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State services and the State Services Commission

by Mark Prebble

Scandals over nepotism in public-sector employment led to the establishment of a public service commissioner in 1913. In the 2000s the State Services Commission continued to oversee employment of top-tier public servants, and administered a code of conduct for all government employees.


Role of central agencies

State services

‘State services’ is a technical term for a large number of government agencies. All ministries and departments, and other state organisations such as the police and the armed forces, are included. Many Crown entities – statutory bodies such as the Accident Compensation Corporation and the Civil Aviation Authority – are state services, as are the Reserve Bank and some other institutions listed in the Public Finance Act 1989.

In June 2010 state services employed about 225,000 people, out of a total of 295,000 people who work in the wider state sector. The state sector also includes officers of Parliament, state-owned enterprises and tertiary educational institutions, but these agencies are not considered to be state services.

Legal controls on use of power

A major issue for any democracy is to ensure that the government uses power for the good of society, and to prevent abuse of power.

The first step in ensuring that government agencies are directed to a proper purpose is the law. A host of acts relating to government institutions define and limit the activities of state agencies. These laws include the State Sector Act 1988, the Public Finance Act 1989 and the Official Information Act 1982.

Democratic oversight

Government agencies also need to have appropriate democratic oversight from the elected government of the day. As a general rule ministries and departments report to government ministers and their activities are coordinated by cabinet. However, 20 politicians meeting weekly cannot manage all the work needed to coordinate the activities of the state sector.

Hot topic

Politicians avoided controversy as well as work when they passed control of state-sector employment to an independent commissioner in 1913. For more than 20 years some people had been getting worked up about the religion of those in the public service. There were calls for ‘just and equitable’ sharing of employment, and accusations that a Catholic prime minister was ‘stuffing’ the public service with Catholic appointees. However, there was no evidence of this, and the heat died out of the issue at about the time independent oversight was introduced.

Key areas and agencies

Three key aspects of government activity that must be coordinated are finance (including tax and spending), personnel (the appointment and employment of senior officials) and agenda management (including legislative priorities). Ministers are assisted in these tasks by the work of three central agencies – the Treasury, the State Services Commission and the Department of the Prime Minister and Cabinet. Between them, these departments are responsible for coordinating the work of the government and ensuring that standards of fairness, integrity and efficiency are maintained.

Power and influence

In other countries the coordination of personnel and agenda management are commonly combined in one agency. In New Zealand since 1913 the control of key personnel matters has been handled separately – firstly by a public service commissioner, and then from 1946 by a Public Service Commission, renamed the State Services Commission in 1962.

In a unique New Zealand initiative, the state services commissioner has powers of appointment of top officials. In other countries those powers are generally held by the prime minister. But though the commissioner has power, he or she is not normally involved in day-to-day policy advice, so has less influence.

By contrast, the head of the Department of the Prime Minister and Cabinet has no formal powers, but is the public servant with the highest influence through involvement in advising on all policy matters.


The merit principle

For 100 years in New Zealand, public-sector employment has been driven by the merit principle. All employment decisions must reflect the appointee’s ability to do the job, rather than any political or other considerations.

Government control

Prior to 1910, though there were laws protecting the integrity of state employment, they were often circumvented by temporary appointments. During the period of the Liberal government (1890–1912) ministers often encouraged or required the appointment of their friends and allies at all levels of public employment. The extent of patronage became a scandal. A key part of the 1911 election programme of the Reform Party was the establishment of an independent non-partisan statutory officer to manage government employment.

Public service commissioner

Once in office the Reform government established the new position of public service commissioner, with responsibility over all public-service departments. The two largest government agencies of the day, the Post and Telegraph Office and the Railways Department, were excluded. The first public service commissioner, Donald Robertson, started work in 1913 as the employer of all other public servants.

Taking the merit principle to heart

Tom Mark, public service commissioner from 1938 to 1941, is the only commissioner to have died in office – literally. He succumbed to a sudden heart attack while arguing with a minister, in the minister’s office, about the employment of the head of the Patent Office.

Job classification

Robertson’s most important job was to classify all public-service jobs and to grade their incumbents. That became the basis of pay rates that applied across the public service. For over 75 years that classification system endured (with extensive modifications) as the means by which all public servants were appointed and employed by the Public Service Commission. In 1962 the Public Service Commission was renamed the State Services Commission, but its power was not extended beyond the public service.

Appeal board

This remote management structure was complemented by a public-service appeal board which could review any appointment. Appeals were judged against the requirements of merit in the job. Appeals commonly took months to resolve and could be lodged against any appointment.

Merit not proven

In 1971 there was a successful appeal against the appointment of Robin Williams as director general of education. Dr Williams was a former senior official of the Department of Scientific and Industrial Research, a former member of the State Services Commission and vice-chancellor of Otago University (and a future chairman of the State Services Commission). Despite that, the appeal board ruled that the State Services Commission had failed to demonstrate that he clearly had more merit than the appellant, so the appointment was struck out.

