Government spent $914 million on contractors and consultants last year

New figures show the government spent almost $1 billion on contractors and consultants last year.

New Zealand dollars

Photo: 123RF

The spend of $914 million is slightly more than the year before ($900.2m in 2017/18).

But it is less as a percentage of the total spending on the public sector workforce: 12.8 percent, down from 13.4 percent.

This is due to the public sector workforce expanding. Two whole new agencies were created in this time, the Ministry of Housing and Urban Development and departmental agency Te Arawhiti.

“It’s early days but we are starting to head in the right direction,” State Services Commissioner Peter Hughes said.

The government ordered the core public sector to rein in and report contractor spending more clearly amid controversy over the high bills two years ago.

It was unknown how the government’s response to Covid-19 will affect expenditure on contractors and consultants in the next 12 months, the commission said.

The biggest spenders were Inland Revenue, with $206m, up $11m year-on-year, and the Education Ministry, $147m, up $15m.

The top five biggest spenders of the 32 core agencies mandated to rein in spending, between them accounted for more than half the spend, or $567m.

Corrections was one, rising steeply to $59m, while only Internal Affairs among the top five actually cut its spending, by $1m to $57m.

Social Development was the major agency to make a big cut – down $23m to $46m.

Fourteen agencies had relatively stable spending, and six managed sizeable cuts, though often off low bases, such as the Serious Fraud Office cutting a million off the previous year’s $1.7m bill.

“This is not about putting a lid on legitimate contractor and consultant expenditure,” Hughes said.

“It’s about striking the right balance between the number of full-time public servants and the number of contractors. It’s a sensible approach but will take time.”

Scores of other public agencies, such as district health boards, are not part of the core state sector, and have been encouraged to cut this type of spending but not ordered to do so.

As of early April, the commission had not issued any advice to agencies regarding their use of contractors and consultants during the pandemic. RNZ had asked if the commission expected that contracts not related to Covid-19 work should not be renewed as a rule.

Today it said that some agencies might experience “an increase in demand for services” while others may face a short or medium-term downturn.

“It’s still too early to say,” it said in a statement.

“The current advice to agencies … is appropriate and adequate. What we don’t want to do is put a lid on legitimate contractor and consultant expenditure.”

In mid-April, public service chief executives took a 20 percent pay cut for six months.

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