Well, good morning, minister. Thank you very much for joining Q + A. Your government's under pressure on a number of fronts at the moment. We've had the SkyCity report, we've had Solid Energy's woes, and, of course, we've had Novopay. Six months now you haven't been able to sort this out. Why is it taking so long?
STEVEN JOYCE - Tertiary Education, Skills and Employment Minister
Oh, because it's a system that's got a lot of difficulties, and sadly there isn't a button you can press that says "fix Novopay tomorrow". I would have pressed it a number of times by now. I inherited a situation where it was very, very challenged. We've made some progress and we'll continue to make progress. So we've announced the remediation plan, which I think the best thing about that so far is it's been able to catch up with the current processing, but there's a big backlog of stuff which now-
CORIN Couldn't you just put more bodies, more money? Beef it up?
STEVEN We are. It's literally what we're doing. And so for example, the last pay - the biggest one so far this year, 84,000, I think, people paid about just under- We don't know yet the number of errors, but it's quite similar to the last two, which were around 2%. That's about double what we'd be expecting at this time. But 35,000 transactions around that, which is actually unheard-of large numbers, and the reason for that is because of all the issues that have been going around, so you've had to actually get enough people not only to do the work but to do all the rework that comes from the lack of confidence in the system.
CORIN So are you saying it's not a matter of money and bodies here, it's just so complex? Even if you had all the money in the world you could throw at this problem, you couldn't fix it overnight?
STEVEN Well, we have no shortage of money to throw at the problem. We do have a shortage of skilled Novopay people, obviously, and we're fixing that up as quickly as possible. That's part of the remediation-
STEVEN Because you can't just bring people in off the street, because they're already operating at more than double what they expected to operate at and we can debate whether that was right or not, and so just bring in people of the street's actually quite difficult. But they are hiring people-
CORIN So how did we get into a situation where there weren't enough people in the first place?
STEVEN Well, on the basis that the system was set up, they presumed they would have enough people, but then of course they had all the issues happen, and we can all debate about why those issues occurred and the reasons. So then they're chasing their tails.
CORIN But is that at the fundamental heart of this problem going forward is that you can't do this system without having enough people to do all those different little pay systems that there are for teachers - your relievers, your special needs. That's the problem, isn't it?
STEVEN Well, no, not necessarily. The problem is that the system got itself into a hole, particularly prior to, just prior to Christmas with those holiday pay stuff-ups. That was the point where it really became pretty difficult, and, you know, they had issues starting up, but that was I think the straw, in some ways, that broke the camel's back. And then you have a very big backlog of issues, and you also have the issues with just keeping up with the current processing. We're getting to the point where we're keeping up with the current processing, but now we're getting in this- trying to resolve this backlog of issues from the first six months, so this week we're setting up a backlog-clearance unit, which is effectively going to double and treble the size of the people working on that. Again, it's about bringing the resources-
CORIN So how big's this backlog, then? Obviously quite big, if you're bringing in extra people.
STEVEN It's very significant, but probably the worst thing about it is that it takes time to solve these issues, so if you talk to the schools, most of the emails I get from schools at the moment are saying, "Yeah, yeah, ok, so this payroll's not so bad, but actually I've got 15 things that need to be resolved in the last six months." And some of them are quite complex. Some of them are quite simple. So making sure that there's enough people that can churn through that as quickly as reasonably possible-
CORIN And these are part of the ministry, is it? How does it work?
STEVEN It's a combination of ministry and Novopay. They're putting in effectively a unit which is part of the money that we've put up - the $5 million, which we'll argue about later. That's going to be the unit that's going to do a lot of that clearance. And, as I say, there's been that in place, but frankly all the additional resource that's been brought in so far has been thrown against the wall of current-
CORIN And so you're saying that you're relatively happy with the progress that's being made each pay going forward?
STEVEN I don't think there's a word that- "Happy" and "Novopay"-
CORIN (laughs) Not happy, then?
STEVEN No, well, look, we're doing better, but nowhere near. The reality is if I was a school administrator, I'd still be pretty slacked off, and I can completely understand that. I wake up every day thinking, "OK, how are we going to push this ahead? If I was a school administrator today, how am I pushing this ahead to make things better for them?" And I can understand their frustration, because from their perspective, they're just not seeing it fast enough.
CORIN So are you still in the mindset that you could dump this? That Talent2 can't deliver?
STEVEN We could still do that, yes, because the question we have to ask ourselves, as well as doing all this work - and, let's face it, the backlog has to be cleared, no matter who runs the system, because you've still got these backlog issues that have to be solved, so that's why you get on and do that. But the bigger question which is the fork in the road which we have to address next week or the week after is are we going to say with this or actually are we going to go to the back-up option we've been developing?
