A World-leading Academic Found Not All is Well in the Public Sector
Listener: 1 February, 1997.

Keywords: Governance;

The last minute decision to make Jenny Shipley Minister of State Services may reflect looming problems in the state sector. The underlying issues are set out in a recently published report, The Spirit of Reform.

Written by Allen Schick, “a world leading public sector academic” (so the Treasury tells us), the report might have been expected to laud uncritically the reforms of core government, given it was written under conditions which would be expected to give a favourable outcome: terms of reference set by the State Service Commission and the Treasury who have a self-interest in the report concluding in favour of their reforms; the report writer an overseas visitor on fleeting visits; the confining of those consulted to insiders, largely excluding academics, dissenters, and those outside Wellington; and a reliance upon anecdote. But Schick was able to overcome these handicaps, and produce a report critical of many aspects of the reforms of government administration.

He described the reform’s concepts as “avant garde” and “novel” while the Treasury 1987 Post Election Briefing, Government Management, which provided the intellectual foundation for the reforms was “extraordinary”. Such adjectives belie the report’s measured tone, and its careful argument. Schick points out the central theme of the reforms “influenced by two overlapping but distinctive sets of ideas, one derived from the vast literature on managerialism, the other from the frontiers of economics. Managerial reform is grounded on a simple principle: managers cannot be held responsible for results unless they have freedom to act. The new institutional economics is grounded on a very old idea: people act in their own self-interest.” It was the latter that the 1987 Treasury PEB emphasized, but “clearly different conclusions might be drawn if the brief were argued from different premises.”

Schick is sympathetic to managerialism, although his vision is of a distinctive public sector approach. Thus while he faintly praises the private sector approach of accountability – “an impersonal quality, dependent … on contractual duties and informational flows” – Schick gives greater importance to responsibility “a personal quality that comes from one’s professional ethic, a commitment to do one’s best, a sense of public service”, which have been downgraded by the reforms. Contractualism undermines public managerialism, for it “may diminish public-regarding values and behaviour in government,” including values such as “the trust that comes from serving others, the sense of obligation that overrides personal interest, the professional commitment to do one’s best, the pride associated with working in an esteemed organisation, and the stake one acquires from making a career in the Public Service.”

Contractualism also weakens the collective interest, for a third party is difficult to fit into a bilateral deal between a purchaser and a provider. Schick reminds us of Edmund Burke’s challenge to his local electorate that his obligation was to the public good as he saw it, not just to serve as their agent. The reader is left wondering – as Schick intends – as where does the public good belong in the narrowly defined bilateral contracts which pervade the reformed public sector. The report also wonders whether the claimed efficiency gains of some processes have been swallowed up in the costs of contracting. Its doubts are based on anecdote – hardly anyone measures the transaction costs generated by the reforms – but numerous public servants (probably those Schick did not meet) would say “hear, hear”.

Schick also writes he is “troubled by the concept of split-personality government that has influenced financial and other reform practices.” The report expresses doubts about the efficacy of such key notions in the reforms as the outcome/output distinction, the ownership/purchaser distinction, the policy/operations distinction, and the completely ignoring of inputs in the assessment of an agency’s performance. Worryingly the report says that today “there is more pressures for conformity and group-think” in the public service. Apparently criticism is even less tolerated than in the past.

There may be two Schick reports, for there is no hint of the one I have been quoting in the 1996 Treasury Briefing to the Incoming Government, which claims it “concludes that the reforms were successful, but that there were areas that needed attention.” Undoubtedly Schick recognizes there were some successes, especially where the managerialist philosophy has been implemented. But my version of his report is riddled with doubts about the extremism of the contractualism which Treasury promoted.

Perhaps the prime minister gave Shipley the herculean task of trying to resolve the oncoming public sector difficulties, because the health sector from when she came is one of the areas where the reform strategy which Schick criticizes has gone most wrong. (Schick was largely kept away from the health sector. He also mentions he did not take the Cave Creek disaster into account, even though the Noble report was published over nine months before his.)

Do not expect numerous sudden and massive disasters in the public sector. Rather there will be an ongoing deterioration of performance (Treasury included). As T.S. Eliot reminds us the world ends not with a bang but a whimper.