high-quality services to the public, in a timely, responsive, and effective way.

National also recognises that what the government spends in its budget is not the government’s money; it is money the government has taken out of the pay packets of hard-working New Zealanders. It is money that could be otherwise be used to pay the mortgage, buy kids’ shoes, or pay the power bill.

The government, therefore, has two responsibilities: the first is to deliver high-quality services and the second is to make the best use of taxpayers’ money.

That leads me to my first point, which is this. Regardless of who makes up the next government, the fiscal context for the public service will be quite different over the next five years than it has been over the past five.

In recent years, people have gotten used to the government making large spending increases each year on the back of fiscal windfalls. Those windfalls will not continue.

Earlier this year, the Budget made an allowance for new spending in each of the next three years of less than half the average new spending of Michael Cullen’s past five Budgets. So the money for new spending in the future was always going to be tight, even before the economy took a dive into recession.

The opening of the government’s books in a couple of weeks’ time will show that operating balances are considerably lower than forecast in the Budget. There will be a fair amount of red ink in the government accounts.

In this context, it is not an ideological statement to say that restraint will be required. So National won’t be spending up large, which would simply have the effect of increasing deficits even further.

So does that mean National will be cutting services? Not at all.

When times are tough, as they are now, people look to the government for a sense of security – particularly older people, the sick and the vulnerable, and those who rely on the government for their incomes.

The New Zealand government is in a sound fiscal position. We can afford to protect the vulnerable and maintain social services, while at the same time being careful to manage the growth in spending, and having much more of a focus on value for money.

National will also be going ahead with its programme of tax cuts, as part of an economic management package that will set the course for a return to growth in the economy.

But these tax cuts will not be at the expense of public services.

I notice that the PSA is producing advertisements that automatically equate tax cuts with the jobs of public sector workers. I disagree with that premise. Our tax cuts will not require cuts to public services. You will see that for yourselves when our tax package is released shortly.

I also want to reassure people – and this is my second point – that a new National Government is not going to radically reorganise the structure of the public sector.

Our focus is squarely on delivering services, not on changing the wiring diagram of the state sector to get a tidier conceptual model.

Few problems are solved by significant reorganisations – in fact, many more tend to be created. It is easy to underestimate the amount of energy and inspiration soaked up by institutional change, as well as the loss of personal and institutional knowledge.

Just as Labour has done, we will take opportunities to make changes to some agencies as part of the usual business of government. However, there will be no wholesale reorganisation or restructuring across the public sector.

Neither are we interested in winding the public management clock back. New Zealand’s public management model has evolved to where it is now, and though some improvements are no doubt possible, I do not believe there is any need for extensive reforms.

The third point I want to make is that a National Government will ensure that resources are focused on the provision of frontline services rather than continuing to boost the numbers of people in Wellington head offices.

I know the PSA is less than keen on this policy. But here is a perfectly legitimate question for you.

Given an overall amount of funding – and I’ve already said that this will be seriously constrained in the next few years – how much should go to those parts of the state sector, like schools and the police, that provide services to the public, and how much should go those parts of the state sector that provide policy advice and other related services to the Government? In other words, how big should the Wellington-based bureaucracy be, relative to frontline services?

My view is that things have got out of kilter in recent years – that the bureaucracy has grown out of proportion to the front line.

I mentioned some examples of this in the speech I gave in March this year, and no-one has been able to refute them. They are worth repeating.

Since 2000, the number of teachers in state primary and secondary schools has grown by 12%. But over the same period, the number of people employed in the various education bureaucracies has grown by 40%. I should point out here that this analysis does take into account the fact that the Special Education Service was brought into the Ministry of Education.

Since 2000, the number of nurses and doctors employed in district health boards has grown by 28%. But over the same period, the number of people employed in the Ministry of Health has grown by 51%. Again, this analysis takes into account the merger with the Health Funding Authority.

Since 2002, the service delivery part of MSD, namely Work and Income, and Child Youth and Family, has grown by 23%. But over the same period, the policy analysis, research, and corporate units of MSD have grown by 109%.

