Unions fear government spending on consultants could skyrocket after it was revealed that the bill hit $375 million last financial year – and John Key warned of “significant” restructuring to come.

The Government spent more than $375 million on consultants and contractors in 2010-11 as a series of government restructurings made thousands of public sector workers redundant, figures show.

Consultants were paid as much as $275 an hour or $2500 a day, according to figures released by 31 government departments and agencies under the Official Information Act.

Some departments are increasing spending on consultants while getting rid of workers who, across all the departments involved, make an average of $33 an hour based on a 40-hour week.

The $375 million is lower than the $400 million the same departments spent in 2008-09, Labour’s last year in power.

Cabinet minister Tony Ryall said consultants were used only when it did not make sense to have permanent staff – for example on short-term projects or schemes needing particular technical skills.

This “expertise” had helped government departments respond to change, he said. “[But] over time I would expect that the costs associated with buying in this expertise would go down.”

However, Richard Wagstaff, national secretary of the Public Services Association, said the $375 million was “significantly” higher than the $335 million the same departments had spent in 2009-10, National’s first year.

That showed departments had lost “a lot of institutional knowledge” when 2000 public sector workers were made redundant under National, and faced “desperate capability and capacity problems”.

The Prime Minister’s promise of “significant” restructurings next year would mean further public sector job cuts and even more consultants employed, Mr Wagstaff said.

It was “extraordinary” that some departments were spending more on consultants despite shedding in-house staff, he added.

Since 2008, the Ministry of Economic Development has increased spending on consultants by $12 million – enough to pay for 161 in-house workers – and made 29 staff redundant.

In a statement, the ministry said the increased spending was due to several major IT upgrades and work on new projects including the Rugby World Cup, the national cycleway and the emissions trading scheme.

Similarly, the Ministry of Foreign Affairs and Trade more than doubled its spending on consultants, from $4.5 million to $9.8 million, while shedding 14 staff. Its biggest increases came in HR, information and public affairs, and property management.

Other departments to increase consultancy spending but shed staff included the Ministry of Transport, Te Puni Kokiri and the Ministry of Health.

Mr Ryall said consultants were not used to replace staff made redundant. But Mr Wagstaff said many consultants were former public sector workers “doing the same thing they used to do, but for a lot more money”.

Some spending on consultants was appropriate, he said, “but they shouldn’t be doing things that departments could do for themselves and which would be cheaper in the long run for departments to do”.

The figures released by departments under the Official Information Act show government consulting can be a lucrative business. Department of Internal Affairs figures reveal it paid consultants Citrix $275 an hour for advice on “identity services”.

It also paid IT firm Silverstripe $2,500 a day for work on data.govt.nz, a project to give the public easier access to government statistics.

Meanwhile, Housing New Zealand paid accounting firm Deloitte $4.2 million in one year to work on projects including an “affordable housing owners’ forum”.

In the election campaign, then Labour leader Phil Goff attacked National’s plan to pay Australian investment bankers Lazard $100 million for advice on its plan to part-sell state assets.

And the Herald reported in September that the Department of Corrections has hired 18 different firms of advisers for a planned privately run prison in Auckland, at a likely cost of $11 million.

A State Services Commission report from July this year backed some of the concerns expressed about consultancy spending.

The commission’s reviews of government departments found that they needed to adopt “an approach of recruiting skilled personnel … to build internal capability and progressively lessen the reliance on contractors”.

Otherwise, they risked losing vital knowledge about how to carry out their work, which they would then have to buy in.

First published in The New Zealand Herald

Government funding cuts could see struggling district health boards (DHBs) go further into deficit, the Treasury has admitted.

In a briefing paper, officials say the boards will have find an extra $258 million over the next four years because the government no longer subsidises their Kiwisaver and pensions contributions.

“If an individual DHB is unable to fully fund this cost pressure, the level of its deficit would increase,” the paper says.

Capital and Coast Health DHB, which ran a $47.5 million deficit in 2009-10, will have to find an extra $20 million in savings as a result of the changes. It has already cut millions of dollars’ worth of services, including home help to the elderly and mental health clinics.

The DHB did not respond to APNZ’s questions at the time of going to press.

Health Minister Tony Ryall said the extra costs were a “very small” amount – less than 1% of the boards’ total budget of over $10 billion.

Their financial management had “improved significantly” since National took office, and their projected deficits had fallen $160 million to around $30 million this year, he said.

Brent Wiseman, the chief financial officer of the Auckland DHB, said staff were working more efficiently, “which mean that more services can be delivered for the same costs”.

The board hoped to run a surplus next year despite having to find an extra $40 million in the next four years.

However, Grant Robertson, Labour’s health spokesperson, said the government had made it clear that health boards would not get extra funding to make up for the subsidy being cut.

