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Dr Muriel Newman

Inherent Failings of Bureaucracy

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Yes Minister

“No government ever voluntarily reduces itself in size. So governments’ programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth.”
– President Ronald Reagan, 1964

It was Professor Cyril Northcote Parkinson of the University of Singapore, who first explained the relentless growth in government. In a 1955 article in The Economist, he outlined Parkinson’s Law, pointing out that “work expands so as to fill the time available for its completion”.

Through his extensive experience with the British Civil Service, Professor Parkinson observed that bureaucracies expand relentlessly at a rate of between five to seven percent a year irrespective of any variation in the amount of work to be done. In particular, his research into the British Navy showed the number of Admiralty officials between 1914 and 1928 increased from 2,000 to 3,569 – even though over that same period, the number of troops fell by a third and the number of ships by two-thirds!

He gave two key reasons for the inexorable growth in bureaucracy. The first is that officials in the public sector will do everything in their power to avoid rivals, employing multiple subordinates rather than equals or someone better, so as to retain their position in the hierarchy. And secondly, officials focus their efforts on making work for each other.

In the eighties, the behaviour of employees within state bureaucracies and the public service was dramatised in the popular British television series “Yes Minister” and Yes Prime Minister” – and the local Roger Hall production, “Gliding On”. But while we all chuckled at the antics, the public cost to taxpayers of an inefficient and self-serving bureaucracy that consumes scarce taxpayer resources that could be better spent boosting economic growth, creating jobs, and raising living standards, is no laughing matter.

Since first being elected into office in 2008, the National Government has campaigned hard on reducing the size and cost of the state bureaucracy. But the revelation last week of a massive blowout in the cost of the government’s new child support computer system, shows there is still a great deal more work to be done.

The cost of implementing the new child support system, which was originally estimated at $30 million in 2011, has now grown to $163 million – $133 million more than first budgeted! To put this into context, it dwarfs the debacle over Novopay (the new school payroll system approved by the Labour Government in 2008), which cost $45 million to fix, and INCIS, the Police’s Integrated National Crime Information System, which was abandoned in 1999 after costs escalated to over $100 million.

As a result of a government inquiry into the INCIS write-off, the State Services Commission is now responsible for monitoring any information technology projects involving a capital investment of more than $7 million in any one year. Whether they were involved in monitoring the child support system is not yet known.

Information technology cost overruns are not, of course, confined to central government. Local government is also prone to serious cost blowouts as the recent revelations over the merger of the computer systems of Auckland’s eight councils into the super city has shown, with costs escalating from an estimated $71 million to $157 million.

With experience showing that the costs of major public projects are always underestimated and the benefits are always overestimated, the question is what can be done about it?

Some answers can be found in a 2002 research paper, Cost Underestimation in Public Works Projects: Error or Lie?, by Professor Bent Flyvbjerg of Aalborg University in Denmark. This was one of the first statistically significant studies of cost escalation in international infrastructure projects. While the study focussed on transportation projects over different geographical regions and historical periods, it also looked at hundreds of other infrastructure projects including information technology systems, power plants, dams, canals, buildings, and aerospace systems.

The results showed that not only are all types of infrastructure projects prone to cost underestimation, but this tendency has neither increased nor decreased historically, and is common in both first- and third-world countries.

Among the more spectacular examples of cost underestimation quoted in the paper are the Sydney Opera House, where the actual costs were around 15 times higher than projected, and the Concorde supersonic aeroplane, which ended up costing 12 times more than predicted.

As far as older examples are concerned, the Suez Canal, which was completed in 1869, cost 20 times more than the earliest estimates, and the Panama Canal, completed in 1914, which had cost escalations in the range of 70 to 200 percent.

The research found, with overwhelming statistical significance, that the cost estimates used to decide whether such projects should go ahead are highly and systematically misleading. They concluded that “cost underestimation cannot be explained by error and is best explained by strategic misrepresentation – that is, lying”.

The researchers also advised that the implications for public policy are clear: “legislators, administrators, investors, media representatives, and members of the public who value honest numbers should not trust cost estimates and cost-benefit analyses produced by project promoters and their analysts”.

