THE PRESS MONDAY, OCTOBER 23, 1989. Watching the public sector

Press, 23 October 1989, Page 16

THE PRESS MONDAY, OCTOBER 23, 1989. Watching the public sector

When the Government set about changing the public service, creating a corporate structure for State-owned enterprises, and devolving the responsibilities which until recently had been those of central government, it changed a mass of practices and traditions. Some of these go to the heart of democratic government. It also created circumstances in which the new organisations felt unfettered and some of the organisations were prepared to shake off many of the principles which had been associated with the performance of the public service in New Zealand. The renovations were designed in the first place to cut adrift some of the old habits and practices and to abandon the departmental style of management in favour of a private-enterprise style of management and a more competitive attitude. One can only speculate on whether the efficiences and economies sought from the new corporations could have been achieved within the departmental structure. In a speech to the 1989 Public Sector Convention earlier this month, the Controller and Auditor-General, Mr Brian Tyler, generally praised the changes in the public service but pointed to a number of areas where he saw greater need for restraint and for willingness to submit to examination and to make information available.

There is a fine irony in all this. The aim of the reforms,, according to the Government and acknowledged by the Auditor-General, was to achieve greater accountability. The effect in some instances has been to make departments and the new State-owned enterprises more secretive and, in some cases, to lose sight of the prime reason for their existence. “The suggestion that managers,” said Mr Tyler, “should have the flexibility to decide not to produce such services or goods and, say, use the related funds to accumulate capital and invest in new facilities — or vice versa for that matter — is analogous to suggesting that a retailer, to whom you have paid good money for some product, can decide whether he or she would rather not provide you with the product that you have paid for but would rather buy new shop fittings. Can you imagine how excited you would get in that event? And yet for some reason, there has been a view that our agents for managing the public sector should have that choice. This was a view that was fiercely contested during the consideration of the Public Finance Act. And in the final analysis it was an argument that was not accepted.”

The curious feature in this was that such arguments should have ever arisen. It reveals at a managerial level a sharp lack of ability to focus on what the organisation should have been doing. There seems to have been a lack of managerial direction in parts of the public service and this was evident when there was much more Ministerial control than there is now. So managers and Ministers were at fault; firmer and better directed management, a little earlier, and an admission from politicians that such enterprises as forestry projects were being used to mop up unemployment, would have been a more

honest approach. The fact that other enterprises are still functioning after huge reductions in staff suggests that their employment policies had a strong social welfare element in them too.

Of course, organisations should know what they are doing and, of course, individuals within an organisation should know what is expected of them, what they should expect of themselves, and whether they could be said to have achieved the tasks they set themselves. Mr Tyler is very much in favour of the changes to produce what is described as more accountability in the public sector. He ignores some of the complications. ■ . .

Although objective measurements are possible, they are more likely to be of quantity than of quality. The enthusiasm to demonstrate achievement runs the grave risk of encouraging the flashy rather than what is sound and productive. In justifying the need for changes, the Government often drew attention to lethargy in parts of the public service. Yet there was also a strong public service ethic that emphasised soundness of advice to the Government and high standards of performance. The system was not an unqualified disaster. The Budget and other control devices that set management and expenditure goals run some risk of generating an output of service that looks better than it really is. — Mr Tyler raises, in a sharp and clear way, many of the issues that are now coming to the fore. Should the prime purpose of a State-owned enterprise, for instance, be to make a profit? He argues strongly against this. To what extent should Parliament have a right to information about State trading organisations? If it does not get the information, is not Parliament simply becoming a powerless extension of the Government, “a rubber stamp, a meaningless institution”? He argues that Parliament should be better equipped to scrutinise the information it gets from departments and State-owned enterprises. He says that it is not the role of the Audit Office to be a substitute for the examination and scrutiny of the Government by Parliament. He reminds us that the Government Administration Parliamentary Select Committee is reviewing whether the Official Information Act should continue in respect of State-owned enterprises. He believes profoundly that it should continue.

He argues for a continuation of the requirement for the public sector to be audited by the Audit Office. He correctly points to the fact that private auditors sometimes come under pressure from firms to give a favourable account of a company. In theory, shareholders appoint the company auditor; in practice, is is usually done by the board of the company and an unfavourable audit might make the board look elsewhere for auditors the next time. Such pressures are more likely to be felt by a small company than by a large company. Mr Tyler interestingly argues that perhaps the legislative audit model should be applied to the private sector.