Grant Robertson is to blame for the end of the Productivity Commission

Dr Eric Crampton
5 December, 2023

The New Zealand Productivity Commission was borne of the 2008 coalition agreement between National and Act. And it was ended by the 2023 coalition agreement between the same two parties.

As former Productivity Commission economist Dave Heatley put it, on the New Zealand Economics Association’s Asymmetric Information blog, “How ironic is that?”

The past few years at the Commission, and its ultimate ending, aren’t just about the Commission. The episode raises broader questions about conventions in public sector appointments, about public service neutrality, and about the path the incoming Coalition government might take.

But first, a bit on productivity, and the Commission.

Improvements in productivity are the ultimate source of wage increases and prosperity. As Heatley puts it, “it is achieving more socially valuable things with fewer socially costly resources.”

If you want government to be able to afford to provide excellent healthcare and social services, you should want stronger productivity growth.

As Heatley emphasises, it is not as though government can simply hit a button and improve productivity. If a government cares about productivity, each Ministry will claim that it’s preferred regulatory or spending initiatives will improve productivity.

The Productivity Commission was established as an Independent Crown Entity. Its charge: to set enquiries into areas where policy settings may inadvertently be hindering productivity and to provide advice.

The Commission became known for rather hefty doorstop tomes on housing affordability, local government land use regulation and urban planning, more effective social services, and productivity within the state sector. Few would have read those reports all the way through. But their detailed work would have been important to Labour’s urban growth agenda, and to the prior National government’s investment approach in social services.

The reports were deeply technical, they were impartial, and they mattered.

So what went wrong?

Heatley notes that all parties barring the Greens supported the Commission’s establishment, and that it survived its first change of government in 2017. Labour’s urban growth agenda would have made less progress without the Commission’s work; an independent Commission’s work should be valuable to parties of all stripes.

But that durability depends on adherence to particular conventions. Heatley writes:

“The NZPC survived its first change of government in 2017, but not its second in 2023. What changed? In my view this came down to Finance Minister Grant Robertson disregarding a crucial yet unwritten convention. That convention is that while appointments to Commissioner positions are the Minister’s prerogative, they need to appoint people that are capable and competent of working with alternative governments. This doesn’t mean that appointees must have no prior political affiliations — that likely narrows the recruitment pool too far — but they do need to be able to act, and be seen to act, in their role as Commissioner without ideology and partisanship.

The Finance Minister’s appointments to the NZPC from 2020 onwards broke this convention, in my opinion. It is also possible that Grant Robertson thought the convention was already broken — by the appointments made by the National Party Finance Ministers who preceded him. If so, that reinforces my case that the convention is broken, and institutions need changing to reflect this post-convention reality.”

In December 2020, Minister Robertson appointed Dr Ganesh Nana, of economic consultancy BERL, to Chair the Commission. When Dr Nana was appointed, many economists were surprised and ACT Leader David Seymour was sharply critical.

It is impossible to tell why Minister Robertson appointed Dr Nana. But controversy around the Commission’s prior work preliminary cost-benefit analysis of the extension to the Level 4 lockdown may have played a role.

Some staff exiting the Commission after the announcement noted, in conversation, an early meeting with the incoming Commissioner where a refocusing away from mainstream economic analysis was strongly signalled; where they viewed the Commission’s prior work as having been denigrated; and, where they expected mainstream economists were no longer welcome.

Their stories were consistent with Jenée Tibshraeny’s more recent reporting for the Herald.

Heatley notes the importance of consulting opposition parties about appointments to independent commissions, and the unwritten convention that Commissioners should be “capable and competent of working with alternative governments.”

It is a problem, and especially if governments need independent agencies that do not fear providing unwelcome advice when others will not.

Ministerial appointments to independent commissions need to be at least minimally palatable to the opposition if the agency is to be durable. But Heatley argues that “we now have to regard the convention as broken.”

Heatley suggests a few options. Ministers could be required to consult with opposition parties on such appointments; opposition parties could be given veto power over appointments; Parliamentary confirmation processes could be introduced; or, all Commissioners could be required to tender resignations on a change in Government (which the incoming Government could be free to reject).

But if the convention really is broken, many of those options would be like agreeing to a ceasefire after the other side has taken a lot of territory.

To read the article on the Newsroom website, click here.

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