CORIN You'll get a technical review report back, and you'll make a decision whether you'll dump them then?
STEVEN Yes, I have the draft for the technical review now. The bit that's missing for me is their evaluation of the back-up plan - ie, the-
CORIN What's your hunch telling you about the chances of them surviving?
STEVEN I'm not going to offer a hunch at this point, because everybody will take that as a decision, and, you know, it's a decision that has to be made really carefully, because no matter which way you go on that, there's pain, right. And the last thing I want to do is create more pain than necessary, so we have to have a cold hard look at whether it will be quicker to remediate on the plan that we're operating on now and which we're continually ramping up or cut across back to the old system. And you would find different views in every school about that.
CORIN So you're talking to Datacom as a contingency solution. Are they ready to pick the pieces if need be? Can they do it?
STEVEN They have presented us with a proposal, which we're evaluating at the moment. I spoke with them last&I had a meeting with them a couple of days ago. There's some more questions that arise out of that. It's based on their old contingency plan.
CORIN Do you think they could do it, though, if they needed to?
STEVEN Oh, I think they could do it if they needed to, but whether it would be less painful than the Novopay system-
CORIN Right, there'd still be issues?
STEVEN Well, look, the reality is you can't cut these things across in five minutes. The reality is they would still have to deal with all the backlog and they'd also have to take teachers back to the old system, which would then have to be upgraded down the line to another system. So effectively-
CORIN So no matter what happens here, there's more pain coming for, what, another year or so?
STEVEN Well, the ministry coming in told me it was 18 to 24 months. I thought that was entirely too much. It's a ridiculous period of time. So I want to see within three months a situation where, as much as possible, workloads from administrators are back to where they were before this thing started.
CORIN So we can have you back in three months and we'll-?
STEVEN You can have me back in three months, but I can't promise miracles.
CORIN Alright, let's move on to another area quickly - SkyCity. Because you're in negotiations with SkyCity. Have they progressed? Are we anywhere nearer to a deal?
STEVEN They are progressing, but I think it would be too early to say we're anywhere near a deal, but the pressure is on to come to a deal or make a decision the other way.
CORIN It seems to be the expectation that a deal will be done, that all this hassle and effort that's gone through and the AG's report, the message from you guys is, "Yes, we're going to do a deal." Are you? Is it actually a done deal?
STEVEN No, we haven't actually said, "Yes, we're going to do a deal." We do want to get on and build a convention centre, but we also don't want to get ourselves in a position where it's a deal at any cost. And the Prime Minister has been very clear to me that we're not doing a deal at any cost. It has to be a fair deal to taxpayers and to the SkyCity people. And so, no, it won't be a deal at any cost and therefore we are prepared to walk away if we can't get a deal.
CORIN So you're comfortable with, say, 500 pokies--? Could we be in a situation where they want this much and you don't and so that's it?
STEVEN I don't think that would be a good idea- I mean, I know it's just the two of us, but I don't think it'd be a good idea for me to be negotiating on morning television on that particular issue.
CORIN Just with the auditor general's report, were lessons learnt? I mean, there were serious criticisms about favouritism in the process on SkyCity. Have you learnt lessons from that at the very least?
STEVEN I think the officials have definitely learnt lessons on the process.
CORIN What about you guys? Not the officials, the ministers?
STEVEN Well, I think from our perspective, there's a very interesting challenge here, which we do need to solve as a country, and that is that the old style of procurement is all about line up four equal suppliers and then make sure they all proceed together to a competitive point, and that's - in quotes - "fair". But there's lots of examples of innovation that comes to the public sector where somebody turns up and says, "Well, I've got this and nobody else has this, so I'd like to do this with you." And of course we've got the public probity requirements and that's very important. So we're doing this new procurement policy at the moment, which will provide more guidelines to agencies about how to deal with something like this.
CORIN Somebody comes to you with a good idea?
STEVEN Yeah, with a creative idea which is difficult to test in the marketplace.
CORIN Just on that procurement policy, will that also include an element of making sure that New Zealand businesses get some preference?
STEVEN No, it won't give preference to New Zealand businesses, per se-
CORIN What about foreign businesses that work with New Zealand businesses?
STEVEN Well, there's a couple of things there. Firstly, we can't, in terms of our trade deals, go out and say we're offering preferences, and even the Australians with the plan they announced a couple of days ago shied away from that, and they know why they have to. New Zealand is more dependent on world trade than the Australians are, even, so we can't go there. What we can do is actually do a far better job of talking to smaller, medium-sized businesses about how they can participate in government procurement. And I actually think it's been pretty shoddy, going back years and years. You know, a lot of it's very short-term. It's all about how you design the tender. And we have to get into a position where New Zealand innovative businesses can participate, and if they get together in groups, they can participate.
