Speech to the Institute of Public Administration New Zealand (IPANZ)

Hon Grant Robertson, Minister of Finance, speech to the Institute of Public Administration New Zealand (IPANZ) – 15 February 2018:

Thank you very much for the invitation to speak today. At the outset I want to make a special acknowledgement to the public servants who are here today.  Over the last 112 days the new Government has asked a great deal from you.

It’s an understatement to say our 100 Day Plan was ambitious. The fact that we were able to tick off those policies and introduce the legislation which we did in that timeframe is testament to many of you in this room, and many others in Ministries and agencies.

To look at what we have done from the perspective of the public service in a period of three months we:

• created two brand new benefits (Best Start and the Winter Energy Payment) as part of a $5.5 billion Families Package
• changed the enrolment and registration process for training and education for tens of thousands of trainees and students with the introduction the first year of our fees free training and education programme.
• created an entirely new government body in the form of the Pike River Recovery Agency
• established a Royal Commission into Abuse in State Care and an inquiry into mental health
• initiated a review of monetary policy and a working group to overhaul the tax system.   And much more besides.

From my personal perspective that we were able to produce a mini-Budget seven weeks in from taking office, with all of the 100 Day Plan policies costed and incorporated into the Half-Year accounts, was an amazing feat.

I speak for all my Ministerial colleagues in saying thank you.

What was really noticeable for me was that, faced with new and different priorities, the public service was responsive, creative and rigorous. 

As you will hear from me today, these are the attributes that we need to foster in order to deliver to New Zealanders the quality of services and improvements to the standard of living I am sure we all aspire to.

As many of you know I spoke to this same gathering last year.  I addressed you then as the Opposition spokesperson who wished after the September election to become the next Minister of Finance.

We had just released our Budget Responsibility Rules, and we were soon to publish Labour’s Fiscal Plan. The polls – well there is no need to go there anymore. My goodness, what a difference a year makes.

But there are some things that have not changed in a year.  In particular the ideas that I talked about that day about how we can support a stronger public service and work together to improve the wellbeing of all New Zealanders.

What I want to do today is to expand on themes in that speech and how we as a government intend to implement the ideas.

I said last year that the public sector is, in my mind, the personification of our collective desire to support, protect and improve the wellbeing of our people.  This Government has a fundamental commitment to the value and values of the public service.

I spoke of our desire to break down silos in the public sector to focus on the overall outcomes we are trying to achieve. And I spoke about how we should be developing policies differently, and measuring their success with wellbeing and the living standards of all New Zealanders front-and-centre.

I spoke of how I wanted New Zealand’s public service to be innovative, coordinated and rigorous. That it should work as an active partner with groups and individuals outside of Government as we formulate and deliver policy.

At Waitangi this year, the Prime Minster spoke about how the new Government welcomes an open conversation with the public on the difficult issues that we face as a country. We need to be honest about the challenges we face, and the policies required to overcome them.

This Government wants to do things differently. We have to start asking ourselves tough questions about how sustainable our current trajectory is across all aspects of Government.

We are putting the wellbeing of people and the environment at the centre of what we do, and introducing policies which will allow for an economy where we work smarter, make better use of our resources, and where the benefits of growth are more evenly spread across society.

In this context, I want to talk about what success looks like and what we will do to deliver it, how we will measure progress in improving the wellbeing of New Zealanders, and the critical role of the public sector in achieving better living standards for all our citizens.

What is success?

Looking at some of our high level indicators, New Zealand is a successful country. Our GDP growth has outstripped many peers since the Global Financial Crisis, and growth is expected to continue to travel along on average at about 3% over the next four years. Other countries do look enviously at that.

But the reality below those high level indicators is not as rosy.  The Salvation Army’s State of the Nation Report yesterday makes the point that at the same times as we have these high level indicators we have seen no discernible change in child poverty rates, high levels of youth unemployment, increased homelessness and more.

As the report says, “it is clear that the benefits of this recent strong economic growth have not been shared across the board or trickled down, as the theory would have it.”

All around us are signs of the significant underinvestment in key public services and infrastructure. No government can declare success in the face of these.

In this context we should ask ourselves questions like what is the purpose of economic growth? What role should the Government have in improving people’s wellbeing?

