goal is to encourage you to have your say on the proposals. This is your opportunity to help shape the future of New Zealand s Public Service.

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2 goal is to encourage you to have your say on the proposals. This is your opportunity to help shape the future of New Zealand s Public Service. Tena koutou katoa. No Birmingham, England ahau. Ko Malvern te maunga. Ko Trent te awa. Kei Whitby, Porirua ahau e noho ana inaianei. Ko Rachel Hyde toko ingoa. Tena koutou, tena koutou, tena koutou katoa. Good morning and welcome to today s session on the reform of the State Sector Act. I m here today to give you an overview of proposed changes to the State Sector Act and why we think those changes are necessary. Over the next twenty minutes, I ll tell you what some of the proposals may look like in practise and you ll have a chance to ask questions at the end. My main purpose today is to gain feedback on the potential implications for Crown entities of the proposed reforms. Other sessions you are welcome to attend will provide a more broad overview of the full set of proposed reforms. While this session has a particular focus, you are encouraged to read the full range of material and have your say in shaping the future of New Zealand s Public Service. You can provide formal feedback on any aspect of the reforms as part of the consultation process. This is about engaging on the concept; which would feed into any detailed policy design. If government agrees to the proposals, further information and communication would be provided around the specifics of their design and implementation next year. Hopefully, this session will leave you feeling informed and curious. My overarching 2 2

3 is one of those things. The State Sector Act underpins the management of New Zealand s State sector. The current Act is 30 years old it was born in a very different world and in response to particular economic, political and value driven pressures. The Act is founded on the principal of individual chief executive accountability, which has led to an increasing tendency to work in silos. This means that while the Act has proven to be effective when individual departments deliver services or results that they have sole accountability for, it has struggled to tackle complex modern problems, and provide citizen-centred services and outcomes, where this requires joining up the system. There is also concern that the Act fragmented a previously unified Public Service, not just by driving the silo effect, but by weakening key elements of the system like senior leadership capability and our ability to stay true to the ethical foundations of the Public Service, things like political neutrality and free and frank advice. These are the reasons why the Government has asked us to review the State Sector Act. The Public Service has two important roles in New Zealand society. First, New Zealanders depend on public servants to deliver vital services every day. Second, the Government relies on public servants for advice and to implement its priorities and policies, which are designed to achieve real outcomes for New Zealanders. We know that delivering on these two roles is what keeps you coming to work every day. We also know that you are working hard and doing a great job. Our public services perform very well by international standards in terms of both integrity and effectiveness, and public confidence in the Public Service is correspondingly high by international standards. This success is built on the efficient and responsive operation of departments, enabled by the legislative framework for the Public Service, of which the State Sector Act is a key part. But success at the departmental level is not enough. The Public Service also needs to perform excellently in the things that departments need to do together in a joined up way, and it needs to maintain the same high standards of professionalism and integrity across the board in order to support the role of executive government in our democracy. No matter how hard you work, it s hard to avoid the fact that there are things getting in the way of the Public Service doing even better. We think that the State Sector Act 3 3

4 at the centre. Māori have also raised concerns about the lack of a holistic and joined up approach in the Public Service and the failures of the Crown in meeting its Treaty obligations to improve outcomes for Māori. To respond to the expectations of those we serve, we need to create a modern Public Service underpinned by fit-for-purpose legislation. Despite the issues with the Act there have been, for much of its history, few voices calling for fundamental change in the legislation. However, over time the pressure for change has increased as the deficiencies of the Act have been seen in practice. This led to the 2013 amendments to the Act which, while significant, did not alter the underlying framework of the Act. Experience since then shows the persistence of the same issues that have been apparent since the early 90s. Fragmentation, difficulty of system-wide leadership, barriers to collaboration, and integrity concerns still remain. These days, the Government and citizens place great emphasis on addressing complex issues that require a highly organised response from the Public Service. They expect that the Public Service: is imbued with the spirit of service to the community and operates with very high standards of professionalism and integrity to fulfil its constitutional role in supporting Executive Government is able to work as an agile and adaptable system in which people and resources are able to move more flexibly across present departmental boundaries, and provides public services which are more accessible and organised with the citizen 4 4

