Economy

Wellbeing Budget: a rocket or a drone?

Two documents foreshadowing next year's Wellbeing Budget - the Treasury’s Living Standards Framework (LSF) dashboard and the Budget Policy Statement have now been launched.  Arthur Grimes discusses whether the launch is of a rocket or just a drone.

Living Standards Dashboard

The Treasury launched the LSF dashboard with its publication of Our People, Our Country, Our Future. The dashboard comprises 12 wellbeing ‘domains’ and four ‘capitals’. It also shows inequalities across different population groups for nine of the 12 domains.

The domains comprise: (i) civic engagement and governance; (ii) cultural identity; (iii) environment; (iv) health; (v) housing; (vi) knowledge and skills; (vii) income and consumption; (viii) jobs and earnings; (ix) safety; (x) social connections; (xi) subjective wellbeing; and (xii) time use. The dashboard presents a range of indicators showing how well (or badly) New Zealand as a whole is doing across each area.

The LSF builds on the OECD’s approach in its Better Life Index. It also builds on the Ministry of Social Development’s pioneering Social Report series first published in 2001. The initial Social Report stated: “The aim of the report is to provide information on the overall social health and well-being of our society.” It presented 36 headline indicators across nine domains (which closely parallel the 12 LSF domains). Included in its aims were “to provide and monitor over time measures of well-being and quality of life that complement existing economic indicators” and “to help identify key issues and areas where action is needed, which can in turn help with planning and decision-making”.

This sounds very similar to the aims of the LSF – and yet the Social Report did not gain traction as a policymaking framework. Why not, and can the LSF be more successful?

One reason is the Social Report was never incorporated into broader frameworks used to prioritise government expenditures. Some other countries’ cost-benefit tools, such as the UK’s Green Book, explicitly incorporate impacts of policies on subjective wellbeing into their analyses. The Treasury is examining this possibility but it is still work in progress.

One aspect in which the Treasury’s analysis has progressed is the measurement of inequalities. The Treasury’s work shows several groups have poor outcomes across multiple wellbeing domains. In particular, sole parents and Māori (and, to a slightly lesser extent, people of Pacific ethnicity) have poorer outcomes than the rest of the population on all the outcomes. In contrast, people aged at least 65 years do well in most domains. This information can assist policymakers to redirect attention (and expenditures) to groups more in need of social assistance rather than to groups mostly doing pretty well.

Budget Policy Statement

So how does Finance Minister Grant Robertson's Budget Policy Statement make use of this type of information from the LSF? Currently, the LSF does not incorporate a method for prioritising programmes to address gaps in our living standards. For instance, while it shows women are doing poorly on issues of safety and Pacific families are doing poorly in housing, how should one decide where the money should go?

In his Budget Policy Statement, Robertson has used the LSF information as a basis for making judgments to identify areas most in need of attention:

- transitioning to a sustainable and lowemissions economy

- boosting innovation, and social and economic opportunities in a digital age

- lifting Māori and Pacific incomes, skills and opportunities

- reducing child poverty, improving child wellbeing and addressing family violence

- supporting mental wellbeing, with a special focus on under 24year-olds.

The data contained in the LSF dashboard supports the need, especially, for the last three of these five priority areas. For example, the ‘spider diagrams’ in the LSF show that, as a group, Māori have a greater likelihood of having ‘low’ (i.e. poor) outcomes on all 12 measured domains than the rest of the population, and have a lower likelihood of having ‘high’ (i.e. good) outcomes for most domains. Sole parents have similarly bad outcomes across the board.

There is another wellbeing domain that is problematic: housing. The Budget Policy Statement says the evidence on housing “has strongly influenced the priorities for Budget 2019”. Yet it is not included in the five stated Budget priorities.

This raises the issue of whether there will be a real – or a token – response to the prioritised issues relative to other policy areas. That will be the real test of whether the Wellbeing Budget represents the launch of just a drone or is really the launch of a rocket that might transform the wellbeing of those most in need.

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