The Quarterly Employment Survey shows a similar picture over the whole of the state sector – the number of jobs in central government administration has grown faster than those in the rest of the state sector, and faster than the number of jobs in the economy as a whole.

Have a look at the entry for “policy analysts” on one of the Government’s own websites – careers.govt.nz.

Under the heading “What are the chances of getting a job?” it says: “Opportunities are good because policy analysis is one of the fastest-growing occupations in the government sector, with a 38% increase in employees between 2001 and 2006. The total number of policy analysts more than doubled between 1996 and 2006…. The number of policy analysts is growing, but it is still not sufficient to meet demand.”

This allocation of resources towards central government administration has real effects. It uses significant resources which could have been used in providing frontline services or could have been used in the private sector.

So let me reiterate National’s position. We are in no way going to reduce the number of frontline staff. Let me make this absolutely clear – under National the numbers of doctors, nurses, teachers, social workers, police and other frontline staff will grow.

What we are going to do is halt the runaway growth in government administration.

Under Labour, the bureaucracy would continue to grow and grow as it has done unrelentingly for the past eight years. In contrast, I firmly believe we have enough administrators to do the job already and that the priority for resources in the state sector is the delivery of frontline services.

Let me set this in a wider context.

The current economic climate, and the fiscal restraints this imposes on us, means we will have to be relentless in demanding that resources are focused on the provision of those quality frontline services that New Zealanders expect and deserve.

We are determined to see a greater proportion of government spending going into services like healthcare and education than being chewed up in government administration. This shift in priorities will result in better value for money from government spending.

Therefore, my commitment to New Zealanders is this – in the first term of a National Government we will not grow the size of the core bureaucracy. We are going to make do with the resource we have, and work to get more value out of it.

This will, over time, restore a better balance between the number of state employees who are giving advice to the government and the number who are delivering frontline services.

Your organisation has been critical of this policy. You have responsibilities to your members, which I recognise. But if I become Prime Minister I will have responsibilities as well – to the people of New Zealand.

I need to be able to look them in the eye and assure them that the money they pay in tax is being spent wisely, and as much of it as possible is going to frontline services from which they will directly benefit.

The next point I want to make is that a National Government is going to uphold the professionalism of the public service.

I believe that over the next few years the public service will benefit from a focus on results over process, on decisions over discussion, and on professionalism over politics.

The current Government is responsible for a lack of direction in the public service. From outside Government, looking in, we see too much policy activity seeking to improve everything at once.

Ministers want to look busy and connected on as many fronts as possible, which leads to large meetings of public servants trying to work out how to pursue their ministers’ vague and contradictory objectives.

For almost any issue you can think of, another new strategy has been developed, in consultation with sector groups. However, most of these are meaningless documents made up of comforting language, the avoidance of hard trade-offs, and the hopeful prospect of more money.

More and more, the provision of high-quality advice is playing second fiddle to the repetition of government-sanctioned, and largely meaningless, rhetoric.

Far too many Cabinet papers simply say that the particular initiative being discussed will “sustainably transform the high-wage knowledge economy for the 21st Century” – or some such jargon – because that is what ministers want to hear.

All this dulls the motivation of public servants who actually want to make a difference to disconnected families or chronically-ill elderly people or underachieving children. This lack of direction is the responsibility of the Government.

National is going to provide a different sort of leadership.

We want to see a more focused public service, which is not trying to do everything under the sun, but which concentrates on doing things better.

We will be respectful of people’s professional skills, because we believe there is a high level of professionalism and competence in the public service. We will give clear leadership, because the public service is most effective when it has a clear sense of where it is going and what has to be done to achieve the desired results.

But we are also prepared to take advice.

The strange thing is that while the current Government is keen to hire more and more advisers, and get them to do more and more things, it doesn’t actually value what its officials tell it.

In an interview in the New Zealand Herald last year, Helen Clark was asked “Do you get many of your ideas from the public service here in New Zealand?” to which she answered “No. It is a very blunt answer but it is true.”

In contrast, we recognise that the public service is full of people with good ideas and we want to hear them. If we are the Government, we will create the space where innovation and the attendant risks are part and parcel of developing better policy and better services.

And we will expect the public service to give us the best advice it can, not second-guess what it thinks we want to hear.

