Better Public Services Advisory Group Report - November 2011

1.8 To facilitate a return to surplus by 2014/15, the previous government decided that there
should be much smaller increases in budgets for the next three years relative to the last
decade 13 . These budgets of course must fund any increases in the costs of delivering
state services as well as the costs of any new initiatives. Living within tight budgets is a
core but challenging part of ministerial responsibility and chief executives’
accountabilities.
1.9 By way of illustration, if the historical trend of cost increases in public service provision
from 1997 to 2008 were to apply at the same rate from 2011/12, there would be a gap of
around $4 billion by 2014/15 (and around $9 billion by 2019/20) between the budgets
available to departments and the cost of delivering those services at current levels. State
sector personnel costs illustrate the magnitude of the challenge – they are forecast to
grow at an annual average rate of 1.1% over the next five years, significantly less than
the average in recent years.
1.10 Managing in this environment is a tough, but achievable, assignment. To manage fiscal
pressures and deliver the fiscal strategy over the medium term, while maintaining service
levels requires efficiency gains across the state services in the order of 3% to 4% a
year 14 . This will require changes to the way services are delivered and to organisational
arrangements. To the extent that efficiency gains alone are not sufficient to bridge the
gap, choices will need to be made to discontinue lower value activity.
Growth in personnel costs (Total Crown)
% increase in
personnel costs
12%
10%
Actual
PREFU 11 forecast
8%
6%
4%
2%
0%
Source: The Treasury
13
Operating allowances of $800 million p.a. in Budgets 2012 and 2013, then increasing to $1.2 billion. A $900 million
capital allowance until the 2016 Budget, to be funded from the Crown’s balance sheet.
14 That is, across public service departments and Crown entities.
17