Nearly $85 million dollars more was spent on contractors and consultants at Health New Zealand in the financial year to June 2024, compared to the previous financial year.

The agency attributes most of this to clinical staff, saying a shortage of health workers requires them to make use of contractors to maintain service delivery.

But Labour’s Health spokeswoman Ayesha Verrall says New Zealanders’ standard of healthcare is being “eaten away, while the Government isn’t controlling costs on contractors.”

“The Government’s cut a lot of back-office staff, and now they’re having to bring in contractors to make sure the work gets done.”

The total contractor and consultant spend was nearly $681m in the 2023/2024 year which ended in June, compared to $596m in the 2022/2023 year - despite a Government directive that public agencies would decrease this spend.

Meanwhile, the contractor and consultant spend on “People and Communications” has more than doubled - from $27m in 2022/23, to $61m in 2023/24.

Verrall said the figure has blown out despite the Government’s promises to cut contracting and consulting costs.

“And yet the services that New Zealanders actually need are being cut with voluntary redundancies ... and a scaling back of hospital builds,” she said.

“The National Party talked a big game about cutting on contractors but they’ve actually gone up almost 20 percent. Christopher Luxon said he wanted medical doctors not spin doctors."

A Health New Zealand spokesperson said most of the spend is on contractors such as locums working on the frontline, while frontline clinical staff haven’t been eligible for voluntary redundancy.

She said the fact Health New Zealand is paying more to contract staff, at a time when vacant roles aren’t being filled, shows the “shortsightedness" of health system cuts.

Health Minister Shane Reti said he’s made the expectation to reduce contracting costs clear to Health New Zealand, but says these roles are needed in times of workforce shortage.

“We certainly have an intention in my instructions to the Commissioner to employ staff full-time as establishment, but the reality is, certainly with workforce shortages, that we still need to rely on locums”

Barring a surprise like Covid or bird flu, he said he would expect the agency’s spend on contractors and consultants to come down in the next financial year.

A Health New Zealand spokesperson said the agency would rather employ permanent medical specialists instead of contracting them as locums.

“But right now, we are living through a global shortage of health workers in specific clinical areas, and New Zealand isn’t immune to this.

“This means that, where required, we make use of contractors to maintaining services to ensure the continued delivery of healthcare to New Zealanders.”

“We also use consultants in limited circumstances that require specialist or independent advice but where we don’t need highly specialist skills on a permanent basis.”

They said the cost increase in the People and Communications category was on HR and payroll specialists as part of the agency’s Holiday Act Remediation project.

It also used contractors and consultants in areas such as financial systems, data and digital programmes, projects like the Aged Care Review, and the Covid19 response contingent workforce.

The spokesperson said Health New Zealand is focused on recruiting permanent clinical staff where needed, including supporting the locum workforce into permanent employment where appropriate. 

“The number of clinical staff employed by Health NZ this year has been at historic highs." 

Health New Zealand’s financial position has been in the spotlight in recent months - with the board scrapped and replaced with Commissioner Lester Levy in July.

Last month, a preliminary assessment of its financials suggested the agency had recorded a $943m deficit in the year to June, almost $1b under the expected $54m surplus.

The agency called for voluntary redundancies in August, and by October had accepted just over 400.