Gordon Campbell on using contractors as an election bogey

contract imagesmallThe demonising of consultants and contractors in the public service assumes that their functions can readily be added to the work burdens of the existing permanent public sector staff without there being any cuts to the range or the quality of social services. That’s a false and depressing position for both major parties to be advocating on the eve of the election. Once again, Labour and National alike are making the same bogus distinctions between front line staff and backroom staff as if health workers for instance, don’t need all that modern research or equipment acquisition support, and likewise the courts and prisons can just concentrate on locking people up and forget all about the rehabilitation work and long term support necessary to prevent re-offending.

As both major parties dive back into the austerity politics that failed Europe in the wake of the GFC, it seems to have been entirely forgotten that consultants and contractors were introduced in the first place because it was cheaper to hire them than it was to keep lots more people on staff all year round. Contractors are paid more because they have no job security between contracts, and have no sick pay or holiday pay or other entitlements. They can be hired short term to do specific tasks, and then let go. To repeat: it has always been cheaper to temporarily hire contractors who have flexible, transferable skills and thereby reduce (or simply not fill) the permanent staff vacancies.

The idea that contractors can be jettisoned with no loss in the range/quality of services is a cynical fallacy. It is a euphemism for cuts to services because existing staff have enough on their plates already without picking up a wide range of additional tasks. So… We are heading into this election with both of the major parties promising to set razor gangs loose on public services, even though New Zealand already spends less on public services – as a ratio of GDP – than comparable OECD countries, including Australia.

Rolling back the state

These are ideologically-driven decisions. For a moment, don’t look at what they’re likely to cut, but look instead at what they won’t touch. National won’t give up its billion dollar tax handout to landlords, or its socially regressive tax cuts that will deliver most of the rewards to the wealthy few in least need. For fear of being labelled as a bunch of peaceniks, Labour will not stop spending billions on the arms dealers lined up to profit from the bogus military threat posed by our main trading partner, China.

More than anything, there is an ideological common ground between Labour and National to cut services rather than raise taxes. In that case, they’ve been helped by the current economic slowdown actively created by a Reserve Bank that has responded to the offshore supply side causes of inflation by attacking the demand side of the domestic economy, which is not, and never has been, the main source of the inflation pressures.

It looks as if the Reserve Bank is now finally achieving the recession it has worked so hard to create, and thanks to the damage it has done, our recession is said to be likely longer and deeper than the downturn affecting other OECD countries. As services are cut and consultants are laid off… Wellington and its retail sector are being set up to take a hammering. Even more so if there is a change of government, and the centre right – as promised – scraps all forms of the production grants available to the film industry, a move that would effectively kill off one of the only high tech success stories in New Zealand over the past three decades. If you take the spending power of public service contractors and of film productions out of Wellington’s retail economy, this would only further degrade the capital’s inner city. But we would all feel more ideologically pure, among the rubble.

Meanwhile the supermarket duopoly and the banking oligopoly will continue in very profitable ways, almost entirely untouched. Long ago, Labour seems to have abandoned any attempt to set the policy agenda. Most of the time, it allows National to take the lead, then consults its focus groups, and comes up with a lookalike policy that can be made to sound slightly more compassionate, at the delivery end. On the economy in particular, Labour is now almost a form of National-Lite, yet with extra hand-wringing about the outcomes.

In any other developed country, the Greens would be the least of what a major centre-left party should be standing for during the second decade of the 21st century. Maybe it is time to eliminate the middleman.

Footnote One: Internationally, there is no right size for the ratio of consultants to core public servants, and nor is there any consensus on how many public servants are required to maintain a credible social safety net in a small First World country.

As one might expect, the political demonising of consultants and contractors makes no distinction between the spending on those engaged on capital contracts – that will add to the future public good – and those contractors employed in operational spending, in delivering the existing systems and practices. In both types as mentioned, the use of contractors was originally seen to be a more efficient, less costly alternative to retaining in house the expertise and institutional knowledge of the core public service, which was stripped away in earlier rounds of ‘small government” market zealotry.

Footnote Two: One needs to be careful in comparing pre 2017/18 levels of contractor/consultant spending with more recent years, since-reportedly – the definitions have changed. Yet it is worth noting that in the 2017/18 year, the Public Service Commission figures indicate that the spending on consultants by the last National government was running at $NZ883.9 million – and by 2021/22 when the pandemic was still rife, and the government was in the midst of addressing the previous government’s legacy of social neglect – – the comparable figure for spending on contractors 2021/22 was only $1.2 billion.

This means that (a) the $400 million in cuts to contractors that National is proposing would take public service spending on consultants back to below when there were dire social deficits evident in health, social housing, infrastructural upgrades etc. These deficits were inherited by the Labour-NZF coalition. Even so, the most recent available spend on consultants and contractors ($1.2 billion in 2021/2022) is still considerably less than what National aims to waste, year after year, on its promised round of socially regressive tax cuts.

Footnote Three: “Savings” is a euphemism for what is in store for almost all of us. The term is “cut-backs.” Here’s the scale envisaged:

The [Labour] government [has] announced it was making changes to spending that would save nearly $4 billion over the next four years. That’s $4b on top of the $4b saved in the 2023 Budget in May.

That’s a total of $8 billion in services cuts and policy delays, over just a little more than the term of the next government. So even if Labour did get re-elected, there would be little or no room for any extra spending to address New Zealand’s existing levels of social need, assuming that all the current taboos against raising tax revenues would remain firmly in place.

If nothing else, Labour’s proposed cutbacks will help to legitimise National’s more draconian programme of cutbacks. Among the cutbacks that Labour is proposing to pursue include the $20.8 million in cuts to grants for research into agriculturally-generated climate change emissions, $52 million cut from disability support services, $58 million from the Covid contingencies fund, $60 million cut from tourism recovery plans, $90 million cut from planting more native forests to create carbon sinks and improve bio-diversity, $115 million cut from r&d funding, even though New Zealand’s investment in r&d is already well below the OECD average etc. etc.

Under Labour or National, we’re being offered only the variations on a recipe for Smaller Government, consistent with market ideology.