Cut Government Consultant Spending — double the target, but at a cost

The Policy: National Fiscal Responsibility Plan — 2023 Election →

National entered the 2023 election arguing that the previous Labour government had created a culture of expensive outside contractors and consultants, hollowing out in-house expertise across the public service. The party promised to reverse that trend: a two-year savings target of $400 million in consultant and contractor spending across the public sector by 2024/25, combined with a push for agencies to rebuild capability internally rather than farming work out.

What it does:

• Sets a two-year target to cut $400 million from consultant and contractor spending by 2024/25 compared to the 2022/23 baseline
• Applies spending limits across core government departments and broader Crown entities, including Health NZ, Defence, and Police
• Requires agencies to shift to in-house expertise rather than contracting out advisory and operational work
• Public Service Minister oversees quarterly reporting on progress against the target

Where things stand:

The government beat the target by a wide margin. Core public-service spending on contractors and consultants fell from roughly $940 million in 2023/24 to $611 million in 2024/25 — a 35 percent drop in a single year. Across the full term, total savings reached approximately $915 million, or about 42 percent, more than double the $400 million goal (RNZ, October 2025). By March 2025, Public Service Minister Judith Collins confirmed the government was already on track to save $800 million over two years, with the actual result landing even higher (RNZ, March 2025).

The headline numbers are striking, but the savings arrived alongside significant workforce disruption. Redundancy costs across the public service exceeded $80 million as roughly 1,500 people were let go, and the overall public-sector headcount fell by around 880 permanent positions (a 1.4 percent reduction). Major advisory firms including PwC cut government-facing roles as demand dried up. Critics pointed to a paradox: some agencies replaced expensive external consultants with large cohorts of fixed-term contractors or secondees who do not show up in the headline figures, meaning the real reduction in outsourced work may be somewhat overstated.

Public Service Minister Nicola Willis framed the result as a "cultural switch from farming work out, to finding solutions within agencies," and noted that frontline roles in areas like Corrections grew even as back-office consultant spending fell. Opposition voices acknowledged the savings but questioned whether capability lost during the cuts — particularly at MBIE and the Ministry of Education, which shed hundreds of roles — would need to be expensively rebuilt later.

What to watch:

• Whether agencies can maintain reduced consultant spending as the government's infrastructure and reform programmes scale up, creating new demand for specialist external expertise
• The Newsroom investigation thread on "embedded" consultants — long-term contractors who sit inside agencies and are not easily captured in standard spending data — which may show the headline cuts are partly a reclassification rather than a genuine reduction
• The government's new $1.25 billion annual spending ceiling for the public sector and whether it holds through the 2025/26 Budget cycle