The relevance of this for New Zealand is obvious – if the costs of major public projects are being routinely underestimated and the benefits over-stated by those promoting such projects, then the role of providing a realistic a cost-benefit analysis should become the responsibility of an independent agency like the Auditor General.

Unfortunately, strategic misrepresentation by project promoters is probably more common than we imagine. Just last month the Wellington Regional Council, which was the original promoter of a Wellington super-city, was caught out misleading the public over the benefits of amalgamation in a newspaper advertisement. The Advertising Standards Authority found that the Regional Council had breached the advertising code of ethics by presenting “its own assumptions and opinions as fact which was misleading and likely to exploit the lack of knowledge of the reader”. The ruling also stated that the advertisement “had not been prepared with a due sense of social responsibility”.

In response, the Regional Council chair Fran Wilde said, “This decision risks having serious implications for democracy and could drastically restrict how local government bodies operate and what they can say in advertising”. In other words, she prefers the Regional Council to be unrestrained in promoting amalgamation even if the benefits are overstated.

As a major advocate of the Wellington super city, Fran Wilde hasn’t ruled out standing for Mayor if amalgamation goes ahead. But support within her own council is collapsing, with six council members out of 13 now opposing the move.

Support amongst the public is also falling away, in spite of the advocacy and advertising of amalgamation proponents – including the Regional Council. According to a Neilsen survey of 1,000 residents, commissioned by the Wellington City Council last month, nearly three quarters of people living in the Wellington region are not in favour of the Local Government Commission’s plan to merge its nine councils into a super-city.

Backing for the Local Government Commission’s Northland amalgamation proposal is also fading away with a Television New Zealand Colmar Brunton poll over the weekend showing only 18 percent support in the Northland electorate. That electorate includes the area governed by the Far North District Council, which was the original proponent of amalgamation in the Northland region.

So with two of the Local Government Commission’s amalgamation proposals dead in the water – as far as local residents and ratepayers are concerned – what’s happening in the third area, the Hawke’s Bay?

This week’s NZCPR Guest Commentator, Research Associate Mike Butler, updates us on developments with some disturbing revelations that the so-called independent Local Government Commission appears to be colluding with the pro-amalgamation lobby “by sending press releases early and planning media initiatives”.

Mike explains that “The commission advised that 2,000 residents would be phoned to survey opinions on the proposal. That survey started this week. Widespread hostility could end the amalgamation process.”

He then goes on to explain what happened: “When it came time for the opinion survey in Hawke’s Bay, the Local Government commission unleashed a media blitz. A commission flyer promoting amalgamation and telling recipients to keep it handy should they receive a call from Colmar Brunton was delivered in every letterbox throughout the region. The Hawke’s Bay Today carried the report in its lead story, A Better HB had a full-page advert on the same issue, and a key Better HB activist had a pro-amalgamation letter published.

“But the commission’s elegant solution to the political problem of Hastings’ debt and the apparent orchestrated PR campaign backfired…”

One would have thought that given the high profile problems associated with the amalgamation of Auckland – including massive transition cost blowouts and some excessive rate increases – the Local Government Commission would be extremely thorough in outlining the case for amalgamation, including providing a rigorous cost benefit analysis. As a Commission of Inquiry, with a statutory responsibility to ensure that any amalgamation proposal produces efficiencies and cost savings, their attempts to quantify costs and demonstrate savings have been woeful.

Just last month the Local Government Commission chairman Basil Morrison was forced to increase their transition cost estimate for the Wellington amalgamation from $184 million to $210 million. And last week, the Napier and Wairoa councils complained that the Commission’s cost estimate of their local infrastructure is incorrect to the tune of $1 billion.

In the case of the Northland amalgamation, it is not the cost estimates by the Commission that are the problem, but the lack of them.

Professor Brian Dollery, of the University of New England in Australia, accused the Commission of producing an “almost entirely ‘evidence-free’ approach” to amalgamation.

In a comprehensive report on amalgamation prepared for the Napier District Council, he explained that, “Given the pivotal importance of local government reorganisation and the need to prevent expensive and divisive errors, it is vital that proposed reorganisation proposals are based on extensive econometric modelling and the best available empirical evidence.” He found in the case of Northland that there was an “almost complete absence of any empirical or other justification for the extravagant claims … of increased efficiency and cost savings from the proposed forced merger of Northland councils.”

