There was a story on Stuff the other day (that I’ve not seen anywhere else) than ran under the heading  “Reserve Bank restructures digital services team, cuts five roles”.    A family member drew it to my attention noting that “people at the Bank are losing their jobs”, and thought I might be interested.   It seemed a little surprising that the Bank was shrinking, with an empire builder in charge, but….

As it turned out, once I read the article it became clear that the Bank isn’t shrinking at all, but growing (quite substantially), increasing staff numbers in what are clearly non-core areas.

“The new operating structure is in response to the changing priorities, outcomes and initiatives that the bank has set out to achieve in its digital strategy, which is part of us achieving our vision of ‘great team, best central bank’. The new structure will improve the functional alignment across our digital services team.”

He said 14 new full-time-equivalent roles would be created across the department and its head count would increase to 58.

“Five roles have been disestablished as part of the changes. Affected staff are being offered full support at this time and are eligible to apply for these new roles.

Fourteen new FTEs just in this one bit of the Bank.  That looks like a case for the Taxpayers’ Union.

Especially as it would appear that this is not the only growth going on in the non-core areas of the Bank.

As it happens, much earlier in the year I had lodged an Official Information Act request with the Reserve Bank asking for the budget and organisation chart for what the Bank calls its Governance, Strategy, and Corporate Relations Group.  The Bank answered a pretty simple question not too many days beyond the statutory 20 working days, but by then everyone’s focus was almost wholly on coronavirus things and so I largely set the response to one side.    It is clearly one of those the Bank does not want to draw attention to, as this is not one of the OIA responses they have chosen to publish on their website, but here is the full response.

RB OIA response Governance Strategy and Corporate group

I lodged the request for various reasons.  Perhaps the most immediate one was the large number of different names (from the Communications section) that kept showing up on OIA responses, press releases and so on.    And then there were things like the Bank’s expensive –  and entirely unrelated to anything they have statutory responsibility for –  Maori strategy, and a story I’d heard from a friend who’d been approached by a headhunter to see if they were interested in a very well paid but not overly-senior role doing “stakeholder relations”, which my friend described as “seemed to involve having coffee with lots of people”.    There was a sense that public money was being used very loosely, even as the Governor repeatedly claimed that his core functions were underfunded –  and the evidence certainly suggested that they were not spending heavily on high-quality analysis, research, and policy development/implementation in their core areas of responsibility.

The Reserve Bank is not a particularly large organisation.  In the latest Annual Report we are told they have 274 FTEs last June (plus a few vacancies).   They do real stuff, including  (mostly) important things like monetary policy, the issuance of physical currency, clearing and settlement operations, prudential regulation/supervision of banks, non-bank deposit-takers and insurance companies, and things like AML for banks as well.

And then there are the luxury consumption items, which seem mostly to be grouped in this Governance, Strategy, and Corporate Relations Group, run by Assistant Governor Simone Robbers.      Within her group are a couple of functions I’m not going to say any more about.   There is a Legal Team of five lawyers (one of whom also acts as Board Secretary).   Given the range of regulatory responsibilities, that is probably inevitable.  And there is the Risk and Audit department with six roles dealing with those functions (recall that Bank has a large balance sheet and significant operational activities).

What caught my eye was the other two departments in Ms Robbers’ empire.  There was this one

and this one

Take Performance and Corporate Relations first.  It isn’t clear that almost any of this needs to exist at all.   Perhaps they need one person to jump through the bureaucratic hoops that Annual Reports and Statements of Intent require (if that is what the Senior Adviser, Planning and Performance does), but the entire rest of the department has the feel of a make-work activity or (which is worse) the Governor using scarce public money to pursue personal whims.     As I’ve noted before, the Reserve Bank is not really a public-facing organisation (in the way that, say, Police, Corrections, MSD, hospitals, schools or the like are), suggesting that the Maori stuff is just a virtue-signalling personal whim.  And if they make a case that there is connection between climate change and financial stability –  a very weak one in a New Zealand context at least –  shouldn’t the climate change function be with the financial stability one.  Again, it feels more like funding the Governor’s personal politics.   And, of course, what is “Corporate Relations” in a government agency, responsible primarily to the Minister of Finance?

But even that was as nothing compared to the Communications Department. I can remember a time –  and I’m pretty sure it would have been this century –  when there might have been four people in Communications, including a ministerials/OIA person and the person doing publications (design, layout, dealing with printers etc).  It was a step when it was decided, over some objection, to have a specialist internal communications person.    And yet by February this year there was 16 roles, and that Stuff story suggests they are just about to add a whole lot more people –  for statutory roles that really haven’t changed much.

I presume this latest restructuring was about the middle column –  the responsibilities of the Manager, Content and Channels.   One could easily see a case for change –  the Bank’s Twitter account, for example, doesn’t seem to be well-used, although whether that is the responsibility of the staff directly involved or of other senior managers is an open question (recall the episode earlier in the year when senior managers had them tweeting out in late February a belief that the world economy was going to be improving this year).  But quite how they warrant going from five people to 14 is a bit beyond me (I have requested a copy of the consultation document).  Perhaps some individuals will lose their jobs, but the empire seems set to grow a lot.