Ours is a government that views economic growth and what comes with it as a means to an end, not an end in itself.

As we said in the Speech from the Throne, success is living in a country where all cultures and human rights are valued, where everyone can access decent housing and meaningful work, where education is free and good ideas flourish, where children live surrounded by creativity and love, and are encouraged to reach their full potential, and where we become world leaders on environmental issues and climate change.

In fact, I’m going to read you some more of the Speech from the Throne:

“All who live in this country are entitled to respect and dignity; all are entitled to live meaningful lives; all are entitled to care and compassion. Everyone should have a roof over their head and be warm in winter. Everyone should have food and a table to put it on.

“Ours is a great country still. But it could be even greater. In our society today, no one should have to live in a car or on the street. No one should have to beg for their next meal. No child should be experiencing poverty. That kind of inequality is degrading to us all.”

It is time we took a broader view of what success looks like. It is time for us to acknowledge that economic growth, as significant as it is, alone will not guarantee improvements to people’s lives – and particularly the most vulnerable.

We will be a compassionate Government that measures itself by how well it improves the wellbeing of its people.

What we will do

There are core things that as a government we will do to make this vision a reality. We are committed to major investments in housing, health, education, police, and infrastructure.  We will work towards a net zero carbon economy, protect the environment, create decent jobs and lift the incomes of families to reduce child poverty.

While making these investments, we will continue to manage the Government’s books responsibly. Under our Budget Responsibility Rules, we are committed to ensuring net debt falls to 20 per cent of GDP within five years of taking office, expenditure is controlled, and sustainable surpluses are delivered across the economic cycle.

Living Standards Framework

But how we work matters too. This Government’s programme is underpinned by an economic strategy focussed on improving the wellbeing and living standards of all New Zealanders through productive, sustainable and inclusive growth.

Of course, headline growth will still be measured in the form of Gross Domestic Product. But while GDP is an important marker of economic activity, and will remain so, there are significant facets of wellbeing that GDP cannot capture on its own.

I have asked the Treasury to further develop and accelerate the work it has been doing on the Living Standards Framework (LSF).

As many of you know the LSF draws on OECD analysis of wider indicators of wellbeing. It gauges our success in developing four capitals – financial and physical, human, social and natural. These provide a more rounded picture of how successful Government policy is in improving New Zealanders’ living standards.

At the moment the LSF is transitioning from the theoretical to the practical. As the LSF is refined into a robust tool it will help us answer questions about:

• The health of the four capitals – natural, human, social, and physical/financial - and whether or not they are growing and likely to be sustained
• Social and demographic inequalities in wellbeing, how the flow of current benefits affects long-term outcomes
• How resource allocation decisions affect capital to improve current or long-term wellbeing.

I acknowledge that the previous Government was, to some extent, attempting to address wellbeing issues through its Social Investment approach. While the underlying principles of early intervention, greater cooperation across agencies, and the use of data are all valid, the “balance sheet” lens adopted by the government when implementing this approach was too narrow.

A good example of this is the issue of social capital. The Social Investment model gave too little weight to the health of a community in influencing that wellbeing of an individual. Our approach acknowledges that the outcomes for both are interdependent. 

I think that in this area the previous Government was the embodiment of the phrase “not seeing the wood for the trees” - focused so much on targeting assistance it missed responding to the systemic issues that were affecting the wellbeing of our communities overall.

The principles that lay behind the social investment approach are still important and will be part of what we do, but the actuarial politics which viewed people as liabilities on a balance sheet are at an end.

Measuring success

For our approach to be meaningful we will need measures by which we can better assess wellbeing. As part of our Confidence and Supply Agreement with the Green Party, the Government is developing a comprehensive set of environmental, social and economic sustainability indicators to better show how we are doing as a country.

In some areas, such as financial and physical capital, there are well-established indicators used nationally and internationally. In other areas, strong evidence-based indicators are still under development.

The Treasury is working with others in the public sector, academic community and international organisations to form a cohesive set of indicators suitable for understanding intergenerational wellbeing in New Zealand.

What the Government’s wellbeing agenda means for the public sector

The Living Standards Framework and measuring the health of the four capitals puts sustainable, intergenerational wellbeing at the core of the public sector system.  This presents opportunities to look at the way we work and the legislative and structural underpinnings of the public sector to ensure they are fit for this purpose.

