How Treasury is changing the way Government works

Quietly in the backrooms of Treasury and the Beehive a group of officials have been working with Finance Minister Grant Robertson on what will amount to the most fundamental change in the country’s economic management since the Rogernomics reforms of the 1980s.

Part of their work became visible yesterday with the going-live of the Treasury’s “Living Standards Dashboard”.

This is a comprehensive map of data and statistics which measures what is being called “wellbeing” across 12 domains (such as health, housing, safety and social connections).

That data, and particularly the cross-links between separate bits of it, form the basis of a Treasury spreadsheet which every Minister making a bid for budget money must now fill out to show how their proposals address the issues raised on the dashboard.

In other words, Ministers must show that money propose to spend will make a difference.

It is a world-leading initiative and is being watched by countries as various as Britain and Israel who are working on something similar.

It is an idea that 50 yars ago, the late Robert Kennedy was talking about in the United States.

He argued that the conventional measure of GDP did not really measure life the way people lived it. 

“It counts special locks for our doors and the jails for the people who break them,” he said.  

“It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl.

“It counts napalm and counts nuclear warheads and armoured cars for the police to fight the riots in our cities.

“The gross national product does not allow for the health of our children, the quality of their education or the joy of their play. 

“It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.

“It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. “

The New Zealand project may not go quite as far as that, but it does seek to go well beyond the simple arithmetic of GDP.

It will play a crucial role in developing the “Living Standards Framework” which seeks to incorporate the wellbeing measures with broader measures of various forms of capital to give an overall economic picture of New Zealand which goes well beyond the debit and credit approach of the national accounts.

The motor that drives much of the data is the two-yearly StatisticsNZ General Social Survey which sees Statistics undertake 8000 face to face 45-minute interviews with questions ranging from conventional economic ones about employment and income through to more subjective intangible questions like “to what extent do you feel the things you do in your life are worthwhile?”

The result is a comprehensive, and in places, worrying, picture of New Zealand society.

Some of it seems intuitive; couples without children lead altogether better lives than solo parents; people over 65 are mainly content except about their health; women are more worried about their personal safety than men and people under 35 have low incomes.

All of that is the day to day stuff of government.

But where the surveys gets interesting is when it asks more subjective questions; none more so than when people are asked whether they feel comfortable expressing their cultural identity.

Probably predictably, Pakeha feel most comfortable; Maori much less so but Pacific Islanders are even less comfortable than Maori and Asian New Zealanders the most uncomfortable of any ethnic group in New Zealand.

But for all-around low numbers, Maori rate particularly badly not matching the rest of the New Zealand population on any indicator. (Though they do come close on cultural identity).

Asians, on the other hand, lag behind only on incomes and housing but are well behind on cultural identity.

For Treasury Deputy Secretary and Chief Economic advisor, Tim Ng, says that at this stage the wellbeing measures have been used as a diagnostic tool for Budget 2019; a way of finding out where the Government needs to act.

“What it has enabled us to do is to look more comprehensively than we have before across the 12 different domains of current wellbeing and the four capitals (Human; social, natural and physical and financial capital) and sue that as a way of framing up the things that we thought the Government should be looking at in Budget 19,” he said.

“Of course that entered into the Ministerial process, and Budget guidance was issued to agencies around the middle of this year.”

That led to what Ng says were “better conversations” with agencies about their initiatives.

“Previously there has been a bid management process where agencies have come up with their initiatives and we, the Treasury, have helped Ministers process them and make their assessments about what they want to prioritise.

“The difference this time, and it is still ongoing, is that agencies are required to state the costs and benefits of their proposals in terms of the same domains that are in the dashboard so if an agency has an initiative they are required to say what they are trying to have an impact on and what is the intervention logic that leads them to believe the initiative will have such an outcome.

“What is the evidence that supports that claim.”

Longer term the Dashboard will be sued to evaluate the progress of the initiatives and try to establish whether they have attained the objectives they claimed they would when they were approved.

The Dashboard is taking the Treasury out of its usual comfort zone of tangible, physical numbers and hard evidence into more intangible measures of things like social connectedness and cultural identity and Ng concedes that it is a learning process for them.

But there are limits. Problems like cultural identity might be best addressed by political symbolism or even rhetoric.

“They are at the boundaries of official advice,” said Ng.

“It’s not an area that the Treasury as an institution would seek to be very forthright in.

“it is an area where we are trying o understand better how our own behaviour in terms of bringing into play cultural factors and measuring cultural conditions – things like discrimination or the ability to be oneself in New Zealand — how we interpret those things and how we link them through to actions by Government.”

The so-called four capitals which have activities and objects assigned to them and a value put on them have also posed problems.

Treasury’s website describes “Natural capital” as including “individual assets such as minerals, energy resources, land, soil, water, trees, plants and wildlife.

“It also includes broader ecosystems and their services; that is, the joint functioning of, or interactions among, different environmental assets, as seen in forests, soil, aquatic environments and the atmosphere.”

Thus the Living Standards Framework must also explain how it adds (or even detracts) from those capital items.

“We’ve learnt a lot about the measurement science in the natural capital area; the same probably goes for social capital as well .”

Ng, however, says measuring human capital is much easier because there are internationally accepted education measures which can be used.

Ng says what Treasury is doing is world leading.

That is because we are trying o drive it through one of the core Government processes being the Budget process.

“Logically there is no reason why it should be limited to the Budget; it equally applies to regulatory assessment and other activities of Government.

“Other countries, even if they have begun the measurement process, have not gone as far as we have in trying to change they that Government processes work.”

Finance Minister Grant Robertson, who has been a strong supporter of developing the wellbeing Budget was, however, careful to point out that it would not be the only measure sued in preparing next year’s Budget.

“This tool will be used alongside other measures,” he said yesterday.

And Treasury themselves say that the whole thing is a work in progress; that they will continue to work on their dashboard but once it becomes more widely known and understood, it should move to the heart of economic and policy debate in New Zealand.