Without a doubt the Local Government Commission under the Chairmanship of Basil Morrison has become a political advocate for amalgamation. As a member of the Waitangi Tribunal, he is also using his position to push a Maori sovereignty agenda onto local government through the establishment of Maori boards – which have been estimated to cost up to $2 million to run.

When asked whether the Chairman of the Local Government Commission should be a retired politician or a retired Judge – knowing that the body is a permanent Commission of Inquiry and that governments have often chosen retired judges to chair such reviews to prevent political interference – 93 percent of NZCPR readers said the Chairman should be a retired Judge.

With the Local Government Commission clearly biased towards amalgamation, if they go ahead and push their proposals onto the regions, it is inevitable that local councils will have to call for region-wide referenda – and bear the costs of doing so. Given the Commission’s bias should it not be they, rather than local ratepayers, who should bear that cost if their amalgamation proposals are resoundingly defeated?

After all, given the propensity of politicians to undersell the costs and overestimate the benefit of their pet projects, while pro-amalgamation politicians are in charge of the Local Government Commission, isn’t this the sort of safeguard the public needs?


Do you believe the supporters of amalgamation are inflating the advantages and underestimating the disadvantages?  

*Poll comments are posted below.


*All NZCPR poll results can be seen in the Archive.


Click to view x 120


Yes! The whole thing is just another way for them to promulgate “jobs for the old boys” and to EXTORT even more RATES TAX from the already OVERBURDENED ratepayers. We are HEARTILY tired of funding you and your lackies OUTRAGEOUS lifestyles. Yes, Bob, Len and Penny, that most certainly includes each of you losers. Mark
Strategic misrepresentation is lying. Isn’t that the first job of bureaucratic politicians to deceive the public? Of all people, I detest liars the most! Monica
I think you are falling into the same trap as the people you criticise…assuming you are 100% correct and they are 100% incorrect…lying even. Laurie
If the Auckland experience is anything to go by, any plans to push through further amalgamations in the face of ratepayer opposition are just patently stupid. Jim
Of course they are. You would probably find with a bit of research that the only ones to support amalgamation will be those who are going to make a buck out of it and those who are easily influenced by idiots. Terry
DEFINITELY !!!!! tony
The Auckland super city is an ongoing disaster for the North Shore. Brian
The law should be changed back to how it used to be. Any local body which has an ” against” verdict in its poll of citizens should not be forced to be part of an amalgamation of councils. The way the law stands is an abuse of our democracy. John Key’s advisers should be promoting this return to a fair system. Napier’s previous MP, who was conveniently appointed Minister of Local Government and whose brother is a prime mover for amalgamation, was not supporting his electorate when he expressed his support. I was doing NRB phone surveys when this was suggested and only 1 in 20 Napier citizens said yes to the proposed change. Russell
This has been a longstanding problem with nearly every type of amalgamation.In nearly every case the amalgamation means additional layers of bureaucracy over the top of what was there and the chief executive and the new mayors receive higher remuneration.With the new proposed super councils there is no way they can be called (Local bodies). Bryan
I agree the LGC should bear the costs of THEIR failed proposals – not the ratepayer!! Would they be so keen then to push their dangerous agenda?? Andrea
Look at what has happened to Auckland and how greedy iwi have got so much control. Kay
I worked with the (ACT) Shorewide group to oppose our own Rodney Hide’s super city extravaganza to no avail. He still denies the colossal failure of his promised and predicted benefits. Peter
Sadly, it is being driven by politics and will eventually be forced upon us despite overwhelming opposition. Tom
Surely Auckland is a great warning for other area residents. Jim
No No Minister!!! No Amalgamation, no Local Government Commission, and No Super Councils, No Len Brown and no Fran Wilde. And then I woke up to find the nightmare was real!!!! Amalgamation is another word for Nationalisation, but in a diluted form, until %u201Cand there%u2019s the rub%u201D until it becomes the reality, from which there is no escape. It is ironic that a supposedly right wing National Party should espouse a left wing ideal…for what purpose? Or are we just another guinea pig to show the world how a new type of local democratically dictatorship can function. Is this the vision of a future of local government, appointments made on the basis of ethnic considerations? To save ostensibly, the excess that would be spent on unnecessary elections because the bureaucrats know in the long run what is best for us. The question before us all stands out clearly… ARE WE THE LAST GENERATIONS TO SEE THE END OF DEMOCRACY THAT OUR FOREFATHERS FOUGHT SO LONG AND HARD FOR ? Brian
