In a windowless Parliamentary Select Committee room on Monday, MPs and citizens engaged in a fundamental debate about what the whole purpose of the Government’s management of the economy should be.
On one side were those who argued that the Government was there simply to preside over classic economic indicators like Gross Domestic Product (GDP) growth.
Up against them were others who argued that the point of economic management should be to ensure that citizens could lead fulfilling lives.
All this was set against the background of another of the National-led Government’s reversals of a Labour Government policy.
The policy that the Public Finance Amendment Bill seeks to reverse incorporates the Treasury’s Living Standards Framework into the Wellbeing Budget.
Simply, it proposed that any Budget would need to explain how it would impact mental health, child wellbeing, Maori and Pasifika aspirations, building a productive nation, transforming the economy and investing in New Zealand.
These would be measured by a host of statistics gathered together by Treasury to form the Living Standards Framework.
The proposal was developed and publicly supported by Treasury’s then-Chief Economic Advisor, Tim Ng.
It received enthusiastic support from the OECD.
The Deputy Secretary-General of the OECD, Ulrik Vestergaard Knudsen, told a Wellington media briefing in 2019 that the OECD had been trying for ten years to get wellbeing indicators into national budgets and that New Zealand had now provided the most in-depth wellbeing project of all OECD countries.
The idea was then promoted by Labour’s Finance Minister Grant Robertson in 2019 and applied to the Budget that year, but he wasn’t on his own.
In Britain, the Cameron Conservative government in 2010 had proposed something similar and set up a unit to measure wellbeing, and Australia’s Treasurer, Jim Chalmers, inspired by his friend Grant Robertson, is proceeding with having wellbeing targets included in Australian Budgets.
But in 2023, the What Works Centre for Wellbeing, set up by Cameron’s Government in 2014 to help ministers and public sector organisations establish the best ways to improve national wellbeing, closed.
Now the same thing is happening here.
Treasury, which did all the initial work to develop the idea of Wellbeing Targets, is now saying they are too complex.
In their Regulatory Impact Statement for the Amendment Bill, they say: “The 2020 changes added an additional set of priorities that needed to be articulated through the Budget Policy Statement, which has added a layer of complexity.
“It is difficult to distinguish one set of priorities from another, and to understand what different purposes they serve.”
The former National MP and long-time advocate for the measurement of women’s unpaid work in the economy, Dame Marilyn Waring, appeared before the Select Committee and scoffed at the Treasury view.
“I see Treasury’s advice to the Minister said wellbeing was too complex,” she said.
“And it’s like, well, get real. Life is.
“We should have all the data possible on the table whenever you’re making, trying to make the very best public policy.
“Decisions are very complex.
“You have to work out trade-offs.
“But it’s much easier to work out trade-offs when all the data is on the table.”
Waring said that we were now removing significant rigour from the checks and balances necessary for complex decision-making.
“And going backwards like this is such a dreadful waste of time,” she said.
Waring argued that physical and financial capital ended up being a quarter of the world of wellbeing.
“It is not representative of environmental, social or cultural capabilities at all,” she said.
In some senses Waring met her match at the Committee with the former Treasury official who was one of the authors of Rogernomics, Dr Bryce Wilkinson also appearing.
The pair came into contact back in the early 80s when Waring chaired what was then the Public Expenditure Committee.
These days Wilkinson is a Fellow at the New Zealand Initiative and a strong advocate for small Government, and he presented the Initiative’s submission..
A number of correction have been made to reflect the fact that Wilkinson did not speak to the Initiative’s submission which was delivered by Nick Clark but he told POLITIK that he was there at the Committee “riding stage coach, but no back-up was needed.”
Predictably, the Institute’s submission supported removing the wellbeing targets from Budgets.
“This is a welcome return to Treasury’s core competencies,” Clark said.
“The wellbeing emphasis, although very well intentioned, created complexity and diluted fiscal rigour.
“It featured multiple dimensions with a lack of prioritisation, making for challenges in policy development and the measurement of outcomes.
“More fundamentally, our view is that economic growth remains the most reliable path to improved outcomes across the board.
“Fiscal responsibility is a strong pillar for economic growth.”
But the Institute was not a total fan of GDP alone.
“We don’t necessarily think that GDP is the be-all and end-all,” he said.
“It’s a good internationally comparable measure.
“The problem with what we’ve had more recently, and particularly the wellbeing indicators, is that there are just so many of these indicators and they’re not easy to prioritise, and some of them are quite subjective.
“I think we would probably prefer a more of a focused set of indicators that are less. There are just so many.
“I think the Treasury’s living standards framework had a hundred different wellbeing indicators. Makes it hard to prioritise, makes it hard to work out trade-offs.
And what we would like to see is more cost benefit analysis which can take on board not just the economic GDP impacts but also social, environmental, cultural indicators as well or measures as well, and put them all into cost benefit analysis and then that’s the way to get good quality government spending and fiscal policy generally.”
So ironically the Institutue, with Wilkinson in the background and Waring more or less ended up saying the same thing; neither opposed to the idea of a Living Standards Framework to underpin a Wellbeing Budget, but just, in the Institute’s case they would prefer that it was done better.
David Hanna, the director of Wesley Community Action, raised another question about ending the Wellbeing requirement.
He linked it back to the Government’s flagship social investment programme.
“It just seems to me that by having the wellbeing component and report and requirement of Treasury in the Public Finance Act requires that balancing between decisions about investment and allocation of how money is spent and how that actually produces outcomes at a macro level,” he said.
“I see that’s aligned with the social investment approach with which the current government wants to promote to ensure that we get good outcomes for investment.”
He has a point. If we stop measuring the overall health of our communities, how will we know whether what the Government is spending money on is having any useful effect?
The internationally regarded economist and Financial Times columnist Martin Wolf, writing in 2019, said “happiness” was at the basis of wellbeing economics.
“Income explains a small part of variations in happiness, partly because relative income matters so much,” he wrote.
“Human relationships, especially partnerships, matter.
“Unemployment is very harmful.
“But mental health is the most important determinant of life satisfaction.”
Wolf was an enthusiastic supporter of what Robertson and New Zealand were trying to do.
But as Robertson has admitted, Covid got in the way.
“Covid really got in the way of the full rollout of the wellbeing approach, and there was a lot more that I wanted to do there,” he said in 2024.
“We got some of it, with the multi-year funding and the clusters and so on, but embedding that fully, so that is the way that governments decide what they’re going to do with their budgets, how we measure our success, that got interrupted severely by Covid.”
Whether the scorched earth approach of the current Government does not end up being a missed opportunity to fine-tune Robertson’s original proposal is one of those questions that political historians will undoubtedly debate into the future.
But it would be surprising if at some point in the future we did not see the return of the Living Standards Framework and the Wellbeing Budget.
