The Free and Frank Series: The Faustian Bargain

18/10/2025

This is the third instalment in a series exploring what free and frank advice means in Aotearoa’s constitutional arrangements. Having established the puzzle of the ghost in the machine, I turn this week to the invisible contract that has governed the relationship between ministers and officials for more than a century: the public service bargain. Drawing on the work of Christopher Hood (2006) and Martin Lodge (2006), this post traces how the classical Westminster deal, loyalty and anonymity exchanged for tenure and professional autonomy, made frankness possible. By the end of this post, I hope to have shown how it’s unravelling through the reforms of the 1980s and 1990s, leaving officials caught between contradictory demands, with no new bargain to replace the old one.

In this post, I begin with the classical Westminster bargain as Christopher Hood and Martin Lodge (2006) described it: permanence, anonymity, and professional autonomy exchanged for loyalty and service. From there, the post traces the bargain’s unravelling across Westminster systems, drawing on Donald Savoie (2003), Peter Shergold (2015), and Dennis Grube (2015), before turning to Aotearoa’s particularly intense experience of reform and Richard Norman (2003)’s (2003) question about what happens to frankness when career safety depends on ministerial satisfaction.

Every day, across thousands of offices and meeting rooms, an implicit contract governs how ministers and officials relate to one another. Yet this contract has never been written down, was never formally negotiated, and most of those who live under its terms would struggle to articulate precisely what it contains. This is the public service bargain: the ghost contract that haunts Westminster governance. Today, this post explores the invisible bargain.

Christopher Hood, the New Zealand-born scholar whose work fundamentally reshaped how we understand public administration, spent decades making this invisible contract visible. Working with Martin Lodge (2006), Hood revealed that these arrangements are far more than simple employment contracts or administrative procedures. Instead, they are the informal institutions that define what different actors in government give and get from one another. Understanding these bargains, Hood and Lodge argued, becomes essential for grasping how government actually works, rather than how constitutional documents and legal scholars insist it should work.

The elegant insight at the heart of Hood’s work is this: relationships between political and administrative authority operate through implicit deals, and these deals shape everything from how advice gets given to who carries the blame when things go wrong. The classical Westminster bargain, what Hood termed the “Schafferian bargain” after Bernard Schaffer’s pioneering work, rested on three interlocking promises. Officials surrendered certain political rights and public visibility. In return, they received permanent tenure, professional autonomy, and protection through the doctrine of ministerial responsibility.

This wasn’t merely about job security, though that mattered profoundly. Permanence gave officials the security and foundation to speak uncomfortable truths to political power, knowing they would still be present when the minister had moved on to other portfolios or other careers. Anonymity meant ministers took credit for success and responsibility for failure whilst officials remained in the shadows, protected from political attack. Professional autonomy meant officials weren’t simply order-takers but professional advisers whose expertise commanded respect and whose judgement carried weight.

The permanent secretary who told a minister that a favoured policy was unworkable wasn’t being insubordinate; they were fulfilling their side of the bargain. The price of this frankness, however, was absolute loyalty. Once a decision had been made, officials implemented it faithfully regardless of their private reservations. This was what Hood characterised as a “trustee” relationship rather than a simple agent-principal arrangement. Officials weren’t merely executing political instructions but serving as trustees of longer-term institutional interests and professional standards.

The Bargain Frays

By the late twentieth century, this classical arrangement was unravelling across the Westminster world. Donald Savoie (2003)’s aptly titled Breaking the Bargain documented how the traditional arrangement in Canada had collapsed under multiple pressures. His central argument proved stark and uncomfortable: the classical bargain had broken down, yet no coherent new bargain had emerged to replace it. Officials found themselves caught in an impossible position, expected to be simultaneously independent and subordinate, both frank and compliant, responsive yet impartial.

The forces that undermined the classical bargain operated at multiple levels. Political power migrated from Cabinet to the Prime Minister’s Office, from ministers to their political staff and advisers. The traditional relationship between minister and permanent secretary was being displaced by new actors and new expectations. New Public Management reforms promised clarity through separation. Officials would be responsible for “outputs” and operational delivery whilst ministers remained responsible for “policy” and political direction. This clean separation, however, proved impossible to maintain in practice.

When programmes failed, ministers blamed officials for poor implementation. Officials pointed to inadequate resources or impossible political demands. The result was what Hood termed “blame games”: endless rounds of finger-pointing with no clear accountability and diminishing trust on all sides. As the supposedly “permanent” public service became less permanent, with fixed-term contracts, performance agreements, and constant restructuring, officials lost the security that had made frankness possible. Why tell the minister an uncomfortable truth when your contract renewal depends on keeping the minister satisfied?