5 Achieving complex social, economic and environmental outcomes requires a new approach that puts outcomes and citizen-focussed services at the core of a joined up Public Service. Alongside Public Finance Act and Crown Entities Act reform, a new Public Service Act presents an opportunity to reset expectations of public servants to this new approach. The review of the State Sector Act is therefore focused on change that will ensure the Public Service is able to: deliver better outcomes and better services create a modern, agile and adaptive New Zealand Public Service, and ensure the constitutional role of the Public Service in supporting New Zealand s democratic form of government. To achieve these objectives, we have made proposals in a number of key areas. They are: Commitment to Māori supporting an improved Crown/Māori relationship Tools for a more flexible Public Service A broader set of organisational options to enable the system to join up more easily where this is the best way to achieve better outcomes or improved public services Leading a connected Public Service transforming Public Service leadership with legislative changes related to chief executives, senior leaders, functional and professional leaders and the Public Service Commissioner The best people for the job strengthening employment provisions and setting the Public Service on a pathway to being an exemplar employer for New Zealand, including proposals relating to diversity and inclusion, common terms and conditions for certain professions, and pay equity Stewardship increasing the stewardship focus of the Public Service and building capability to serve future governments 5 6

6 Purpose, principles and values setting out in one place, in legislation, the purpose, principles and values of the Public Service An expanded definition of Public Service expanding the definition of the Public Service to include a range of Crown agents and Autonomous Crown entities. Not all the proposals have implications for Crown entities, but some are explicitly focussed on Crown entities and others will have direct impacts on Crown entities. It s therefore important to understand why Crown entities are being included in what is generally being described as Public Service reform. The term Public Service as it is used in the current State Sector Act, covers only a fraction of the entities that are involved in the provision of important public services to New Zealand. The State Sector Act reform proposals are intended to clearly articulate the spirit of service that binds public servants together under one system, collectively responsible and accountable to citizens. Some areas of the reform proposals will have direct implications for some Crown entities. They are: An expanded definition of the Public Service Purpose, Principles and Values Crown/Māori relationship Proposals related to the Commissioner s integrity and standards mandate. The rest of this presentation covers each of those proposals in more detail, beginning with the definition of the Public Service. 6 7

7 The Public sector performs a complex set of roles, from providing a huge range of services to New Zealanders, to the fair and uniform application of rules and regulations and supporting and advising the Government of the day. Performing these roles to the highest possible standard requires a range of different approaches, which is why there is considerable variation between the way parts of the public service work and are organised. One of the key differences is between entities that operate under the direction of ministers (departments of the public service), and other entities that are at arms-length from ministerial control. These arms-length entities take various forms, but consist mainly of Crown entities. They are outside the Public Service as defined in the State Sector Act, and constitute a wider group of State services agencies. There are other organisations which fall within the State sector, but which are not part of the State services due to their different ownership and governance arrangements. You can see the current situation illustrated in the diagram on the screen. The term Public Service as it is used in the State Sector Act, covers only a fraction of the entities that are involved in the provision of important public services to New Zealanders. From the citizen s perspective, there is no real distinction between entities whose fundamental purpose is to serve the public, regardless of their organisational form or whether they are part of the Public Service or the State services. From their perspective, it matters little if a function that was previously delivered by a department is now performed by a Crown entity, or that a function conferred on a Crown entity may transfer to a department. What matters to New Zealanders is that all public service entities operate with a spirit of service to the community, and do the best job they can to provide services to, and achieve outcomes for, the people of New Zealand. 8 9

8 For these reasons, we are proposing to reconceptualise the Public Service: as a collective institution in the executive branch of government comprising a broad array of entities unified by sharing one or more common features such as: delivery of services to, for, or affecting the public; acting under a public mandate; or funded primarily from public money. It is not necessary to restrict the Public Service to Public Service departments. In the past, the Public Service has included other organisational forms, and other Westminster-based systems, such as Canada and Australia, include a broad range of organisations in addition to departments. The change we are proposing would mean the Public Service would expand to include a range of Crown entities in addition to departments. Crown entities would continue as legally separate bodies corporate, operating under the governance of a board and at arms-length from the responsible Minister, as at present. They will not become part of the legal Crown. We are not proposing to simply broaden the definition of Public Service so that it includes all State service entities. There are good reasons for the varying degrees of independence in the arms-length relationships between entities and ministers, and we are thinking carefully about the appropriate balance between maintaining independence and achieving a sense of unified public service. We are proposing to expand the definition of the Public Service to include a range of Crown agents and Autonomous Crown entities. These are the Crown entities which are already subject to Ministerial influence, whether that is by appointment or removal of board members or the ability of Ministers to direct government agencies to have regard to Government policy. We are not proposing to include Crown entity companies, Crown entity subsidiaries, Tertiary education institutions, or School boards of trustees. This is for a variety of reasons, for example the entity having commercial objectives, the principle of academic freedom and institutional autonomy, or the entity not being subject to Ministerial control or influence. This change will have the effect of applying to a wider range of public entities the unifying purpose, principles and values of the Public Service, and an obligation to support and facilitate the Crown/Māori relationship. The intent of this unifying level 10 11

