Bringing Wellbeing into the Public Finance (Act)

New Zealand is trying to reshape its fiscal policy with compassion and giving it a human touch.

In Jan-2019, I had blogged how NZ govt plans to include well-being into its budget. The Govt presented the budget in May-2019 which plans to focus on these aspects of well-being:

The Wellbeing Budget

TAKING MENTAL HEALTH SERIOUSLY A new frontline service for mental health with a $455m programme providing access for 325,000 people by 2023/24 Suicide prevention services get a $40m boost Reaching 5,600 extra secondary students with more nurses in schools Tackling homelessness, with 1,044 new places – Housing First will now reach 2,700 people
IMPROVING CHILD WELLBEING Specialist services as part of a $320m package to address family and sexual violence Breaking the cycle for children in State care, including helping 3,000 young people into independent living Taking financial pressure off parents by increasing funding to decile 1-7 schools so they don’t need to ask for donations Lifting incomes by indexing main benefitsand removing punitive sanctions
SUPPORTING MĀORI AND PASIFIKA ASPIRATIONS Major boost for Whānau Ora, including a focus on health and reducing reoffending Ensuring te reo Māori and Pacific languages survive and thrive An additional 2,200 young people in the Pacific Employment Support Service A $12m programme targeting rheumatic fever
BUILDING A PRODUCTIVE NATION Bridging the venture capital gap, with a $300m fund so start-ups can grow and succeed $106m injection into innovation to help New Zealand transition to a low-carbon future Nearly $200m set aside for vocational education reforms to boost apprenticeships and trade training Opportunities for apprenticeshipsfor nearly 2,000 young people through Mana in Mahi
TRANSFORMING THE ECONOMY Over $1b boost in funding for KiwiRail Helping farmers with the climate change challenge by investing in scientific research Encouraging sustainable land use with a $229m package Freshwater focus improving water quality in at-risk catchments
INVESTING IN NEW ZEALAND $1.7b to fix hospitals over the next two years 10-year $1.2b investment in schools, starting with $287m this year for new buildings Bowel screening programmeextended to five more DHBs Investing in better and more healthcare with $2.9b for DHBs

In a recent speech, Finance Minister Grant Robertson explains how these changes are being done.

First some history:

If you’ll step into the Tardis with me for a brief moment, I’d like to take us back to 1989, to set the scene, and remind us all how far we’ve come. 

….

it was a time when the government and the public service were struggling with entrenched issues related to fiscal sustainability – high levels of debt, poor transparency, and poor responsiveness to Ministers.  It was a time of focussing on inputs, not outcomes, and – it sounds incredible today – it was all based on a cash accounting system.

It was difficult to measure agencies’ performance and to get an accurate and up-to-date picture of what was being spent, and where wastage was happening.

In July 1989 though, something happened that began to change all of that.

Peter Neilson, who was the Associate Minister of Finance, introduced the Public Finance Bill to Parliament.  I was amused to read in Professor Ian Ball’s recollection of Peter’s speech, that Peter started off by saying that “We all know accounting is boring; public sector accounting is boring to the power of two”, before going on to introduce what – with the hindsight of today – became a revolution in New Zealand’s public finance system.

Since the PFA took effect in 1989, our public finance system has taken control of its fiscal position, has high levels of transparency and accountability; and is renowned internationally. 

It did that by putting a model in place that focussed on management, outputs and performance, and was based on decentralisation, accountability and much greater transparency.  The Fiscal Responsibility Act, which followed on the heels of the PFA and was later incorporated into it, created a framework for robust fiscal management.

We can easily point to some enduring and positive outcomes from our public finance legislation.  Now: –

    • Our public finances are strong.  New Zealand’s public debt is relatively low compared to our international peers, and the government is running operating surpluses which are forecast to increase further
    • New Zealand ranks relatively close to the top of many international transparency, corruption and wellbeing indicators, and we have a high level of trust in government
    • We are consistently ranked no.1 in global surveys of ease of doing business and starting a business.
    • In contrast, many OECD countries are still grappling with fundamental macro, fiscal, and public trust challenges.

And maybe we can see that public sector accounting isn’t “boring to the power of two” any longer – that increased transparency has also brought about an increased – and welcome – level of scrutiny of public sector spending, and the outcomes it achieves; and increased public interest in what the government is delivering using the revenues that it collects.

Hmmm..

In 1989, they pioneered inflation targeting too.

To present:

My objective is a public finance system that enables the public service to positively assist and improve the intergenerational wellbeing of New Zealanders.

We need a system where our time and effort is focussed more on ‘strategic’ management of public finances – with a clear ‘line of sight’ to the strategic value of public spending.  We believe that the public finance system can be shifted to improve intergenerational wellbeing on a number of fronts.

These include:

    • Supporting the parts of the system to work better together
    • Smarter regulation of the system
    • Lifting performance
    • Building capability
    • Strengthening long-term resilience.

With these improvements in mind, the Government is taking steps to reform the public finance system to reduce risk aversion, promote innovation, and support a more rapid response from the public sector to issues and challenges.

Our modernisation of the public finance system, addressing its current limitations, is a key element of aligning the public sector to a wellbeing approach.

The work programme includes three important themes – they are:

    • Firstly, changing the overarching framework for measuring success and identifying the priorities, through amendments to embed wellbeing in the Public Finance Act, as well as the government’s broader commitment to sustainable development goals
    • Secondly, changing the financial management framework, to increase flexibility, encourage collaboration and support and enable a more strategic focus.  This includes changes to the appropriation system and a different approach to planning and reporting
    • And thirdly, rethinking the approach to the Budget, so that we look at existing as well as new spending, and create more space to focus on the challenges and trade-offs needed to improve wellbeing for all New Zealanders.

The wellbeing of our citizens is at the heart of everything we do, both now and for the future.  We need new thinking to achieve this vision. 

Nice bit..

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