In a pre-budget speech on Friday Bill English made much of “social investment”. It will be a central feature of the budget on May 21.
What is it? And is it really investment?
Throw in two other cues.
One is that John Key has said he wants his prime ministerial legacy to be what his government does for disadvantaged children. That in part stems from his own downscale period — though with a battler-mother who valued education and the sort of values that set a child up in life whatever the material start.
The second is English’s often-repeated line of the choice he made in 2009-10 when the global financial crisis compounded a drought-driven recession.
He said it again on Friday: “We decided to support the most vulnerable, maintain benefits and focus on better public services, rather than cut spending.” English’s parliamentary baptism was in the turmoil sparked in the National party by Ruth Richardson’s slash-and-burn “mother of all budgets”. In 2009 he did not slash and burn.
Some might call that minor-key Keynesian.
But only minor-key. English told public service chief executives in 2009 to invent ways of “doing more with less”. Operating expenses such as wage bills, back-office expenses and so on were capped.
The squeeze is still on. On Friday English said he is cutting to $1 billion the 2014 budget’s $1.5 billion “operating allowances” — new spending — for 2015-16 and 2016-17. The Treasury estimates 1.5 per cent lower economic growth over the next four years than it projected in the 2014 budget.
Still, $1 billion is double the $500 million average through English’s first six years. And it needs to be put in the context of English’s “better public services” invention, in which his “social investment” invention sits.
The “investment” idea was borrowed by the 2010-11 welfare working group from the Accident Compensation Corporation. Now called the “forward liability investment approach”, it involves calculating the fiscal liability of young people going on a benefit and staying there and finding ways to keep them off. The return on that “investment” is the avoided future liability in benefit costs.
English has vowed to apply this more widely. On Friday he focused on investing in at-risk children’s first five years, the years when much of the later trouble gestates.
The Ministry of Social Development (MSD) says actuarially calculating the future cost sharpened its focus on which “cohorts” (a favourite English word) to prioritise and what needed to be done to keep them off the benefit. MSD says that requires not just getting them into a job but improving overall personal outcomes through intensive case management so they don’t boomerang back on to the benefit.
Also, much more and finer-grained data has been generated which can help target resources and improve case management. Wider matching of these data with data other government agencies collect and hold could establish correlations of need and dependency — though some trying to do this say patch protection still hampers sharing.
(A loose parallel is private firms’ use of data on consumer’s purchases and other habits to target marketing.)
English says this forward liability approach can be used to harvest more “low-hanging fruit”.
Certainly, he has been shaking some trees. One is social housing. He wants anyone other than Housing New Zealand to take over managing houses for the poor. Sceptics abound.
Another is his general push to farm out services through non-government agencies which he thinks can better identify and deliver to specific “cohorts” than rule-bound government agencies. So: give the disabled vouchers so they can shop around.
This reflects his heavy “customer” emphasis in his speech to the Institute of Public Administration in February.
What English has left out is the “forward asset” side of the equation. (Just as he has left out investing in the highly profitable Cullen super fund.)
Businesspeople invest to build assets. Insurance to avoid a liability is a small part of the action.
MSD is finding co-benefits such as tax revenue, better health and less crime, from those it helps to successfully stay in work.
This suggests an innovative, businesslike government could profitably focus policy on building assets.
Education has always been thought to do that — though how much of that “investment” generates private assets (more earning power, a wider appreciation of what life offers) and how much public assets is not rigorously calculated.
Science is underinvested. Natural resources likewise. Health is overwhelmingly a repair shop when it could be a big forward-asset-investment in “wellbeing”.
“Wellbeing”? Some in the Treasury have been exploring “wellbeing economics” — comprehensive wellbeing, not just production, the usual yardstick — and related “stocks” of physical, human, natural and social assets.
That would be a radical rethink. Is English up for that? If not (subject for a future column), is Labour’s Grant Robertson?