9 of commonality is to strengthen the spirit of service to the community, and make it easier for public servants to work across organisational boundaries. The diagram on the screen shows our re-conception of the New Zealand Public Service. Next, I m going to go into more detail about the proposals related to the purpose, principles and values

10 agencies, and individual public servants, need to work in the way that retains New Zealanders confidence and ensures that the Service is seen as trustworthy. These considerations point to the need to unify the Public Service around some fundamental common elements. The expectations of public servants, and Public Service agencies, need to be clear. There is no single legislative statement of the purpose, principles and values of the New Zealand Public Service. Such statements do exist, for example in various sections of the State Sector Act, and in the Public Service Code of Conduct issued by the State Services Commissioner. They are also implied in other legislation, like the Official Information Act However, we lack a single statement that can act as a point of identification and unity for the New Zealand Public Service. We propose that the statute include provisions outlining the purpose, principles and values of the Public Service. Placing these in legislation will ensure that they form an enduring foundation for the Public Service. Articulating the purpose, principles and values in one place will also clarify societies expectations of the Public Service. Clarity of understanding will assist us to promote and embed the spirit of service across the Public Service, supporting public servants in their efforts to work in new and innovative ways that best meet the needs of New Zealand and New Zealanders. The proposals on purpose, principles and values are at the heart of everything we are trying to do. New Zealand is internationally known for having a Public Service that is constitutionally sound, politically neutral and operates with the highest levels of integrity. But we can t take this for granted. Around the world we can see evidence of the gradual erosion of the principles and values that underpin democratic governance. We aren t immune to these developments in New Zealand. At times, the Public Service has been criticised for short falls in integrity and professionalism, including our ability to remain politically neutral and provide free and frank advice. The Public Service has a very complex set of roles to perform, from providing a huge range of services to New Zealanders, to the fair and uniform application of rules and regulations and supporting and advising the Government and supporting the constitutional role of the Executive in our democracy. Performing these roles to the highest possible standard requires a range of different approaches. For this reason there is considerable variation between departments and entities in the way they work, are organised, and in their organisational cultures and behaviours. The proposals would apply the unifying purpose, principles and values of the Public Service to the expanded Public Service that would include some Crown entities. We believe this unifying level of commonality will strengthen the spirit of service to the community, and make is easier for Public Servants to work across organisational boundaries. We are putting forward proposals which we think are broadly right, but they are only proposals. We want to hear from all of you whether the aim and content of the proposed purpose, principles and values rings true for Crown entities, as well as whether you think articulating them in legislation is the right thing to do. However, there are some common standards that form the bedrock of the Public Service. Whatever way they are working, all agencies need to maintain high standards of service and conduct, as failure in one agency reflects on all and undermines the role of the Public Service in supporting executive government. All 13 13

11 The State Sector Act 1988 did not set out a purpose for the New Zealand Public Service. It focused on actors within the public management system (the State Services Commissioner, chief executives), and the functions, powers and responsibilities of those actors. This articulation of the New Zealand Public Service does not reflect the role and importance of the Public Service in New Zealand s constitutional framework. The Public Service is a fundamental institution within the framework of New Zealand s democratic government. It is part of Executive Government, supporting the Government to achieve its objectives and being trusted to serve future governments with the same integrity and professionalism. Reform of the State Sector Act can provide a clear articulation of the purpose of the Public Service. We do not yet have a succinct statement that adequately captures the purpose of the Public Service. We know that the Public Service has the following roles and, from this, will come a purpose statement. The Public Service Act 1912 first established political neutrality and merit selection as principles for the New Zealand Public Service. The 1962 State Services Act expanded these principles by stating that the Public Service must be imbued with a spirit of service to the community. In 1988, the State Sector Act reinforced the existing principles but spread them throughout the legislation, making it difficult to read them as a coherent set of unifying principles. The 2013 amendments to the State Sector Act affirmed stewardship and free and frank advice as principles for the Public Service (both of which had long histories as constitutional conventions), but failed to bring the various principles together in one clear statement. Alongside the principles found in the State Sector Act, other legislation (such as the Official Information Act 1982 and the Ombudsmen Act 1975) has confirmed openness, with appropriate protections, as a key principle for Executive Government and the Public Service. The reform of the State Sector Act provides an opportunity to set out these foundational principles, the ones you can see on the screen, in a concise statement at the front of the Act. Our intent is that these principles would underpin institutional behaviours. The long-form consultation document, which you can view and download at 14 15