“This means it will have to come from already over-stretched budgets and will inevitably lead to cuts in services.”

Health received an extra $452 million in May’s Budget, but the CTU has estimated that that was nearly $110 million short of what was needed to keep pace with increased staffing and equipment purchasing costs.

“These are DHBs that are already suffering from underfunding,” Mr Robertson said. “The amount of money they have been given has not kept up with the cost of inflation and an ageing population for the last two years, and this is just another blow to them.”

The Treasury briefing paper also reveals that schools will have to find an extra $304 million over the next four years as a result of the changes.
Education Minister Anne Tolley said “no decisions” had been made about how the cost would be met.

However, Sue Moroney, Labour’s education spokesperson, warned that parents would have to pick up the tab.

“It’s worrying, because the only places that schools can get funding is from government, from parents via school fees, or from fundraising.

“So the picture this paints is that they will be even more pressure on parents to pay even higher school fees. Families are really struggling out there, and they just can’t cope with these continued increases in costs.”

Schools got a 2.9% increase in the operation grant funding in the Budget, but Ms Moroney said that was not enough to keep pace with inflation or growth in school rolls.

The Treasury paper also warns that the Ministry of Education payroll system may find it “challenging” to make the changes to staff’s pay by next year. But the ministry said it “considers it will be possible” to make the changes in time.

While citizen involvement has become an election buzzword, local groups are left railing against the reality.

A warm, sunny Sunday in April brings the season’s first sunbathers on to the shingled beaches of Hastings, in East Sussex. A perfect day, too, for promenading on the pier – or it would be if it hadn’t been closed for four years as a health hazard to the public.

Hastings pier, owned since 2000 by Panama-based property company Ravenclaw, is a potent symbol of community decline. Behind its barred gates, the shops lie empty and the attractions are boarded up. It needs at least £2m in structural repairs after successive owners have let its pillars and trusses decay.

Citizen involvement is a main plank in the political parties’ election campaigns, with the Conservatives promising a community right-to-buy as part of its plans for a big society. This would give groups the first right of refusal on assets – such as parks and libraries – sold off by public agencies. Labour, meanwhile, can point to the Advancing Assets for Communities programme, a series of pilot schemes designed to transfer local assets to community groups.

But the fight by the Hastings Pier and White Rock Trust (HPWRT) to take control of their local amenity is a salutory lesson in how difficult community ownership can be in practice.

Angela Davis, an HPWRT trustee, says it has been “three years of battle” to get the Conservative-run borough council to back the idea of handing over the pier to the community group, using a compulsory purchase order. The group believes that a rejuvenated pier – with a traders’ market, bars and shops – would help Hastings to reverse falling visitor numbers and regenerate the town.

It has taken seven months for the group to get a £75,000 grant, from the government’s Community Builders programme, for a feasibility study of its proposals.

“You do need business acumen within a community group,” says Davis, pointing out that her fellow trustees include the manager of a local shopping centre and a hotel owner. If all goes well, she plans to ask Community Builders for the £2m needed to restore the front section of the pier, and the Heritage Lottery Fund for at least another £2m to tackle the rest.

The other big obstacle is time – or lack of it. Davis, a former business and IT consultant, has the financial security to work unpaid for over 50 hours a week, but points out that, for most people, “life is difficult enough earning a living, raising a family, and so on” without trying to take over the local library or community centre.

A recent report by the Asset Transfer Unit (ATU), the government-funded arm of the Development Trusts Association, reveals that only 11 of the 75 pilots launched in April 2007 to transfer local assets to community groups have been successful, with a further 15 nearly completed.

The little-used Sneyd Green community hall in Stoke-on-Trent is one success story. Taken over and transformed by the local community association, it is now fully booked for events months in advance. Another success is in South Gloucestershire, where a local group is now running Winterbourne Medieval Barn and using it to host community events and education programmes.

However, the ATU’s report identifies problems on both sides. Many councils are risk averse, and are unwilling to invest the time, energy and money needed. Some have “confrontational” relationships with community groups, or are seeking to offload only assets damaged beyond repair. On the other side, many community groups “require significant time and in-depth support”, especially where they have little or no experience of running assets.

The report says it is too early to say if those problems are greater in deprived communities, where most pilots take place, but it admits that the subject “may well merit further investigation”.

In particular, groups need “unfettered investment capital” – something that may be harder to find in poorer areas. The bottom line, the report says, is that asset transfers can take, on average, five years from first contact.

Back in Hastings, Davis remains optimistic that, if all goes well, her group could have control of the pier by the end of the year. But, given the obstacles they have faced, she says that to expect hundreds of other local groups to follow their lead is “very much an ideal”.

First published in The Guardian