Exclusive: Robertson on the Budget
By Richard Harman (author)
The Budget this week will be a groundbreaker.
The logical continuation of the “Wellbeing” measures it will report on will extend right across the public sector.
For Finance Minister Grant Robertson it will the first big step out on a path that will lead, eventually, to a restructuring of the way that Budgets are composed and set up.
In many ways, it will be as significant as the 1989 Budget, which was the first under the Public Finance Act and therefore the first to apply medium-term specific targets to the Government's finances.
The main target then was a reduction in government debt to “below 50 per cent of GDP” by 1992, three years away.
The Act was a product of its time with its promise to reduce mortgage interest rates to between seven and ten per cent and to reduce unemployment below 100,000.
Robertson can now move on, in part because 30 years of the Act have seen a new discipline become embedded in the Government’s finances.
That was evident at the Prime Minister’s weekly press conference yesterday when she assured journalists that the post-2022 revised debt targets would still include the current 20 per cent of GDP as the midpoint in the new 15 – 25 per cent range.
Back in 1989 then Finance Minister David Caygill could have only dreamed of a target like that.
The new challenges that face the Government now are more complex.
A simple numeric target will not be enough to fix things like child poverty or Maori and Pasifika incarceration rates or even an issue like confidence in cultural identity which appears on Treasury’s Living Standards framework as a factor in income levels.
So this Thursday we will see some numeric targets and some explanation of these measures.
In essence, a wellbeing analysis seeks to define policies by their outcomes. Under the Public Finance Act, as it stands (though there have been some moves in the wellbeing direction), Budgets are essentially about outputs.
“What we did in this budget there was have a wellbeing analysis done of all the budget proposals,” Robertson told POLITIK.
But this has been done as a sort of voluntary add on process.
Robertson believes that putting a requirement into legislation galvanizes the public service.
“I've really noticed that with child poverty reduction act that has really sharpened and focused the minds of the public service now there is a legislative requirement to report on this," he said.
“And so, therefore, we've got data coming through.
“We've got to improve their collection of that.
“ But equally their analysis of the particular initiative is now thinking about how is this going to reduce poverty numbers against the indicators in that AAct.
“So what we're really saying is we want to be able to kind of move forward similarly with a broader wellbeing analysis and also have Treasury report on a reasonably regular basis on wellbeing as well.”
Those reports will probably not be even annual but over a longer time frame like the current long term fiscal statement and the investment statement which each appear every four years.
But the first step will be the inclusion of a provision for wellbeing targets in the Public Finance Act and for them to be acknowledged in each Budget just as the overall debt targets are now.
The process will be similar.
The Government will set the specifics of the targets; the Act will simply contain the requirement that they be included in the Budget.
The next step will open up some big questions.
First will be an attempt to rationalize the reporting requirements for Government agencies and entities.
Robertson says work is now going on within the Government on this.
“We have a host of different statutory and non-statutory planning and reporting things we've got statements of intent; we've got four-year plans we've got a long term investment plans.
“We've got various other types of reporting.
“I think we can probably do a bit better to be smarter about that and might get a bit more strategic and align with the concept of wellbeing.
“So that's the next stage of work; what a more streamlined and effective set of reporting systems would look like.”
But there is one obstacle to turning wellbeing budgets into charters for multi-agency solutions to problems.
The Public Finance Act requires that money be appropriated on an agency by agency basis.
The last Government made some modifications to that, but the wellbeing approach is going to require radical changes.
That is already evident in the recent domestic violence initiative announced by the Government.
“We've now got eight agencies all working together towards a single set of outcomes for people.
When we think about the way that we go about planning and so on if we could think more about those outcomes and planning and use across agencies tools.
“There really isn't a facility for that now.
“So that's something we can work on too.“I think there's some technical things we can look at around the way we deal with appropriations. “
A lot of what Robertson is talking about is highly technical public-service speak.
For example, he is studying the possibility of multi-year appropriations.
Projects don’t necessarily fit into the neat July to June public sector financial year. Already he has started projecting capital allowances out over a number of years.
“We've got a four-year multi-year capital allowance now, and obviously as time goes on we can look at whether that is the right time or whether there needs to be other areas where we need other types of multi-year funding.
“This is an area that is an area where we know we're always going to be spending.
“Why not do that and actually give the agency that to get more certainty."
But that is not a project for the immediate future; if he returns as Finance Minister after the next election, it would be on the work programme then.
“ To be frank, we have an election year next year.
“So some of that sort of work around looking at how we can do better planning and reporting how we can simplify some of those appropriation issues, I think we could probably do that more of that next year but I think that longer-term stuff around the joint appropriations and joint planning will take a bit of time.
“And I've got it --- we've got to bring the public service with us.”
This Thursday’s Budget will be different. It will mark yet another New Zealand fiscal innovation like the Public Finance Act and the Fiscal Responsibility Act.
The Opposition will undoubtedly attack it, but the Wellbeing Budget is actually a logical continuation of the process that began back in 1989.