State Sector Act 1988

In 1988 the State Sector Act removed the special employment status of public servants. The classification system was abolished. All public servants were to be employed by the head of the relevant department. Appointments were still to be based on merit, but terms and conditions were agreed between the employer and the employee under the same employment law as for other New Zealanders.

The separate appeals system was abolished, although each department still had to have an internal procedure to review appointments. The state services commissioner continued to be responsible for maintaining the non-partisan role of the public service, and was the employer (on behalf of the Crown) of public-service chief executives.

State services integrity

In 2004, 90 years after the position was created, and 40 years after the title was amended to refer to the broader state services, the role of the state services commissioner was extended beyond the core public service to cover standards of integrity and conduct across most agencies of the state services.


State services commissioner

The state services commissioner is a statutory officer with three main powers:

  • appointment of top officials
  • issuing a code of conduct
  • investigating poor performance.

Appointments

In most countries with Westminster-style governments senior appointments are handled by ministers, commonly the prime minister. In New Zealand the appointment of most top officials is the responsibility of the state services commissioner.

For the departments in the core public service the State Sector Act 1988 sets out a process for appointments as head of department (chief executive). The state services commissioner must find a suitable candidate and propose that person to ministers.

Cabinet (technically the executive council) must consider the proposal and has the power to disagree. In practice this has happened only once among hundreds of appointments since 1988. If cabinet does not exercise this veto, the commissioner is authorised to appoint and employ the chief executive.

Since 2000 cabinet has also directed the state services commissioner to manage the selection process for the heads of other departments, including police, the armed services, the intelligence agencies and Crown Law. For those departments the formal power of appointment remains with the governor-general (effectively meaning the prime minister), and the commissioner’s role is advisory.

Code of conduct

The head of each government agency is responsible for setting the rules for day-to-day conduct of government employees. As the employer it is their role to determine expected performance and other employment conditions. However, wider standards of behaviour within the state services are determined by the state services commissioner.

Colourful commissioner

The longest-serving public service commissioner was Peter Verschaffelt – holding the post from 1923 to 1935. He was appointed at the age of 36 and was widely admired, but eventually alcoholism led to his resignation. Some time later he shouted his disapproval of some public service legislation from the public gallery of Parliament; as a result he became the only commissioner to be excluded from Parliament.

Prior to 2005 the commissioner’s power to issue a code of conduct was limited to the core public-service departments. Since then the commissioner’s responsibilities have been extended across the state services. In 2007 the first state services-wide code was issued. It requires state servants to be fair, impartial, responsible and trustworthy.

Inquiries

Whenever the need arises the state services commissioner has the powers of a commission of inquiry. The commissioner may gather evidence from government departments, and summon witnesses and examine them under oath. The prime minister can instruct the commissioner to carry out an inquiry – but the commissioner may also initiate inquiries without direction.

This power allows an independent review of matters of public concern in the state sector. In the early 2000s inquiries considered the management of fisheries, safety and control within prisons, and alleged political partiality in a public-service appointment. The reports were all published. The commissioner could follow up an inquiry by determining employment consequences (such as loss of pay or bonuses) for the chief executive of a public-service department.


Senior officials

As a general rule senior officials in New Zealand are employed under the same employment law as all others in the labour force. There is no separate law to determine the conditions of employment for public servants, and no more security of tenure than in any other job. Any grievances are considered in the same employment court that hears private-sector employment cases.

The employer of state servants is generally the chief executive of the department or agency concerned. Conditions of employment are negotiated between the individual or union on the one hand and the department or agency on the other.

Schools are an exception to this rule. Though individual school boards appoint and employ principals, teachers and support staff, pay and conditions are negotiated centrally between the education-sector unions and the Ministry of Education.

Heads of ministries and departments

Chief executives of core public-service departments are employed by the state services commissioner on terms determined by the commissioner. Heads of other departments, including the state services commissioner, and the heads of the police, the armed services, the intelligence agencies and Crown Law, are appointed by the government. Most hold offices set up by statute, so are not employees.

Controversial figure

State-sector chief executives were seldom controversial figures, but William Sutch was an exception. Early in Sutch's career, the government of the day found his left-wing political activities incompatible with work as an economist in the public service. His social history of New Zealand, commissioned for the centenary in 1940, was rejected as too radical. As head of the Department of Industries and Commerce Sutch was generally admired by manufacturers, but distrusted and sometimes loathed by farmers. A government with strong farming interests forced him to retire in 1965, on the grounds that he had been a public servant for 40 years.

Their salaries are set by the Remuneration Authority, which sets salaries for members of Parliament, judges, statutory positions such as state services commissioner, and local-authority representatives. Other conditions are set by the state services commissioner. The commissioner’s conditions of employment are set by the prime minister.

Crown entities

Heads of most Crown entities (such as statutory bodies, and Crown-owned companies) are employed by their boards, on terms set by their board. The boards are required to consult with the state services commissioner whenever pay or conditions are reviewed. When the commissioner and the board cannot agree on a rate for the job, their disagreement is brought to ministers for a decision.

The various boards of public-sector agencies are responsible for monitoring the performance of their chief executives. The contracts of most chief executives (but not office-holders) include provision for some performance payment, to be determined by the employer (not the minister). Dismissal of chief executives is the responsibility of the relevant board, generally in consultation with the state services commissioner.