And then there are those other functions in the Communications Department.  The Manager, Government and Industry Relations for example.  In many private sector companies that might be a role for a lobbyist.  But this is a government agency itself.   Aren’t functional departmental heads, the Governor and the Board responsible for dealings with the Minister, the Treasury, and so on.   Isn’t the head of bank supervision responsible for dealing with banks?

And then there is the left-hand column –  notably, the Manager, External Stakeholders and not one but three Senior Adviser, External Stakeholders roles.  There must be a great deal of coffee being drunk.   It isn’t clear what the case is for any of these roles.

Let alone for adding lots more staff.  And note that Stuff article suggested that the head count of the relevant department (presumably Governance, Strategy, and Corporate Relations group) was rising to 58.  By my count in February the total of roles was 36, suggesting that all these new “digital channels” roles – whatever these people are supposed to be doing –  aren’t even the only non-core staff increases that have occurred this year.  It is as if the Bank has money galore, little or no sense of restraint –  all while still not doing their day jobs (the ones Parliament actually assigned them) at all well.

It is doubly puzzling because based on what is in the public domain, the Bank has authorised funding only until the middle of next week.

The Reserve Bank has a very odd funding structure. Formally, there are no binding constraints on the Bank’s ability to spend whatever it likes.  If seignorage revenue is not what it was with interest rates so low, it is still more than ample, and in any case the Bank does not even need positive capital to keep operating.

But 30 years ago when the 1989 Act was passed a strange and inadequate partial reform was put in place, whereby the Governor and Minister could (but did not formally need to) agree a five-year Funding Agreement.  If such a Funding Agreement was signed it was subject to ratification by Parliament.  There has been a succession of Funding Agreements in place since which, almost always, the Bank underspent.  It was very much a half-measures reform –  better at the time than what had gone before (no constraints at all) but well out of step with modern expectations for transparency and accountability.     The current Funding Agreement covers the period to 30 June 2020, and thus in effect expires next week.

Here are some observations I made when the current Funding Agreement was adopted

I don’t have any particular argument with the size of the Funding Agreement total, or the modest increase over the next few years (although it does seem to be a larger increase than many government departments, with flat baselines, have been experiencing).  My concern is about process.

In particular, for one of the most powerful government agencies in New Zealand, the agreement contains almost none of the information people might reasonably need, whether as MPs or citizens, to know whether $49.6 million is the right amount.  The entire document runs to just over two pages, but the meat of it is simply five lines

That is the same level of detail we get in the Estimates about the spending of the SIS – and at least Parliament (a) has to vote for the SIS’s spending, or the spending can’t happen, and (b) has to vote each and every year.

MPs were asked to vote on the Funding Agreement yesterday with no information about what the Bank and the Minister proposed that the Bank would do with the money.  Presumably the Minister is aware of the Bank’s plans, but he now has no control over them beyond the top line number.  In particular, the Bank has two quite distinct main statutory functions and it would be useful to know how the spending is split between monetary policy and financial stability.  And within financial stability, how much is being spent on responsibilities under the Reserve Bank Act and how much on those under the Insurance (Prudential Supervision) Act?  And how are those splits envisaged as changing over time?

It remains pretty extraordinary.    And it wasn’t as even as if this highly limited degree of detail was mandated by law

There is nothing in the Act that requires funding agreements to be so abbreviated, and there is certainly nothing that would have stopped the Bank, the Minister, and Treasury releasing background papers to accompany the Funding Agreement, either before it was put to Parliament.  That would have given MPs, and outside observers, the opportunity to scrutinise the plans for the Bank’s spending before the matter came to a vote in the House.  Estimates hearings for other departments spring to mind.

But the Bank (mostly, I imagine) and the then Minister and Treasury had no interest in serious scrutiny or accountability.  It probably won’t be any different this time, but we”ll see.

Even setting aside transparency issues, it is a very odd mechanism.  No other organisation I’m aware of, public or private, has a fixed budget five years in advance.  And whereas, for example, the Minister can override the Bank’s monetary policy target (for a time, transparently) he can do nothing to override the five-year spending allowance (which is not even binding anyway).  I remain convinced that when the rest of the Reserve Bank Act is overhauled the Bank should be moved to a conventional system of annual appropriations, with a proper breakdown by function.    The standard objection –  what about backdoor ministerial pressure? –  doesn’t stop us funding a whole bunch of other important agencies, including Police, annually through a proper system of parliamentary appropriations, including estimates hearings.

Presumably

(a) in the next few days a new Funding Agreement will be announced, and time will have to be made for a parliamentary debate on that agreement.  If/when that happens, hard questions should be asked about just how wisely and frugally the Bank is spending public money (even if you are unworried about the total government spending at present, an additional kidney transplant might be a better use of money than another “digital channels” person, let 14 of them),

(b) the Bank has already been told by the Minister that he is okay with them spending a lot more money or else in the dying weeks of the old agreement they wouldn’t be restructuring to add lots more positions.

I should perhaps add in conclusion that the Reserve Bank may be no more wasteful on these sorts of “corporate” functions than many other government agencies, some of which probably should not even exist at all.   But that is no consolation.  We should want senior officials and ministers spending money as frugally as if it were there own, not as liberally as tends to happen when it is other people’s money and there is little transparency and less accountability.