Prime Minister or Chief Restructuring Officer — only time will tell.

By Thomas Cranmer, a.k.a. Philip Crump

On Saturday New Zealand elected its 42nd Prime Minister, or did it?  Only time will tell, but quite possibly the country has, more accurately, appointed a Chief Restructuring Officer. 

Luxon’s corporate background and relative lack of political experience have been well traversed over the last year. A popular refrain from the National Party leader whilst burnishing his turnaround experience has been that a country is not a corporate but that there are similarities. 

On the Mike Hosking Leaders’ Debate a few weeks ago Luxon expanded on his philosophy by telling Hosking, “It’s all about management and my personal experience is that CEOs get different results with different management using the same amount of money so it's what you do with it — and expectations and clarity, and bringing in all those CEOs before Christmas and saying ‘hang on, here’s the new deal, the deal is you have to deliver, you have to deliver’ — that’s what I’m sick of, absolutely sick of, all the talk and no action.” 

Peter Hughes, the current head of the Public Service, did not have to wait until election night to sense the change of political winds. By announcing his resignation a few weeks ago, he acknowledged not just the inevitable change of government but also that the public service is about to undergo fundamental change. The next step is the amendment of the Public Service Act which has seen power move away from ministers and become concentrated in the Commissioner. It has entrenched a feudal system which Hughes has sat atop and managed through patronage. 

The challenge for Luxon is not therefore that the public service is too partisan but that it has begun to act more politically, not just on behalf of whoever is in power, but also for themselves.  By flattering their political masters, they have secured an element of political independence for their own projects. The question, therefore, is who else from the top tier of the public sector needs to be removed from their posts in order to reset expectations?   

Some commentators, such as Roger Partridge from the New Zealand Initiative, have floated the idea of following the Australian approach of the incoming government replacing several department heads in order that they may implement their reform agenda more effectively.  It is a view that is known to hold some appeal amongst National’s current front bench. 

As a restructuring expert, Luxon knows the imperative of having the right people in the right roles in order to drive success.  Beyond that, what does a Chief Restructuring Officer do? 

Invariably there will be a laser focus on costs — led by a ‘RIF’ in management-speak, or a ‘reduction in force’. To the public, read job cuts and redundancies. The focus will however be broader than simply staffing costs. National has already signaled as much by announcing an expectation of a reduction in back-office expenditure on average across the public service by 6.5 percent, on top of the 1 or 2 percent already announced by Labour.  Given that staffing costs make up a significant announcement of baseline costs of many ministries, these cost reductions will necessarily lead to job losses. The challenge will be to ensure that austerity does not impact frontline services. There is already apprehension in some departments about what services could be affected by the imminent cuts. 

National will, however, need to get a grip of the public service if it is to have any hope of implementing its agenda.  But more importantly, what will the agenda be?  Is New Zealand set for managed decline at a slower rate than Labour promised, or for reform and a reversal of our downwards trajectory? 

It was a question posed by Hosking in his Leaders’ Debate interview — “If I’m looking for revolution, why am I voting for you? You look the same as Labour.” 

Luxon’s retort was what voters will get is, “really good economic management because that’s what we do.”

“There’s only two numbers I reckon that New Zealanders need to understand, the 80% increase in government spending and the $100 billion worth of debt”, Luxon said. 

“And we’ve got nothing to show for it … nothing, we haven’t got extra ICU beds after $60 billion worth of Covid spending, we haven’t got extra roads, we haven’t got anything for all of that borrowing, for all that spending, nothing.”

It summed up the frustrations of many New Zealanders. And perhaps when Labour reflects on its loss, it may come to realize that spending huge sums of money does not automatically translate into improved frontline services.  Tony Blair’s Labour Government learnt a similar bitter lesson when it invested unprecedented amounts of taxpayer money into the NHS in the early 2000s only to see it absorbed like ink on blotting paper with nothing to show for it. 

Corporate restructurings often take place in phases over a number of years because stakeholders are unwilling or unable to take the financial pain in one hit.  Luxon will need to work his way into the role, but the public will be looking for early signs to indicate whether this Prime Minister is willing to grapple with the difficult questions concerning the cost of living and divisive social issues, or whether, as Hosking suggested, he’s just the same as Labour. 

This article first appeared on NewstalkZB Plus on 17 October, 2023.