Is New Zealand’s wellbeing budget a step change or a new coat of paint?

By:
10 Jun 19

Action as well as ambition is necessary for New Zealand to achieve the goals of its wellbeing budget, says professor of Public Financial Management at Victoria University of Wellington Ian Ball. 

 

The New Zealand government’s wellbeing budget has attracted a lot of attention, both in New Zealand and internationally. The question is: Does it warrant the attention? The answer appears to be “No, and yes”.

No, because there is nothing new in the concept of ‘wellbeing’. Wellbeing appears to mean the same as ‘outcomes’, and outcomes have explicitly been the rationale for government decisions and action in New Zealand for the past thirty years – the term being introduced and legislatively defined in 1989. If anything, it could be argued that introducing another term to mean essentially the same thing will simply confuse, even if the term ‘wellbeing’ also has a history in welfare economics.

No, because it emphasises ambition over accomplishment.

A budget is an expression of ambition for the advances in wellbeing that will be achieved during a period, against which, at the end of the period, the actual accomplishments should be reported. In the fiscal arena, the budget lays out the government’s objectives, and the financial statements report on achievement. The wellbeing budget lays out what the government plans to do, but has the look and feel of an annual report.

The real test of whether the government is successful comes at the end of the year when the evidence is in. The government should report on its achievements after year-end, in an annual report of outcomes achieved (which could sit alongside its financial statements).

No, because there is nothing new in the idea that outcome-focused decisions will cross portfolio boundaries, and that there is a need for collaboration between ministers, and between departments. The ‘many-to-many’ relationship between outputs and outcomes implies the need for collaboration, as the services provided by one department will have outcomes beyond their minister’s portfolio.

Similarly, the outcomes of primary interest to one minister will be impacted by the actions of multiple departments, as well as by external factors. This idea is already given effect within the current system, for example in multi-category appropriations.


'That the wellbeing budget puts an increased focus on outcomes other than fiscal performance and economic growth creates the risk those other outcomes take priority over economic and financial objectives. Indeed, this could be seen as the whole point of the wellbeing approach.'


But, yes, because the process explicitly recognises, and is a useful step towards operationalising the idea that the quality of New Zealanders’ lives is not adequately represented by GDP and that our living standards are reflected in capitals other than financial capital. And, yes, because the wellbeing budget articulates very clearly the areas the government regards as most urgently in need of action.

And, yes, because behind the budget documents, there is a step towards the creation of processes that both strengthen the role of outcomes in the decision-making process and encourage, enable or require the collaboration necessary for an outcome-focused budget process to succeed. If the reality of collaboration between ministers (and departments) is reflected in the wellbeing budget, this is worthy of attention. Similarly, there are other elements of the process which suggest that the process of prioritisation is based on high-quality analysis and evidence.

That the wellbeing budget puts an increased focus on outcomes other than fiscal performance and economic growth creates the risk those other outcomes take priority over economic and financial objectives. Indeed, this could be seen as the whole point of the wellbeing approach. Thus, the new approach might undermine the fiscal strength the New Zealand Government has built up over three decades.

However, from this first wellbeing budget, and the fiscal objectives the government has adopted, it appears that the government intends to continue building the strength of its balance sheet.

There is one respect in which the wellbeing budget runs the risk of being wishful thinking. Having outcomes or wellbeing at the heart of the government’s strategy and budget process is necessary, but it is not sufficient. To the extent that it focuses on outcomes, at the cost of being unclear or non-specific about the nature of the interventions, it is incomplete.

While outcomes may be what government is aiming for, they can be achieved only by actions, whether those actions are services (outputs), transfers, or regulations. The combination of desirable objectives and authorising expenses (inputs) will only enhance wellbeing if the spending supports the right actions. So being clear about the nature of the interventions is as important as being clear about the objectives sought.

This wellbeing budget is ambitious. But there is much further work to be done, including the development of an end-of-year reporting process, without which its success will be difficult to gauge.

  • Ian Ball

    Professor of Public Financial Management at Victoria University of Wellington and emeritus chair of CIPFA International

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