CORIN You're saying no preference for New Zealand businesses, because you're-
STEVEN No expressed preference.
CORIN No expressed preference. But we talk to unions and they say the big criticism they have of your government is that you are not urgent enough on jobs. There's not enough activity. Yes, you're laying a platform for growth, with your business growth agenda and that type of thing, but there's no urgency. Procurement is one way to do that.
STEVEN I disagree completely on that. So if you just look at the last week, right, so you've got a prime minister in Mexico working on the TPP; you have the R & D grants that we announced for Callaghan Innovation last week; we had the East Coast oil and gas study that I was involved with with Simon Bridges during the week; we had the RMA changes-
CORIN None of those are going to deliver jobs in the short-terms, though.
STEVEN Oh, yes, they are. No, yes, they are. You talk about things like the convention centre and the Hobbit movies, and you talk oil and gas. This week, Methanex announced they're firing up that third train at Waitara Valley. That's 500 jobs in Taranaki right there.
CORIN But we lost 23,000 jobs in that December quarter.
STEVEN No, well, that's not correct.
CORIN Yes, it is. That was the employment rate, not the unemployment rate. The employment rate. There were 23,000 less jobs in that quarter.
STEVEN That's according to the HLFS, so let's go through that for a quick couple of minutes. Firstly, they're mostly part-time jobs, and the difficulty has been, there's no doubt about it, when you're actually in tight financial times, when people are saving more, the biggest issue- the industries that generally soak up part-time jobs, which is retail, and that's an industry that hasn't gone well for some years, and you can't magic that away. That's called the global financial crisis.
CORIN But surely in December, in that period, you would have expected lots more extra retail jobs. You would have expected the economy to soak up those jobs.
STEVEN Well, you've read the critique of HLFS. The QES came out in the same week, and said that we've 56,000 more jobs in the last two years. The actual PAYE numbers again came out this week. The PAYE numbers, you know, as part of the government's books are actually up significantly, and the number of people on unemployment benefits, which is actually where the rubber meets the road, is down-
CORIN They say explaining is losing. You're having to fight on the numbers.
STEVEN Oh, yeah, but the numbers- You're always fighting on the numbers, you know. One quarter the Opposition are on about the QES because that's down. The next, they're on about something else. That's the politics of it. You come back to the whole issue of jobs, which is really important, and that's all about encouraging investment in the New Zealand economy. Now, the Opposition's solution is to try and protect all existing investment and not encourage new investment.
CORIN But this is-
STEVEN Hang on. But our plan is that you have to acknowledge that sometimes businesses become uneconomic, but it's all about how you encourage new investment in the economy. So right across the economy, we're encouraging that new investment - whether it's in food processing and manufacturing, whether it's in oil and gas and so on. And we're saying we're prepared to encourage that new investment.
CORIN But are you encouraging manufacturing? Because manufacturing is struggling and manufacturers are turning up to this committee and saying - the Opposition's committee - and saying, "We're dying here, and you guys don't care about it." You're quite happy to give farmers help for drought relief. You give them money for their irrigation funds and those sort of things. Why not manufacturers?
STEVEN And exactly that's what we've done. So in the last week, $25 million in R & D, co-funding subsidies to eight New Zealand businesses - including one who happened to be at the Opposition's manufacturing inquiry - to move them up the innovation chain.
CORIN But you know very well-
STEVEN Hang on. No, no, hang on.
CORIN &the issue is the dollar. That's eight businesses you've chosen.
STEVEN No, those ones have applied for the money, obviously. But you come back and you look at the TIN100, which is the technologically advanced IT companies-
CORIN IT companies, yeah.
STEVEN Not just IT. High tech. People like Gallagher's, people like Douglas Pharmaceuticals, people like Fisher & Paykel Healthcare. Most of those are doing very well, and if you look across New Zealand's manufacturing sector, what you see is that those that have the more unique products, that have the greatest level of innovation that is valued overseas are actually doing very well. Some of them aren't doing so well, but the reality is that's the way through this. Sitting there and trying to pretend that we can be the old fortress New Zealand the way the unions want, that we can just put up the walls and pretend that the world hasn't changed - well, sorry, that's '70s thinking, and that would be a one-way path disaster. And you can look at Spain, you can look at Greece and that's the way that ends up.
CORIN Steven Joyce, Economic Development Minister, thank you very much for your time.