12 has a more extensive explanation of the meaning of each of these principles. Clear values are critical for leading culture change in organisations and systems. The values we have proposed are designed to be a powerful unifying influence across the Public Service. They will help achieve all the objectives of the review; focusing Public Servants on the need for improved services, on the need for agility and innovation to that end, and on the vital importance of the ethical underpinnings of a professional Public Service in our democracy. Values underpin individual behaviours. How we articulate the values of the Public Service in legislation will drive the behaviours of public servants. Reform of the Act could include a very clear statement of Public Service values. We think that the values should provide the ethical underpinning of behaviour in the Public Service. More specific, mission-based values that drive organisational performance are best owned and articulated within those organisations, rather than being described at the system level. We have proposed five system-level, ethical values, which you can see on the screen, but we are really interested to hear whether you think we have got these right. Are there any concepts missing? What are they, and why do you think they are important? 15 16

13 employees will be expected to follow the entity s policies, systems and practices for adhering to the purpose, principles and values. The State Services Code of Conduct already sets relevant standards and we intend that it would be updated to reflect the purpose, principles and values more explicitly. As the legislation will not be directly enforceable, we are not proposing to include sanctions for non-compliance with the purpose, principles and values. However, compliance with the code of conduct is a condition of employment, so serious breaches could have employment-related consequences. We are not proposing that the purpose, principles and values will be directly enforceable. The intention is that they will be given life through chief executive leadership, agency policies, and active promotion of codes of conduct. A key part of this will be to provide more detailed specification of how the principles and values should be applied in practice. We propose that the Commissioner be given the ability to issue guidelines and rules on the application of the principles and values to specific issues and circumstances. These will be able to be updated and extended more flexibly than legislation, and therefore will be the appropriate place for matters of detail. There will be little or no change to the role or authority of the board as a governing body. Crown entities will still act in accordance with their enabling legislation and the Crown Entities Act. Some entities have statutorily independent functions. The proposed purpose, principles (underpinning institutional behaviours) and values (underpinning individual behaviours) of the New Zealand Public Service will not run counter to these. Boards will be expected to ensure the entity has appropriate policies, systems and practices in place to effect the purpose, principles and values. We envisage that the guidelines and rules issued by the Commissioner, including codes of conduct, will be the means of establishing formal and enforceable obligations. Crown entity 17 17

14 neutrality), responsibility and trustworthiness. The proposed statements of purpose, principles and values will bring together in one place these existing statements from the Code of Conduct, along with other statements of purpose, principles and values found throughout the State Sector Act. We are not proposing changes to the content of those statements, but rather we want to protect them by enshrining them in legislation. I ve already mentioned the State Services Code of Conduct a few times, so I thought at this point it would be useful to clarify the relationship between the reform proposals and the Code. Under the State Sector Act, the Commissioner may set minimum standards of integrity and conduct for a range of agencies, including all or any Crown entities except Crown Research Institutes, Tertiary Education Institutes and their subsidiaries. The current Standards of Integrity and Conduct for the State service (the Code of Conduct) was promulgated in It extends to Public Service departments, Crown Agents, ACEs, ICEs, some Crown entity companies (excluding CRIs) and subsidiaries (excluding subsidiaries of CRIs and TEIs), and Public Finance Act schedule 4A companies. Crown entities covered by the Code must: Comply with the minimum standards of integrity and conduct set out in the Code, and Have in place policies, procedures, agreements and training that is consistent with and reinforces the standards set out in the Code. Each Crown entity board is expected to ensure their organisation complies with the standards set out in the Code. The current Code deals with issues of fairness, impartiality (including political 18 18

15 This slide shows the alignment between the current coverage of the Code of Conduct and the proposed purpose, principles and values. It s important to note that we are proposing that the purpose, principles and values extend to the entity rather than to the board. The reason for this is that the Public Service is currently defined in terms of organisational form, as are the State services for the most part. The exception is the Education service, which is defined by employment relationship). The future, expanded Public Service will continue to be defined in terms of organisational form, which means it is the Crown entity itself that will be part of the Public Service. Therefore, the PPV will apply directly and immediately to the entity. The board and employees are separate from the entity. The board is the governing body of the entity, and the entity s functions and powers can only be exercised by the board or under its authority. Therefore, as I ve already indicated, it will be incumbent on the board in its governing role to ensure that the entity has everything necessary in place so that the entity, including the employees, play their part in giving effect to the PPV in an appropriate manner. Again, as compliance with the code of conduct is a condition of employment, employees will also be obligated to give effect to the PPV as a consequence of their employment relationship. In addition to the PPV, we are proposing that the expanded Public Service is covered by new provisions relating to the Crown/Māori relationship. The Public Service also has an important stewardship role to support the Crown, through the government of the day, to foster a strong relationship with Māori. Around the country there are pockets of good practice in our public services, but the quality of relationships with Māori and level of responsiveness to issues that affect them is not consistent. There is a need for a new approach to the Public Service s role in supporting the Crown/Māori relationship. By weaving the intention of the Treaty throughout our Public Service, we can enhance the relationship between the Crown and Māori and work together to improve policy, design and delivery of services to achieve better outcomes for Māori and all New Zealanders

