Oram: Budget long on rhetoric, short on transformative funding

The Government’s first Wellbeing Budget is a useful start on the phenomenally difficult task of shifting how we invest as a nation and how we measure our progress, but old habits will die hard, writes Rod Oram.

Rather than our historic preoccupation with GDP, a useful but narrow and flawed metric, the Government is seeking to make better decisions by working with four capitals – financial and physical, human, social and natural – as key drivers of our standard of living.

Using that methodology the Government chose six priorities for its first Wellbeing Budget, and devised some innovative ways to bring multiple agencies of Government together to work on each.

This approach has brought about the biggest changes in the three priorities focused on people – mental health, child wellbeing and Maori and Pasifika aspirations. The investment will be substantial, particularly on mental health, and applied in some novel ways.

However, the Government has made far less progress in applying the wellbeing methodology to its other three priorities  - the productive economy, the environment and infrastructure investment. 

All three are largely business-as-usual with only a few gestures to new and co-ordinated approaches; they don’t get to grips with the massive transformation all three need; and, worse, there are some serious disconnects between them.

'Building a Productive Nation' is the first of these three in the order the Government presents them in the Budget. It does have a significant new initiative, a $300 million fund to help young companies overcome the shortage of capital they experience as they grow. Of that sum, $240m will be money the Government would otherwise have given the NZ Superannuation Fund to invest. The Fund will still get substantial sums. The other $60m will come from the existing assets of the NZ Venture Investment Fund, an established Government/private sector vehicle.

And the Government has also come up with $151m of additional funding to help businesses become “more productive and develop high-value, low-emissions products.” But it’s not clear which agencies will run that money, or how it will be applied.

By far the biggest disappointment of this Budget is the Government’s fifth priority, 'Transforming the Economy'.

This priority also embraces the fundamental overhaul of vocational education the Government has in train. But after that it drifts off into a welter of programmes, mostly old and some new, with mostly minuscule budgets.

The third of the Government’s economy-centred priorities is Investing in New Zealand. Its top four “highlights” are identified as $1.7 billion to “fix hospitals” over the next two years; $1.2b over 10 years for school buildings; money for five more DHBs to run bowel screening programmes; and $2.9b for “investing in better and more healthcare” by DHBs.

Again these are very worthy items, some with longish investment plans, mostly across many areas of public services. But it’s hard to spot the innovative, ambitious and multi-dimensional ones in the mix that are the results of this new Wellbeing Budget methodology.

By far the biggest disappointment of this Budget, though, is the Government’s fifth priority, 'Transforming the Economy'. It says its intention is “to grow and modernise the New Zealand economy and  ensure a just transition to a low-emissions future. We need to preserve and enhance our environment, as our natural resource based is the foundation for our long-term wellbeing.”

Yes, the Budget provides $1b to invest in KiwiRail and the Auckland City Rail Link. These will help reduce road congestion and emissions. But that aside, the Government is very long on rhetoric and astonishingly short on money or action for transformational change.

For example, the highlight of “The Productive and Sustainable Land use package” is $229m for “projects to protect and restore at-risk waterways and wetlands and provides support for farmers and growers to use their land more sustainably.”

Even more worryingly, the highlight of the “Meeting the climate change challenge” is another $8.5m as New Zealand’s contribution to the Global Research Alliance on Agricultural Greenhouse gases “to reduce and mitigate our agricultural emissions.”

Oh, there is an additional $3.2m for the Agricultural Climate Change Research Platform to support world-class research here in New Zealand to help agriculture deal with the effects of climate change.

Under the heading “Transitioning to a low carbon future”, there is the previously announced $27m for the new National New Energy Development Centre in Taranaki and $20m for a new science research fund “for cutting-edge energy technology.”

And there’s $49m over the next four years for Te Uru Rākau, the new government agency Forestry New Zealand, to help the sector generate more value from its wood and timber resources.

There’s $4m over four years to help the Ministry for the Environment “work on improving resource efficiency and shifting New Zealand to a zero-waste economy.” A tiny sum for a massive tasks, since per capita we’re among the most wasteful of developed countries.

... this is a good start on the Wellbeing Budget in social areas [but] the Government has a Herculean task ahead in economic and environmental ones.

All up, the climate change bracket includes only eight budget initiatives totalling less than $80m.

So it’s abundantly clear the Government, as the nation as a whole, has a vast amount yet to learn about the true value and importance of natural capital. Natural capital does have five references in the Budget document, equal to the number of references to social capital, and more than the four for human or three for financial and physical capital. 

But it has none of the innovation in programmes or serious commitment of money that the other three capitals have. Yet it is this transition to the low carbon economy which will drive our transformation to a highly productive economy, wealth generating and strongly sustainable nation.  

So, while this is a good start on the Wellbeing Budget in social areas, the Government has a Herculean task ahead in economic and environmental ones. One simple search of the Budget document illustrates this: The four new capitals used – financial and physical, natural, social and human had just 17 references in the 149 pages of the Budget document.

But that good old word capital, shorn of those crucial new modifiers, turned up 160 times. Clearly, old habits thrive.

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