The Australian experience, documented by Peter Shergold (2015) with characteristic insight, followed a similar trajectory. He described a public service caught between contradictory demands: be more responsive to political direction, but also more independent in speaking truth to power; be more managerial and results-focused, but also more strategic and policy-savvy. The result, as Shergold noted with his trademark dryness, was a public service that risked becoming “neither fish nor fowl.”

The Visibility Trap

Dennis Grube (2015)’s research reveals another dimension of the bargain’s breakdown, one that strikes at the heart of the classical arrangement’s logic. Across Westminster systems, officials are increasingly being drawn into the public spotlight to defend government policies in what he memorably terms “promiscuous partisanship.” Ministers dispatch their departmental secretaries to media interviews, to parliamentary committees, to public forums, expecting them simultaneously to provide neutral technical advice and to advocate for the government’s political position.

This represents a fundamental breach of the classical bargain’s anonymity principle. The traditional deal was that officials would be loyal in private but invisible in public. The new expectation demands that officials be faithful in public, defending policies they may have privately questioned, placing their professional reputations behind political decisions that may not survive the next election or the next crisis.

The consequences ripple outward. When officials become publicly associated with partisan positions, they lose their credibility as neutral advisers to future governments. When they defend policies that subsequently fail, they become targets for political attack. This isn’t simply a matter of individual choice or ministerial preference; it represents a structural shift in what governments expect from their senior officials, a shift that fundamentally alters the implicit bargain under which the system operates.

Aotearoa’s Particular Intensity

Aotearoa’s experience with these dynamics has been particularly intense. The reforms of the 1980s and 1990s represented not merely a modification of the classical bargain but a wholesale renegotiation, perhaps the most radical anywhere in the Westminster world. The State Sector Act replaced permanent tenure with fixed-term contracts for chief executives, introduced performance agreements and output-based accountability, and created a more explicitly “businesslike” relationship between ministers and officials.

Richard Norman’s work, particularly his incisively titled Obedient Servants?, captures the fundamental dilemma this created. With their careers no longer guaranteed, how could senior public servants reconcile the professional expectation of providing frank and fearless advice with the recognition that their career safety might lie in, as he delicately phrases it, “minimising the frankness”? This raises the spectre of a more compliant or “obedient” public service, where advice becomes tailored to please political masters rather than serve the broader public interest.

The reality proved more complex than the reforms’ architects had anticipated. The separation between policy and operations proved impossible to maintain in practice. The promise of greater autonomy came bundled with greater vulnerability. The promise of more transparent accountability produced what Shergold aptly terms “accountability overload”: endless reporting requirements, performance measures that captured what was measurable rather than what mattered, and a risk-averse culture where officials learnt that the safest answer was invariably “no.”

The reforms also revealed the cultural dimensions of these bargains in ways that pure institutional analysis might miss. In a small country where ministers and officials often know one another personally, where professional and social networks overlap substantially, the formalisation of relationships through contracts sat awkwardly with the informal, relationship-based culture that had always characterised government in Aotearoa. Norman points to the “battles for turf” between central agencies and the “ugly organisational jealousy” that emerged in the 1990s as direct consequences of the reforms.

The bicultural foundation adds yet another layer of complexity. Te Tiriti o Waitangi created plural obligations that sit alongside, and sometimes in productive tension with, Westminster conventions. Officials must navigate not only the relationship between ministers and public servants but also the relationship between the Crown, Iwi, and Hapū, as well as between different forms of authority and legitimacy, and between competing visions of what good governance requires.

The Trust Problem

At the heart of all these dynamics lies the question of trust, that most elusive and essential element of effective governance. Hood’s work on “blame avoidance” reveals why trust matters so profoundly. When things go wrong, as they always do in the complex and messy business of governing, the question of who carries the blame becomes central to how the system functions. The classical bargain offered officials protection through ministerial responsibility and anonymity. The new arrangements offer no such protection, or at least far less specific protection.

This creates what Hood identifies as the “agency problem.” If officials know they will be blamed for failure, they develop strong incentives to avoid risk, to document everything exhaustively, to create elaborate systems of defensive justification. The result can be a public service that achieves technical accountability while losing practical courage, becoming risk-averse precisely when creativity and boldness might be most needed.

Trust operates at multiple levels in these relationships. Personal trust develops from working together, from tested relationships and shared challenges. Professional trust emerges from respect for expertise and judgement. Institutional trust derives from confidence that the system itself will function fairly, that implicit bargains will be honoured even when individuals change. As Savoie argues persuasively, this institutional trust has been eroded by constant restructuring, by the politicisation of appointments, and by the perceived failure to protect officials who speak truth to power.

