The present framework for the public sector - notably the State Sector Act and the Public Finance Act - is the creation of the Fourth Labour Government.

A decade on, that framework shows signs of some considerable stress and it is time for us to look at it carefully to see what remedial work may be required.

I want to discuss this with respect to three main aspects: Labour's view of the purposes of the public sector, our view of the appropriate structure, and our view of the necessary ethos.

Labour, I think it is fair to say, has a less ambivalent attitude to the public sector than the present government. We want an efficient public service, a matter I will come back to later. We do not seek a return to the world of Roger Hall's Glide Time, caricature though that was (and, after all, glide time was a concept designed to enhance efficiency).

But we do want a public service; we see it as an essential part of a civilised society. Let me here also distinguish various parts of the public sector. There are really four different public sectors.

The first is the policy and administrative public sector - what is sometimes thought of as the core public sector. The second is the collection of semi-autonomous social delivery agencies in areas such as health and education - schools, hospitals, etc. The third consists of the guardians of public security and safety --police, prison officers, firefighters, the armed forces. And the fourth consists of the state's remaining commercial activities, such as NZ Post.

The failure to recognise clearly the differences between these various functions and divisions within the public sector has been a partial cause of some of the difficulties we now face.

The key demands as far as the core public sector is concerned is efficiency and accountability. Arguably neither is being delivered as well as it could be.

Whether the difficulties in that respect necessitate changes to the State Sector Act is, I think, an open question. It is certainly one on which we should avoid having closed minds.

Arguably the Act has encouraged both a false and a politically unsustainable view of accountability. In theory the Minister sets policy and "purchases" outputs. The Chief Executive is entirely responsible for administration within those constraints.

The reality remains more complex. The policy is often developed under the Chief Executive's guidance. The Chief Executive can blame administrative problems on either policy or lack of money. And, in practice, the Minister cannot successfully wash his or her hands of administrative failure, even of the most detailed kind.

It is not my purpose to imply that the reforms of the 1980s have not driven significant efficiency gains (though arguably the Public Finance Act has been more important in that respect than the State Sector Act).

But it has also encouraged the excess balkanisation of the core structure. More importantly, and exacerbated by that balkanisation, there has developed a view that each government agency is a separate business, isolated and, indeed, in competition with the other businesses that collectively form the public sector.

Departments and ministries thus exist in isolation, making decisions with little or no reference to each other or to overall system needs. Mistakes are repeated with monotonous regularity, policy options are pre-empted, and unnecessary duplication and inefficiencies occur.

Even more fundamental a concern is the belief that the agencies of the core public sector are businesses at all. The language of customers and clients is at best an unnecessary conceit, at worst a dangerous fallacy. There is no way that taxpayers or beneficiaries are in any real sense customers or even clients.

Moreover, their position is such that it is incredible that the service providing department should consider it necessary to engage in branding exercises, as if it faced some form of serious competition. It is an absurd parody of the reality.

It also ignores the fact that the fundamental disciplines of a business do not apply. In reality dismissal of the chief executive is very difficult (in part because that itself tends to reflect upon the government).

We need to change this false culture. The key role needs to be taken by the government itself, but the lead in terms of implementation has to be taken by the State Services Commission.

There has been a weakness of purpose and leadership from the State Services Commission which is in part responsible for recent excesses. We can no longer blame inadequate salaries - with departmental heads now paid much more than the Prime Minister.

Other areas also need attending to -

· commonality of functions
· career structures
· partnership for quality
· ethos of public service

The last reflects a wider ethical and cultural dilemma at the heart of the new society. We have come to emphasise only material reward as the reflection of worth, building a society on particularly crude cash nexus.

In the second area of the public sector - schools, hospitals, etc. - the issues are often very different. Excessive and petty managerialism certainly has presented problems. But the fundamental issues are of resources being limited while expectations are infinitely expandable.

Solutions:

Ø intermediate democracy
Ø clearer funding in health
Ø greater strategic co-ordination

SOEs and similar businesses to fit the business model. Here we need to return to the fundamentals of the reforms of the 1980s -
· appointment of quality boards
· non-interference in commercial decisions.

We also need to add a stronger emphasis in some instances on the formation of strategic alliances.

Finally, the size of the state. Less important than the quality.

[Dismiss Scully/Caragata work - economic model, auto-correlation, dubious data, false causality].
Funding remains, however, a key issue.

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