More oversight of public spending needed

Dr Bryce Wilkinson
NZ Herald
21 December, 2023

Thank goodness New Zealand has an Auditor-General who takes his official responsibilities seriously.

Last week, he released a damning assessment of recent ministerial processes for making funding decisions on two major infrastructure 
investment programmes.

In January 2020, the government announced a $12 billion infrastructure New Zealand Upgrade Programme. Ministers rushed to approve projects, despite officials advising, “at several points”, of value-for-money risks. 

The Auditor-General found that it was unclear how Ministers assessed or managed those risks when approving projects. Here is his judicious conclusion: 

“In my view, the scale and stated significance of these investments, the limited information available to Ministers, and the multi-generational impact of the investments warranted considerably more rigour before the NZUP announcements were made.”

Readers might well infer that Ministers were cavalier about value-for-money. 

The other programme aimed to spend $3 billion on “shovel-ready” projects. The Auditor-General found that this programme was:

“let down by the absence of clear records and a rationale of how and why some decisions were made by Ministers.”

Unsurprisingly, further down the track some projects have had to be discontinued, rescoped or delayed for cost and other reasons.

As the Auditor-General pointed out, poor decision-making processes reduce transparency and accountability -- which put value-for-money at risk,

These two cases cannot be dismissed as aberrant. The Auditor-General’s press release immediately adds:

“The observations echo similar findings in the Office’s work about aspects of the Strategic Tourism Assets Protection Programme, the Cost-of-Living Payment, the Provincial Growth Fund (PGF), and most recently the reprioritisation of the PGF.”

And three cheers to the Auditor-General for also adding:

“It concerns me that significant decisions on the spending of public money continue to occur without appropriate processes for ensuring value for money and transparency. I think that Parliament and the public have a right to expect more for spending of this scale.”

“A lack of transparency and documentation about how and why decision-makers made significant decisions can also create the perception that processes lack integrity. In a country that prides itself on the integrity of its public sector, this is something we should all be concerned about.”

Ministers who do not care much about value-for-money for the public at large do not care much about New Zealanders’ well-being. 

So, who is responsible for this malaise and what can or should be done to guard against wasteful spending and lack of accountability?

The Auditor-General's report criticises Ministerial decision-making, rather than Officials. I read it as a coded suggestion that Parliament itself was lax in allowing money to be appropriated for vague purposes, with inadequate checks and balances

In principle, the government is accountable to Parliament.
Only Parliament has the power to tax. Parliament determines what is a lawful use of public money when it determines how spending is appropriated.  

If a government spends money illegally, the Auditor-General has the power to direct a Minister to report to Parliament about the illegal spending. 

There is no suggestion of any such illegality in his report. That implies that Parliament has approved spending for overly open-ended purposes. The more Parliament does this, the closer it is to giving the government an open chequebook at taxpayers’ expense. Doing that invites poor quality spending, and worse.

The difficulty is, of course, that the government of the day has a political majority in Parliament. Very few incumbent Governments would allow Parliament to reduce their ability to spend at will.

Enter the Third Estate and public opinion. If the mainstream media just treats such reports by the Auditor-General as transient passing news, it will register little with the public at large. 

Yet, if the public does not mobilise at authoritative, independent evidence of wanton spending, more of it can be expected. Cynicism and corruption would breed. Democracy suffers.

The bottom line is that Parliament needs to do a better job of holding government to account for spending quality. 

It would help if the media did a better job of holding both government and Parliament to account, thereby sparking public concern and attention. A politically-partisan media lets itself and the public down in this respect.

The Auditor-General made three recommendations for improving decision-making and increasing accountability. None required Parliament to do a better job. 

All three looked to improved reporting, guidance and oversight by the Treasury. But that may not be enough. The Treasury exists to serve the Minister of Finance. If its Minister is part of the problem, Treasury’s ability to make a difference is limited.

At a more general level, the Auditor-General has told us that something is rotten about government decision-making. 

It is not his role to assess the cost of that rot. Doing that requires employing economic and financial skills. 

Some years ago, The New Zealand Initiative proposed a Fiscal Council be created as an Office of Parliament. It would employ those skills. 

It would advise Parliamentary Select Committees, and thereby Parliament and the public, on the value-for-money from government spending programmes.

Being independent of government, it could express views Treasury cannot publicly express. 

Such a fiscal council would complement the role and skills of the Office of the Controller and Auditor-General. Parliament and the public could be better informed of evidence of wasteful spending.

A fiscal council is not the only option for improving Parliament’s oversight and control of government spending. Public debate should be wider.

But something more to constrain wasteful government spending is sorely needed. Only public pressure is likely to make it happen.

The mainstream media can shrug its shoulders over the Auditor-General's report, or it can put its shoulders to the cause of achieving greater accountability for value-for-money from public spending. 

I hope the public will reward it if it does the latter.

To read the article in the NZ Herald website, click here

Stay in the loop: Subscribe to updates