They are merely empire building. Maurice
Underestimating the cost estimates of major projects – of course they do. Auckland City Rail Link – $2.7 billion??? – the true figure will probably be somewhere between 4-5 $billion. Gary
It seems that these commissioners commission themselves to advocate for their own agenda using public funding to manipulate the public.. Murray
There is no way that all the areas can be combined as they are geographically too widespread and have very few areas of mutual interest.. Wellington should study the disastrous nature of the Auckland City Council and scrap any thoughts of unification. John
Gross distortion of pathetic data. Simon
With Auckland as an example – who wants to go down that path. Patricia
To suit their own agendas,not for the good of the project. Steve
We just have to look at communist states. the centralised so much with disastrous results. Already we see how amalgamation of many ssmaller councils into district councils has created a bungling bureacracy. Take for example how long it takes a village tto get an light bulb changed when services are centralised. A 15 minute job from village rresident to village worker has now become a long and tangled mess. Call to the council, work order made by reception, handed on to department assigned to a workman who must travel to the village …….. Peter
I would like to know why the govt is pushing this amalgamation issue, something stinks here! Peter
Absolutely! and the bloated staffing of the amalgamated council is using and obscenely large proportion of our very high rates. There would be plenty of money for core work, and some new projects, and no change to output if several thousand council staff were released. I am incensed about the disgusting inefficiencies and lack of accountability of any staff for bad decisions. Gordon
Hidden agendas are behind the drive to push these amalgamations through, count on it. Brian
If council amalgamations into super cities go ahead it will just make it easier to implement AGENDA 21 laws which is a world wide scheme being driven by the United Nations Organisation (1992 Rio Summit) to usher in the fascist regulatory state through local councils !!! Remember the Soviet Union, which was an elected legislative council on the local, regional and national levels culminating in the Supreme Soviet. STOP AGENDA 21 ! Don
History is repeated every time. I cant get over the fact that local government commisions think the public believe every word they say. Dennis
Auckland is a prime e3xample. Cliff
Definitely – you only need to look at Auckland to know this is so. Rosemary
The sincerity and credabilityof the LGC appears to be somewhat suspect. You would have to be forgiven for thinking that its outcomes have been predetermined. If true; this sort of behaviour is normally classed as being out of step with most New Zealanders sense of fair play and therefore deserves to fail in its quest.. Gary
You mean are they liars the answer is yes. Arthur
They are. Robert
Definitely yes just as the similar is said in the reverse for projects that are not wanted by governmental opposers ie over estimation of cost and belittlement of benefits. Roger
This is an Agenda 24 initiative of the United Nations. John
More propaganda. David
We only need to examine the costs and failings of the greater Aucklland Council, the under estimate of the computer systems amalgamation mentioned in your briefing today is a national disgrace is a perfect example. Gavin
It is all explained in the news letter and how true the comments are. Barry
Evidence to date would support this to be the case. The latest example is Auckland although to be fair there are infrastructure issues in this mix. David
As the prof said -it is a make work scheme. Keith
Few if any politician is 10% honest, we need first past the post and binding referendums. Robert
Politicians & their ilk are the biggest liars of the lot. Rod
Has the amalgamation of Auckland been such a success that other areas can’t learn from it? Auckland’s amalgamation is a disaster for the old outer councils who are being used as a cash cow for the old Auckland City Council. The neglect of the outer councils is so obvious. DON’T DO IT. Gary
They always do. Anthony
But how do we, the Auckland Rate Payers, get the Greater Auckland City dissolved ? There has been absolutely no benefit to us here in the old Franklin Ward. Mark
Auckland clearly proves the point. Nigel
Certainly seems the case in HB. Lyn
