Labour 'not committed' to Govt's public service cuts, promises assessment before any changes

Labour wants to introduce a “mandatory public good test” before government agency restructures or job cuts, a move that could delay any proposed public service changes.

Labour leader Chris Hipkins told the Herald on Wednesday this would create a “very rigorous” assessment of the costs and benefits of any changes to the public service with the intent of understanding “the consequences” before they’re made.

He said Labour was “not committed to going ahead with the cuts” the Government has outlined in Budget 2026, which were expected to save the Crown about $2.4 billion over the forecast period.

Labour will set out its own plans after the Government opens the books at the end of September, but any changes his party puts forward won’t be “as they are foreshadowed in the Budget”.

In Budget 2026, the Government announced a series of baseline savings, totalling about $2.4b over the four-year forecast period. That includes savings of 2% in 2026/27, 5% in 2027/28 and 5% in 2028/29.

The savings will come from various government agencies – with some excluded – although what exactly will be cut to make up the money isn’t specified. Reducing back-office staff, contractors and consultants, as well as cutting some “lower-value” programmes was mentioned in the Budget as ways departments can find the savings.

Speaking to a Public Service Association (PSA) event on Wednesday, Hipkins said of those proposed cuts, the “consequences of that will be significant”.

“Cuts will never be the way we secure a better future for New Zealand and for New Zealanders.

“We know better than most what cuts mean in practice, because a public service cut isn’t just something on a spreadsheet or reflected in the government accounts. Eventually those cuts affect people’s lives.”

He said the Government wasn’t telling New Zealanders what exactly would be cut, asking “what is it that’s on the chopping block next?”

Hipkins said the current Government “chose to cut the services that New Zealanders rely on [and] a Labour Government will make different choices”.

Labour's Chris Hipkins speaks to the PSA. Photo / Jamie Ensor

Asked by the Herald afterwards whether Labour would reverse those baseline cuts, with the money from that having already been added to the Government’s forecasts, Hipkins said Labour would set out its own fiscal plan after the official Pre-election Fiscal and Economic Update (Prefu).

“But clearly, we’re not committed to going ahead with the cuts that they have made in this year’s Budget.” He said Labour would “obviously set out our own plans around how we balance the Budget” when the party sets out its own fiscal plan.

Pushed on whether that meant Labour wouldn’t make $2.4b worth of cuts, Hipkins didn’t explicitly rule out making equivalent savings elsewhere, but did reiterate Labour wouldn’t progress the cuts “as they are foreshadowed in the Budget”.

He later added Labour would “review what work is being done when we get into Government, but we’re not committed to going ahead with those cuts”.

If Labour was to introduce the public good assessment of agency changes, that could mean restructures or cuts are pushed out or cancelled.

Asked whether Labour was sure it would be able to find the money to replace what the Government is currently planning to save, Hipkins said the party was “absolutely committed to getting the Government’s books back into balance”.

He said the current Government was “cutting public services without any real understanding of what the consequences of that could be” and he wanted a “very rigorous” assessment of costs and benefits.

A mandatory public good test is something the PSA is advocating for, with national secretary Fleur Fitzsimons saying agencies should consider the consequences “before ploughing ahead with a restructure, not after the damage is done”.

“If nothing changes, mark our words – there will be future Royal Commissions and other official inquiries that will set out the tragic impact of this dangerous approach to cutting jobs without an adequate assessment of the consequences.”

The PSA’s proposed public good test includes considering the impact on the services the agency delivers to the public, compliance with Te Tiriti o Waitangi, health and safety impacts and impacts on disadvantaged population groups.

On pay equity, Hipkins told the unionists Labour would reinstate the previous legislation repealed by this Government. But he wouldn’t tell the Herald whether Labour would fund it to the same amount the Government has said was saved by its reforms.

“We will set out a more detailed pay equity plan in due course but we are committed to getting the books back into balance within the timeframe we’ve set out. Our pay equity commitments, we believe we can do within that.”

Labour is promising, using the Obegal metric, to return to surplus in 2029/30.

Jamie Ensor is the NZ Herald’s chief political reporter, based in the press gallery at Parliament. He was previously a TV reporter and digital producer in the Newshub press gallery office. He was a finalist in 2025 for Political Journalist of the Year at the Voyager Media Awards.