Department of the Prime Minister and Cabinet

The Department of the Prime Minister and Cabinet is part of the public service, employing non-partisan public servants serving the prime minister of the day. The department works closely with the Prime Minister’s Office, which manages the prime minister’s political priorities.

A prime minister’s department was initially established in 1926, but for its first 50 years was located within the Department of External Affairs. The current department was formed in 1989 from the merger of various separate offices, including the Cabinet Office.

Chief executive’s role

The chief executive of the department is the prime minister’s principal policy adviser. Anything of professional concern to the prime minister (other than re-election) is of interest to the chief executive.

As the only department head to be located with ministers and the prime minister in the executive wing of parliament, the chief executive has unparalleled access to ministers. And as the only department head with access to all cabinet papers, he or she has an unparalleled range of influence.

The chief executive is the principal conduit between the prime minister and the public service. He or she ensures that public-service leaders respond to the government’s priorities and that the prime minister is aware of emerging concerns.

Prime minister’s advisory group

The department includes a small advisory group (generally around 10–15 people) who prepare advice for the prime minister on any issue of government policy or management, and are informally known as the prime minister’s eyes and ears. Staff in the group are drawn from across the state services and the private sector; most stay for a few years before returning to their former positions.

Housing boom

Some pressing issues are investigated by groups within the prime minister’s department. When house prices jumped by 80% between 2002 and 2007 (similar growth had taken the previous 40 years), a House Prices Unit was set up. The unit concluded that population growth, the tax structure, low interest rates and readily available credit had all contributed to the increase.

National security

National security is a central responsibility of all prime ministers and this is reflected in the department. The chief executive chairs the Officials Committee on Domestic and External Security Coordination. That committee consists of the heads of all the security agencies of the government, including the Police, the armed services and the intelligence agencies.

During times of national emergency the committee meets often (commonly daily and occasionally more frequently) to ensure that the government’s response is coordinated and that misunderstandings are avoided.

Intelligence coordination

The department also has a leadership role across the intelligence community. Its intelligence coordination group ensures that intelligence collection is focused on national priorities. Another group within the department, the National Assessments Bureau, draws on information from all sources to monitor and report on any threat to security.


Cabinet Office

Cabinet is at the heart of New Zealand’s system of collective government. Cabinet ministers meet regularly to agree on policy and priorities which they then stand together to defend in Parliament. This system has endured since 1856 when New Zealand achieved responsible government.

Cabinet secretary

Like any collective grouping, cabinet needs administrative support, and the position of cabinet secretary has existed since the 19th century. The role of the secretary was to ensure that the agenda papers were available for ministers and that cabinet’s decisions were conveyed to the public service.

For nearly a century cabinet met without any officials present. The prime minister would annotate his copy of the agenda papers to indicate cabinet’s decision – a process that restricted the ability to record complex decisions. On 29 January 1948 the cabinet secretary was admitted to cabinet meetings and a systematic record became possible.

Cabinet Office

The secretary now heads the Cabinet Office, which is within the Department of the Prime Minister and Cabinet. The office is largely a secretariat of about 20 public servants, supporting the work of cabinet and its committees.

Every year the Cabinet Office assembles over 2,000 papers from across the public service. Copies are distributed to ministers for weekly cabinet and cabinet committee meetings.

At those meetings Cabinet Office secretaries record the decisions which are then printed on green paper and issued as cabinet minutes. Those minutes are the definitive record of cabinet’s deliberations and they serve to direct the work of the public service. A ‘cabinet green’ represents unquestioned authority for public servants.

Invisible servants

Most people working in the three central agencies of the government have little or no contact with people outside the state sector. Those in the Cabinet Office work so close to power that the need for discretion is increased; they are invisible as far as most New Zealanders are concerned. The Honours Unit is an exception to this. While working on the New Year and Queen’s Birthday honours lists, they are in direct touch with people from all over New Zealand.

Executive Council

The cabinet secretary also holds the position of clerk of the Executive Council. The council is the official source of advice for the governor-general, and includes all ministers. At the Executive Council the governor-general meets with ministers to formalise cabinet’s decisions in matters such as confirming appointments or making regulations.

The official secretary, the governor-general’s principal public servant and the other staff at Government House are also the responsibility of the cabinet secretary.

Constitutional responsibilities

The secretary of the cabinet provides advice to the prime minister on constitutional matters affecting executive government. He or she also advises on matters of ethics and probity concerning ministers, and supports the governor-general during elections, transitions and government formation.

Legislation coordinator

The legislation coordinator, who coordinates the government’s legislation programme, is also located in the Cabinet Office. He or she assists the government to develop, monitor and adjust the legislation programme.


Hononga, rauemi nō waho

More suggestions and sources


How to cite this page: Mark Prebble, 'State services and the State Services Commission', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/mi/state-services-and-the-state-services-commission/print (accessed 16 December 2019)

He kōrero nā Mark Prebble, i tāngia i te 20 Jun 2012