16 Engagement, participation and partnership with Māori Delivering services and results Building cultural competence in our workforce, and Increasing the number of Māori in senior leadership roles. We also propose that the legislation include explicit provisions to strengthen and clarify the Commissioner s and chief executives collective responsibilities. This could include responsibility for: developing the cultural competence and capability of the Public Service supporting Māori leadership within the Public Service ensuring the Public Service has strong relationships with Māori and is responsive to the needs and aspirations of Māori, and advancing opportunities to work with Māori. Q. How should the Public Service operate to support the relationship between the Crown and Māori? Q. What else could we do to improve the relationship and deliver better results for Māori? The current State Sector Act is silent on the Crown/Māori relationship. Our aim is to ensure the Public Service can support the step change needed to deliver meaningful results for Māori. We are considering a wide range of initiatives to bring about a step change within the Public Service, so that it is: highly responsive to Māori issues able to proactively, confidently and competently engage with Māori committed to developing the knowledge and skills necessary to deliver results for Māori better able to partner with Māori, and able to incorporate Māori perspectives into its work as a matter of course. Explicit authorisation through the legislation will play a key role in ensuring this happens. We propose that Act contain specific references to the Public Service s support of an improved Crown/Māori relationship, and take into account the Treaty of Waitangi and its principles. We propose a prominent stand-alone clause that is clear about the expectations of the Public Service and contains guidance to support the Public Service in building its capability. To do this, the clause could set out provisions relating to: 21 21

17 As we are proposing that a range of Crown entities would be included in the expanded Public Service, those Crown entities would have a role in supporting Māori relations. We are proposing that the State Services Commissioner could issue appropriate guidance on how this supporting role would apply with respect to Crown entities, and will work with Crown entity leaders to ensure effective implementation. For example, the Commissioner could issue guidance on: supporting more Māori into leadership roles, or developing organisational culture that enables Māori staff and Māori culture to thrive within Crown entities, or developing policies and practices on external engagement with Māori that is more responsive to their needs and aspirations. Q. We are interested in hearing from you how you think the requirement to support Māori relations might impact Crown entities, and what kind of guidance you think would be helpful. The final element of the proposals that will impact Crown entities is in relation to standards of integrity and conduct. The Commissioner s interests in integrity and conduct are based primarily on the nature and role of the State services in New Zealand s constitutional democracy. They concern the way in which agencies act as instruments of executive government, especially in the exercise of their powers and in the way their actions (or inactions) affect the public s trust in government and the entity s relations with Ministers. In relation to Crown entities in particular, the Commissioner has three main outcomes for setting standards of integrity and conduct. These are that: Crown entities earn and hold the trust of New Zealanders in the entity and in government as a whole Individual board members and employees adhere to appropriate standards of integrity and conduct, and There is a basis for assessing compliance with required standards of integrity and conduct, and for dealing with breaches if they occur Under the current State Sector Act, the Commissioner has graduated options in relation to promoting and reinforcing high standards of integrity and conduct in the State services. These being with guidance, move up to setting minimum standards, and then step up markedly in severity to advising responsible Ministers of serious 22 23

18 ethics / integrity breaches and investigating matters of integrity and conduct. We think there is a gap in between these options. The reforms propose strengthening the Commissioner s mandate to set expectations and then to formally direct agencies on specific integrity matters. For example, the Commissioner might set expectations around Crown entities creating an environment to encourage people to speak up (e.g. whistleblowing). If setting expectations does not have the desired effect, the Commissioner could then require Crown entities to put in place specific policies or take specific actions. We are proposing that this mandate only applies to those Crown entities where the Commissioner can currently set, issue, apply and enforce a code of conduct. So, that concludes my overview of what we are proposing and why. Thank you for your attention and interest. Now it s your turn. I ll answer any questions I can, and I have colleagues here to help me out as well. The floor is open to questions

19 Before we finish for the day, I d like to encourage you to Have Your Say. There is a range of channels you can use to make a submission, as you can see on the screen. Consultation closes on October 12 th. We want to hear your thoughts and ideas, so please make a submission and join the conversation about how we can build the Public Service we all want for the future of New Zealand. 25