It was after Auckland became a Super City it attained a Maori Statuary Board and as a result 3,600 “Purple Dots” appeared over the city which gave Maori unprecedented rights over private property owners. These Maori rights totally ignored Maori law of “ahi kaa”, translating as “The land is theirs until the fire goes out”. According to ahi kaa as soon as a tribe was defeated or were driven off their land all right to ahi kaa were extinguished and as a result they dug up deceased chiefs remains (wahi tapu) and took them with them as incoming tribes had the right to dig up and desecrate same in order to establish their aki kaa.. Loss of Maori customary right of ahi kaa would also apply if their land was sold and new owners lit their fire of ahi kaa. As the Treaty saw the borders of New South Wales extended to encompass “all of the Islands of New Zealand”, our true founding document, Queen Victoria’s Royal charter of 16-11-1840, split us from New South Wales, gave us our first constitution and English law only, Maoris have no right to impinge their cultural ideals upon freehold/fee simple land title. It may be possible that after amalgamation of other Councils more purple dots could be extended over more Super Councils causing further loss of ahi kaa and the Queen’s law to more private property owners in favour of “made-up-Maori-control-over-private-properties”. George
Fran Wilde couldn’t lie straight in bed.I attended one of her early seminars which was stacked with her supporters and the recent full page advertisement, found to be incorrect fully supports my theory. Ron
Look at Auckland if you want to see a disaster of blow out costs. Rodney
I have been through 2 amalgamations in Auckland. The first was to amalgamate the North Shore boroughs – this immediately led to a golden palace purchase by the new Council to seat the new Councillors – a big increase in rates and a lowering of access to Council Staff. Now this latest one to create the “Super City” and again a huge blow out. The Government wants amalgamation as fewer Councils make it easier to impose the Will of Government. Nothing to do with “savings” – just a means of working towards a dictatorship. Amalgamation DOES NOT WORK, it does NOT REDUCE COSTS Peter
They will lie to further their cause,like the protesters lying about a (500 yr)old kauri tree. JOHANNES
Wit a failed model Auckland to go on why do they persist. John
The more bureaucracy created through ‘amalgamation’ history shows the greater potential for creeping dictatorship. The bigger amalgamation gets the easier it is to hide reality. Stui
Most definitely, just talk to those who live on the outer fringes of Auckland and see what if anything they have gain. Beryl
Just look at the Auckland example.  John
Amalgamation can only wortk if set up democratically and there is nothing democratic about unelected Maori seats. Neil
Look at Auckland where amalgamation has been a tragic disaster. Peter
Never completely honest! Mark
The Auckland amalgamation is ample proof of this situation and the Mayor continues to emulate the practice with his pet city rail project.. John
We saw the results of forced amalgamations in 1990, let alone the latest Auckland region catastophy. Ron
Kapiti residents have very little connection to Wellington except for the rail system which is A1. A number may travel for work to the big city. Our water & sewage systems are new compared with a 100 year old Wellington system. Our local interests are more to the North than South. I consider that the proposed “amalgamation” (takeover) is a plan to subsidise Wellington’s Bloated Spending. Brian
Let me think now …. my rates have increased by 50% …. all local urgent needs are not even in the Councils TEN YEAR PLAN! Only 30% of rates money is claimed to be returned to our community! What a load of BS! Andy
Just a pity that we do not have the people with the ability to make amalgamation a success as it should be. Tom
My experience with the Local Government Commission in the 1990’s as Chairman of the Waitaki County Council convinced me then they should be fired for incompetence. Their time is certainly over. Forbes
It was very clear the majority of FranklinCounty wished NOTHING TO DO WITH Auckland “super” city. We in Franklin have only noticed standards of service dropping & cost of using amenities like halls etc., has greatly increased, such that previous organisations/groups have needed to find alternative venues that don’t cost Auck. city fees. Isabel
After having lived in Auckland during the Borough Council amalgamation in the early ’90’s and seen first hand the gradual erosion of services and co-operation that we had enjoyed from our local council, my advice would be to avoid any sort of large-scale amalgamation like the plague. The belief held by some at the time was that it was a ploy by Central Government to exert a greater level of leverage and control over Local Government than ever before. Bigger is not always better – particularly when a special interest group has their own barrow to push! Scott
