This thesis is a case study of a small country far from the trading markets of the world that, in pursuing economic independence, restructured the way it managed central government between 1984 and 1994. In the process it built a new governance structure for the state sector'. It reintroduced complete financial reporting by the Government to the parliament; a constitutional convention that, despite popular belief, has not really been adhered to for over fifty years in any country with the Westminster system.
Between 1984 and 1994 New Zealand fundamentally changed the governance structure of its state sector. It restructured trading activities of departments and created state-owned enterprises under an umbrella Act, the State Owned Enterprises Act 1986. Passing the State Sector Act 1988 the New Zealand Parliament changed the public service from a permanent, neutral and anonymous service to one in which each state sector entity's chief executive is contracted for a fixed term and is responsible for the management, including financial management, of his/her entity. The Public Finance Act 1989 changed parliament's power from solely monitoring the Government's use of public finds to monitoring the performance of all state sector entities and the consolidated financial statements of the Government of New Zealand. It did this by parliament approving appropriation for the Crown's "purchases" (specified goods and services provided to the people called "classes of outputs") from government departments or other entities, changes in its "ownership interests" (capital structure) in departments and crown owned entities, and for payments on behalf of the Crown". It linked the formal to the informal incentive structure within state sector entities by, among other things, linking the performance agreement of each chief executive to their institution's measurable performance.
Parliament appropriated public resources to the Government to deliver specific, measurable objectives for each class of outputs in each vote. It required entities to table a budgeted statement of financial position and a statement of objectives / corporate intent within a full suite of financial statements. The parliament continued to safeguard the financial procedures it applied in scrutinising the government and showed a keen interest in the laws Government applied in dealing with public money and public resources. The governance structure included, among other things, parliament's consideration of estimates, and its committees' role in examining the expenditure, administration and policy of government departments, offices of parliament, crown-owned entities, the Reserve Bank of New Zealand and state-owned enterprises. It received and considered reports on the performance, efficiency and effectiveness of these entities from the Controller and Auditor General. It continued to require the Controller to assess the Government's requests for funds from the Crown Bank Account to ensure they were in accordance with legislation prior to funds being released. It changed Standing Orders and increased the power and number of its committees. The core aspect of the governance structure is the role of individual members of parliament in ensuring the state sector has a human face that harmonises with the values and priorities of constituents.
The parliament reformed itself to maintain its ability to hold the Government to account for the performance of state sector entities and the consolidated entity, the Government of New Zealand. The parliamentary committees worked together to ensure the reforms maintained their human face and, in the process, resulted in them adhering to principles of clarity, transparency and accountability.
The case study has found that the move to report performance resulted from a longstanding dissatisfaction among voters about their influence on Government. The people of New Zealand were not being represented in the House because the system of voting was resulting in inappropriate representation.
The principle of the New Zealand Government being fully accountable to parliament was maintained in the design of the reforms. Finally, as in all democracies, it is up to the citizens to ensure the Government is held accountable by the parliament. Following the reforms to the management of government between 1984 and 1994 this is much more readily attainable.
i Public sector equals the state sector and local government. This thesis restricts itself to the state sector.
ii Receipts on behalf of the Crown are also monitored by the parliament.