National will expect a high degree of professionalism from the public service, part of which is telling Ministers what they are not comfortable hearing. Ministers may well disagree with the advice they are given, but open and respectful discussion is the best way to make progress.

As part of this openness, policy advisers will be able to take part in Cabinet committee discussions where it is appropriate. That’s because advisers can exercise better judgment if they have a better understanding of the context in which they are making those judgments.

In additional to upholding the professionalism of the public service, we are also going to uphold its political neutrality.

The neutrality of the public service has come under threat in recent years. The case of Madeleine Setchell was perhaps the most visible sign of this. I applaud the PSA for publicly stating its concerns over this matter in a number of press releases. I’m sure that words were spoken behind the scenes as well.

As a result of the Setchell episode, public servants began to be concerned that they would be disadvantaged in their careers because of their political connections, or those of their spouses or relations.

Others were left wondering if their face would fit with an incoming National Government.

To those people I can give some reassurance. All we are concerned about is your professional competence and your willingness to serve the government of the day.

National governments in the 1990s worked with senior public servants who had close links with the Labour Party. We trust the professionalism of the public service and its commitment to neutrality.

It is not just in employment matters, however, that public sector neutrality has been tested. There are numerous examples of the Government stretching the boundaries in using departments, and their resources, for party political gain.

I am thinking here of the occasions in which promoting a particular initiative becomes promoting the Government, and promoting the Government becomes promoting those political parties that make up the Government.

Bill English tells me that when he was Minister of Health there was a tense discussion between his office and departmental officials about whether his photo should appear on the front page of a ministry newsletter detailing a major policy announcement. The department argued that his photo shouldn’t appear in the newsletter because it would politicise the publication, and so it didn’t.

Today it seems that hardly any newsletter is sent out without the Minister’s smiling face trumpeting the political priorities of the Government. This is emblematic of a change that possibly few public servants are aware of because it is essentially business as usual.

There has to be a clear line drawn between the political role of the Government and professional independence of the public service. In recent years it has become harder to know where that line is.

In fact, one of the very few benefits of the Electoral Finance Act has been the way it has forced the public service to look at its own activities in the face of legal penalties for what the EFA defines as political communication. Hence the term “Labour-led Government” has been mercifully absent from much public sector publicity.

My final point relates to unions. You have asked me about the role of the unions in the public service and the future of the Partnership for Quality agreement.

The answer to your first question is simple. Unions in the public service will continue to represent their members and advocate for their interests, as they do now. Public servants will continue to join unions, or not join unions, as they please.

Under National, there will be no changes to the rights of workers to negotiate collective agreements with unions as their bargaining agent. Principles of good faith will continue to apply to those negotiations.

Furthermore, I expect government departments and Crown entities, as good employers, to have constructive and ongoing relationships with the unions that represent workers in their organisations.

At a higher level, I also expect there to be regular contact between unions and Ministers, and in particular between the PSA and the Minister of State Services, on issues of mutual interest.

Signatories to the current Partnership for Quality are the Prime Minister, the State Services Commissioner, the CEOs of government departments, and the PSA. From our perspective, if there’s a change in government, the agreement as it exists, ends.

I’ve laid out in this speech today National’s intentions for, and expectations of, the public service. I have made it very clear my determination to see New Zealanders get better value for money from public services. That means improving the productivity, the professionalism, and the effectiveness of those services.

I expect that the PSA and a Government I lead can work constructively on these objectives. We are open to a new agreement in the future about improving public services, but I won’t prejudge that today.

In conclusion, let me reiterate that if National is the Government after November, we will be whole-heartedly committed to improving public services in New Zealand.

I think a change of Government will be an opportunity for the public service to build on its recent achievements, refresh its thinking, and re-focus on effective services for the public.

National believes that some changes are necessary. In particular, we want to ensure that resources are focused on the provision of frontline services rather than continuing to boost the size of Wellington head offices.

We will also back the professionalism and the political neutrality of the public service, and expect free and frank advice.

I believe that over the next few years the public service will benefit from a focus on results over process, on decisions over discussion, and on professionalism over politics.

I’m sure that is something we can all agree on.