Without doubt. Roy
Christchurch (pre EQ) is an example. We demonstrably have had excessive rates rises, poor allocation of resources, political big ticket expenditure, and less service. Rob
When people in positions of authority put self-interest ahead of their responsibility to those who employ and/or elect them we are in danger. Power corrupts, and ABSOLUTE POWER CORRUPTS ABSOLUTELY! Barry
The Local Government Commission members are clearly biased and should be sacked. Les
Of course they are. We need a list of all the advantages and another of their idea of disadvantages. Then we require similar lists from the ratepayers of Auckland. Mary
Bigger is not better, it’s simply harder to manage and is less responsive to local issues because it works on averages. Alan
Morrison needs to go. Everyone has an agenda. Russell
Selfserving scumbags. BJ
I live in Hawke’s Bay and know they are. They lie. Raiford
Pushing their own barrow. If you don’t help me to push we will lose this money for nothing job. Same as the Waitangi Tribunal. Monkey, you scratch my back and I scratch yours. Johan
I Live in Dunedin and we were told before our stadium was built it would not run at a loss. It loses millions and is a burden on Dunedin ratepayers. Need I say any more Colin
Using Auckland as an example – what is good for the CBD is possibly not a need of the other urban areas within the amalgamation and definitely not good for the farming communities usually on the perimeters. Elizabeth
Absolutely! Terry
Auckland Super City is proof enough. The cost of living in Auckland has grown mainly because of Local Govt costs. Pavithra
Empire building by left wing Politicions Allan
Look at Auckland – increased rates, decreased council services, increased council charges, cost blow-outs, expensive ego-projects … and Carter and co told us we would be ‘better-off’! Keith
Apply this test. You will be given only that information that helps you arrive at the decision or conclusion that the proposer wants from you. Colin
Of course they inflate the advantages, other wise no body would be sucked in to supporting their hair-brained schemes. Usually a cunning way to make country dwellers pay city rates. Allan
The past fiascoes prove it. Lance
…greed and the lust for power will forever determine the fate of the human race… Chris
Surely, the prove is in the figures from the Auckland Super City amalgamation, and yet they are still pushing forward with amalgamation of local councils. Lorna
Of course they will: they’re hardly likely to argue against their own ideology, are they? Honesty doesn’t come into it. Graham
Auckland (where I live) is absolute proof of how disastrous amalgamation is, our rates have increased substanshally since we were forced into this terrible “Super City” , we have just been told they are going to jump up again. Some bar d should be held responsible. R Hyde I understand. Graeme
Of course they lie to further their self interest and bias. Who would trust any politician from any level of Government? Peter
They should learn by example: it would be difficult to point to many benefits to the citizens & ratepayers of Auckland that have come out of the amalgamation. John
History is full of examples of this happening. Bureaucracies continue to grow. Mark
It should be a criminal offence to mislead the public by the local govt commission Hone
Look at the mess Auckland is now in. Steve
Yes, they will make everything look so much better than what it actually will be and dont seem to be able to produce evidence of the advantages they go on about. Lyn
This is another method of transferring state assets into private (shareholder) ownership. It is a rort pure and simple. Geoffrey
Yes It was inevitable when you see the makeup of the LGC and with the Chairman also being a member of the Waitangi Tribunal… Albie
Of course supporters of amalgamation see only the benefits. But it is wrong that the Local Government Commission is forcing local residents to have to fight for their democracy. Laurie
Bigger is not always better in local government. Kathy
Basil Morrison should be replaced with a retired judge who knows how to behave respectfully and impartially. Stewart
Amalgamation supporters have their heads in the sand. They do not put any value on local democracy. It is a good idea for the LGC to have to pay the cost of referenda if they force it onto unwilling regions. It is time such government panels had to reap the consequences of their actions. If their amalgamation proposals fail, it is because they have not listened to the public nor done a good enough job of reflecting local wishes. Brian
Sack them all – and their proposals! John
Basil Morrison should go. The Commission is too political. It is nothing like a proper commission of inquiry. If it was these regions would NOT be facing amalgamation as that is NOT what the locals want. Peter