It also must be accompanied by politicians backing the public service to be innovative and entrepreneurial.  To empower you to work not only more closely with each other, but with the wider community.

I know that there has been significant change in the public sector in recent years to break down silos that exist and create a more cohesive and connected public service.  I welcome those changes and acknowledge the advances that have been made.

We need to go further.   We will be looking again at the legislative underpinnings provided by the Public Finance Act and State Sector Act to ensure they not only remove barriers to collaboration and creativity, but are structured to actively enhance it.

We want the public sector to feel empowered to co-design with us.  The flawed theories that have seen government reduced to acting as a contract management agency miss the very real chance to use the skills and creativity of thousands of very clever people to advance our country’s wellbeing.

Innovation and entrepreneurship are, by definition, risky and uncertain. Many businesses tend to be risk averse, so when investments in new technology are needed, or adoption of innovative new ways of doing things is necessary, or a bold vision is called for, there is no reason for the Government not being an active partner alongside private business to foster innovation and progress.

I want this Government to be more active in driving growth and innovation in our economy. The Public Service is a critical part of this innovation drive as well.  As an enabler and as leader.  This will be crucial to our Government’s focus on improving the wellbeing of all New Zealanders.

Agencies’ policy advice and service delivery

The Living Standards Framework will also have an impact on how agencies develop policy advice and deliver services. Wellbeing indicators should sharpen further the focus the public service has on:

• better understanding what will make a difference to wellbeing
• using good data and tools like a refined and revised CBAx to test the likely effectiveness of policy options
• evaluating the real-life outcomes that particular services and spending are achieving – or where they are missing the mark.

Lastly, the Living Standards Framework will support Government agencies to work together in a cohesive way so that public policy on wellbeing, spending and other government interventions are aligned to improving intergenerational wellbeing.

I know that the public service can and does undertake some great cross-agency work on issues that cut across departmental boundaries. But I’m sure we’ve all seen instances where policy advice is still developed and delivered in siloes.

Departments can go in different directions based on whether they have social objectives, financial objectives or environmental objectives, and advice seldom includes an intergenerational perspective.

With a comprehensive set of environmental, social and economic sustainability indicators, government agencies can see more clearly the broader impacts their work may have, discern the interconnectedness and crossover of their work with that of others, and identify opportunities where working together will make a big difference to our standard of living.

Wellbeing Budgets

Taking a wellbeing approach built on the Living Standards Framework will be a core element of how we create our future Budgets and measure the success of our work. At the start of the Budget cycle it will help us work out our priorities. It will then aid measurability and accountability for outcomes after the Budget.

Government agencies will start to see the direction of travel with the development of Budget 2018, which will be delivered on 17 May this year.   But it is my goal that Budget 2019 which will be New Zealand’s first Wellbeing Budget.

I want us to go further than broad, high-level wellbeing priorities, to having a Budget process and a public sector that are structured around measuring and improving wellbeing outcomes.   This will require significant change - right down to the way that Budget documents are presented.

By doing so we will be in a much better position to attain the kind of sustainable, intergenerational wellbeing improvements that we aspire to.

An indicator of the direction of travel is the Prime Minister’s Child Poverty Reduction Bill, not only setting agreed measures of child poverty, but also a requirement that each government set targets against those measures and that governments report on child poverty indicators at every Budget.

Budget 2019 is when the impact of the Living Standards Framework approach will truly be felt. It coincides with the first year the Government will be required to report on its impact on child poverty, our highest priority.

Conclusion

This Government is willing to have the tough conversations with New Zealand that need to be had for us to solve our long-term challenges. This does not mean we will always have the answers, but for us to solve any problem we need to first admit when there is one.

Ensuring the long-term wellbeing of New Zealanders will depend upon our answers to the challenges that lie ahead. This Government has a plan to ensure New Zealanders are prepared for these challenges. The input of the public service is essential to this success.

Our success will be measured in terms of how we improve the wellbeing of all New Zealanders, how we are reducing child poverty and how we are improving sustainability. Our wellbeing agenda, our policy and Budget decisions, and our expectations of the public service are all means to the end of supporting New Zealanders to have lives of dignity, security and hope.