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Insights 16: 12 May 2023
Newsroom: Eric Crampton on how Govt allows councils to block new development
Podcast: The Initiative's economists on whether Australia is a better option for skilled talent
NZ Herald: Roger Partridge on how Joe Biden’s new deal threatens global prosperity

Improving accountability for state sector performance
Dr Bryce Wilkinson | Senior Fellow |
The state sector is widely failing to meet the public’s expectations. One problem is inadequate accountability due to confused objectives.

Far too many spending programmes and regulations require those responsible to balance conflicting considerations with no guidance as how to reach a principled conclusion. That makes purposeful time-consistent management and proper accountability impossible.

To his credit, the Auditor-General has been alerting the public to such accountability problems, albeit to little discernible effect.

The governance of government commercial operations illustrates the importance of clear-cut single purpose accountability.

Government commercial operations can be subject to competition, the strictures of monopoly regulation and transparently subsidised for non-commercial responsibilities. Their Boards then know they are accountable for their commercial results.

The greater the degree of government ownership of commercial operations, the more likely it is that non-transparent uncommercial activities will be undertaken, with the waste concealed from public view. Politicians might want to put party hacks on boards. All might want to purse non-commercial activities with poor transparency. Waste is to be expected.

For these reasons, ownership matters.  It is not the only thing that matters, but it matters.

An assessment last month by Wellington consultancy firm TDB Advisory is a timely reminder of this point.

The assessment showed the financial performance of New Zealand’s ports since 2015 is strongly negatively related to the degree of government ownership.

For example, the rates of return of mixed ownership ports exceeded the returns on 100% government owned reports every year for the past eight years.

The Port of Auckland case is particularly instructive. Between 1993 and 2005 20 percent of its shares were publicly listed. Its return on assets in the four years to 2005 averaged 16.7%.  In the four years that followed delisting it averaged 6.7%.

In 2015, the late Brian Gaynor in 2015 documented a “dramatic reduction” in its communications and transparency after its delisting. Even ratepayers were better informed about its performance under the earlier mixed ownership structure.

One critic of TDB Advisory’s assessment tried to excuse its post 2015 poor performance . He pointed to the $65 million cost of its scrapped automation project. But such commercial waste is a governance issue. Ratepayers had been disempowered relative to the mixed ownership option.

Many New Zealanders are desperate for more income. Wasteful use of capital matters. Clarity of purpose matters.

Much more could be and should be done to reduce waste.

The map, and the territory, of the state sector
Dr Tony Burton | Research Fellow |
The classic British TV series Yes, Minister put the problem well. Any incoming Minister faces a nearly impossible task not only in getting their head around the policy issues in their area, which can be formidable, but also in getting to grips with the machinery of state.
Sir Humphrey, the official who knows the state far better than his Minister, always has an advantage.
The machinery of state is complex. Even trying to map it is no small task. By the normal classifications there are more than 3,000 government organisations, two thirds of which are school boards.
No one in central government is quite sure exactly how many of the rest there are.
They have a cosmically confusing jargon of ICEs, ACEs, Public Service and Non-Public Service, departments, agencies, Commissions, Boards and entities.
And there are finer distinctions. “Statutory Crown entities - Crown agent” and “Statutory Crown entities - independent Crown entity” are different beasts. And while some officials, after decades of bureau experience will know the differences and why they matter, pity the incoming new Member of Parliament trying to keep it all straight.
A map of the entities on its own would not do much good. The map of the state sector is not the territory.
Focusing on what government does, rather than on what Ministers wish would happen, is a useful way to get beyond the euphemisms of government language.
The health system is an aspiration. What really happens is spending on treating illness.
The education system is an aspiration. What really happens is teaching and certification.
It is also useful to have a sense of scale.
The nucleus of government, Parliament and its services, consist of six organisations that together account for a mere fifth of one percent of total central government spending.
Ministries and their operational entities mostly spend money, treat illness, teach and certify, make and enforce rules, and deal with overseas.
In a forthcoming Policy Point we will map the State Sector and describe the territory in more detail. It is a first step to a longer report on alternative approaches.
Whatever the outcome of this year’s election, new Members of Parliament will need to understand both the map and the territory.
We hope the work will help those Members in dealing with the Sir Humphreys they find when they come to office.

A ‘third way’ approach to truancy
Dr Michael Johnston | Senior Fellow |
New Zealand’s much-publicised truancy problem is not easy to get a handle on. Should we go for the carrot or the stick?
On the ‘carrot’ side of the ledger, some American commentators have suggested paying students to turn up to school. But here in New Zealand, the government has opted for the ‘stick’ approach, announcing $74M to pay for new attendance officers. ACT wants to use a bigger stick and issue on-the-spot fines to the parents of truant students.
But some of our innovative secondary schools have devised a clever, ‘third way’, approach to the problem. Their solution is to change the definition of school attendance.
Inspired by home-based learning during COVID lockdowns, they are implementing ‘working-from-home’ days for their students. This is a stroke of genius.
On working-from-home days, students do not have to attend school to be counted as attending. On those days, there is always full attendance.
Some parents may worry that their children will spend working-from-home days on their PlayStations or social media. What they don’t understand is that this is a feature, not a bug. In today’s classrooms, teachers are not supposed to teach anyway. Students direct their own learning.
A look at the New Zealand Curriculum shows us why parents have nothing to worry about.
The curriculum emphasises ‘key competencies’ more than old-fashioned subjects. We are told that young people need key competencies for life in the 21st century. They include things like managing themselves and relating to others.
It’s easy to see why personal management and social skills feature so prominently in a 21st century curriculum. But the way some critics talk, anyone would think that human beings had been organising themselves and interacting with one another from time immemorial.
There’s no better way for teenagers to learn self-management than to make key learning decisions for themselves on their working-from-home days. Which game to play? Which posts to like? These are difficult choices. But young people must learn to take responsibility for life’s crucial decisions.
And what better way to learn about relationships than by posting selfies or chatting with friends on Instagram? The future, after all, is online.
Yes, working-from-home days are perfect for 21st century learning. They side-line teachers and put student agency in the forefront. They foster the key competencies.
And if every day was a working-from-home day, we would have no truancy at all.

On The Record

Initiative Activities:   
All Things Considered
  • Graph of the week: Gross National Income per capita in 1979 and 2021
  • Chart of the week: Compare the chart in Sen, Development as Freedom, and the broader set of countries
  • A worrying trial-balloon from Canada's governing Liberal Party
  • The social harms of taxing private wealth
  • New York is forcing schools to change how they teach children to read
  • What's wrong with Kiwirail?
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