The Ghost Contract Today

The scholars we have been examining, Hood, Savoie, Grube, Shergold, and Norman, all wrote during or immediately after the period of intense reform and restructuring of the state. Their work documents a moment of transition, a breakdown, and the search for new arrangements. The question for Aotearoa now is what comes next, what kind of bargain makes sense for contemporary conditions.

There are signs of what might be termed a “post-NPM settlement.” The pure contractual model has been softened somewhat. The Public Service Act 2020 represents an attempt to rebalance, to retain the accountability mechanisms of the reforms, whilst restoring some elements of a unified public service with shared values and purposes. But it did confuse the relationship between officials and ministers. More on that in a later post. For now, it is sufficient to say the Public Service Act did not return to the classical bargain, and we may not be able to either. It is possible that the world that produced that bargain no longer exists.

The question becomes what kind of bargain proves sustainable and practical for contemporary governance. How to balance accountability with autonomy, how to combine political responsiveness with professional integrity, how to build trust in an environment of constant change and heightened scrutiny. These are not merely technical questions about institutional design but fundamental questions about how democratic governance operates in practice.

This is where the concept of free and frank advice becomes crucial. It represents the practical, day-to-day expression of whatever bargain exists between ministers and officials. It is the mechanism through which the implicit contract operates, the space where political authority and administrative expertise negotiate their relationship. Yet as the research reveals, there is significant disagreement in Aotearoa about what “free and frank” actually means, and that dispute reflects more profound uncertainty about what kind of public service bargain we actually have.

The Faustian Heart

The Faustian element in these bargains¹; the aspect that makes them simultaneously necessary and troubling; is this: every gain comes bundled with a loss, every benefit with a cost. The classical bargain gave officials security and autonomy but demanded political self-effacement and anonymity. The managerial bargain promised empowerment and accountability but delivered vulnerability and blame. Any future bargain will involve similar trade-offs, similar tensions between competing values.

The question is whether we can make those trade-offs consciously and deliberately, whether we can negotiate these implicit contracts with eyes open to their costs and benefits. Or whether we will continue to stumble into new arrangements and discover their costs only when it proves too late to renegotiate, only after the trust has been lost and the system has adapted in ways we neither intended nor desired.

The invisible contract remains unsigned, unwritten, yet binding nonetheless. It shapes every interaction between minister and official, every piece of advice given, every decision made. Understanding how it works, how it has evolved, and how it might develop further is essential for anyone seeking to comprehend how our democracy functions beneath the surface of formal institutions and constitutional documents.

The public service bargain, then, reveals the first layer of explanation for why free and frank advice resists definition. The classical deal offered a clear, if unwritten, framework within which frankness was professionally safe. Its fracturing left officials caught between contradictory expectations with no coherent replacement. But these bargains, however abstract they may appear, play out in a specific institutional space. That space has a name.

Next in the Series

These bargains, however abstract they might appear in academic analysis, play out in a precise location. There exists a space in government, neither purely political nor purely administrative, where ministers and officials must work together despite their different roles, accountabilities, and incentives. It is where democracy and bureaucracy collide. This is what we might also call the purple zone: the place where red political authority meets blue administrative expertise, where the implicit bargains we have been discussing become lived reality rather than theoretical construct. Next week, we will explore this purple zone and New Zealander Alex Matheson’s (1995) work in detail, examining how Aotearoa has developed its own distinctive approach to managing the inherent tensions that arise at the intersection of political and administrative roles. Understanding this space, along with the particular pressures and possibilities it entails, is essential to understanding how free and frank advice actually operates in practice.

References

Grube, D. (2015). Megaphone bureaucracy: Speaking out and the changing conventions of Westminster public administration. In J. Wanna, E. A. Lindquist, & P. Marshall (Eds.), New accountabilities, new challenges (pp. 127–147). ANU Press.

Hood, C. (2011). The blame game: Spin, bureaucracy, and self-preservation in government. Princeton University Press.

Hood, C., & Lodge, M. (2006). The politics of public service bargains: Reward, competency, loyalty—and blame. Oxford University Press.

Norman, R. (2003). Obedient servants? Management freedoms and accountabilities in the New Zealand public sector. Victoria University Press.

Savoie, D. J. (2003). Breaking the bargain: Public servants, ministers, and Parliament. University of Toronto Press.

Shergold, P. (2015). Learning from failure: Why large government policy initiatives have gone so badly wrong in the past and how the chances of success in the future can be improved. Australian Public Service Commission.

¹ A Faustian bargain refers to a deal in which one gains something valuable but pays a profound moral or spiritual price; the term comes from the German legend of Faust, who sold his soul to the devil in exchange for knowledge and power. In the context of public service bargains, it captures how each arrangement offers certain benefits whilst demanding costs that may not be apparent until much later, and how the very act of making such bargains transforms those who enter into them.