Roots of Wellbeing Budget reach back to National

The Government's much-vaunted "Wellbeing Budget" will not be a bold break from the past but most likely just a repackaging of the approach of most of the last decade, writes Peter Dunne.

The Government is moving quickly to put the debacle of the capital gains tax behind it and focus instead on its second Budget due to be released on May 30. At the same time, it will also be determined not to repeat some of the mistakes associated with the capital gains tax debate. And, because the Budget is a confidence matter, it will be proceeding with the assurance of the full support of its partner, New Zealand First.

One of the mysteries of the capital gains tax debate, fuelled once more by the Prime Minister's affirmation of her personal support for such a tax in the same statement that she rejected outright the idea her Government would ever implement one, is why the Government did not do more to promote its position to the public at large in an attempt to win them over.

Many possible explanations have already been offered, and no doubt many more are yet to come forward, but the bottom line is that the Government will not make the same mistake twice.

Therefore, as has already been signalled, there will be plenty of the customary of Budget good news stories released over the next few weeks as the Government, like its predecessors, seeks to milk every possible advantage from its Budget decisions.

That should be relatively plain-sailing. Governments always have the upper hand on the policy agenda in the weeks leading up to the presentation of the Budget.

But this year's Budget has an added significance - it is the year of the "wellbeing" Budget, and its success or failure will be determined by the success or failure of the "wellness" message to resonate with New Zealanders. But here is where the problems begin, because aside from the generalities, the Government, in a manner reminiscent of its approach to the capital gains tax debate, has been very vague about what the "wellbeing" Budget really means, how it will be significantly different from the Budgets we have been used to, and what greater impact it will have on the lives of New Zealanders.

At the World Economic Conference in Davos in January the Prime Minister gave a hint when she said: "We need to address the societal wellbeing of our nation, not just the economic wellbeing,” and that she was promoting a “wellbeing Budget” to gauge the long-term impact of policy on the quality of people’s lives.

That sounds good, but what does it mean in practice? The Minister of Finance put a little more flesh on the bones in a speech earlier this year when he said, "Using the Treasury’s Living Standards Framework (LSF), evidence from sector-based experts and the Government’s science advisors, and with collaboration among public sector agencies and Ministers, we have identified five priorities for the Wellbeing Budget."

He further explained that The LSF contains data measures across 12 areas, including health, housing, safety, and social connections, which are in most cases internationally comparable. It shows the current and future wellbeing of New Zealanders broken down by their ethnicity, age, gender, region, family time and deprivation area over time.

By implication, we are being led to believe that this represents a vastly different approach to Budgets than has been the case until now, with this Government at the helm of a much more holistic and thorough approach to the Budget process than has ever gone on before.

Well, unfortunately for its narrative, this is not the case. Labour likes to think that the nine years of the previous National-led government, and to some extent the Labour-led government before it, were years of wasted opportunity, where no innovative thinking, outside perhaps the so-called Cullen Fund for retirement savings, and Kiwisaver, happened, and that, consequently, their historic mission is to fill the yawning social, philosophic, and compassion gap.

The truth is somewhat different.

Treasury's Living Standards Framework upon which the Government is placing so much emphasis has been in development since 2011, and the 2012 Welfare Reforms first introduced the notion of a social investment approach, looking to evaluate the long-term return from investing in social services, and to use this information to target future spending. That is barely different from the Prime Minister's 2019 Davos commitment to use the Budget process to gauge the long-term impact of policy on the quality of people’s lives.

In a 2016 commentary, the accounting firm KPMG noted that: "The social investment approach is also likely to survive this (National-led) Government in some form; given that the idea of using data and analysis to inform evidence-based spending decisions is hard to argue with". This is reinforced by the fiscal benefits – reducing future social spending gives future governments more discretion over where government expenditure is applied.

Or, as then Prime Minister Bill English told Parliament when debating the 2017 Budget, "We are unashamedly addressing the hard core of New Zealand's longest-run social problems, and in this Budget there are 14 initiatives that do that ... we are making some progress because what is the point of having a Government if it cannot deal with the most complex, the most vulnerable?" 

Again, sentiments that would not have been out of place in the Prime Minister's Davos speech in January.

What all this shows is that the work towards what is now being promoted as the bold and innovative Wellbeing Budget has actually been ongoing for most of the last decade and is not some dramatic new concept developed by the current Government. Indeed, many of the types of steps likely to form part of the "wellness and wellbeing" Budget's measures have already been underway for some years.

All this creates a conundrum for Labour, already struggling for successes in its self-proclaimed "year of delivery".

After the humiliation over the capital gains tax, it desperately needs a bold policy win. The Wellbeing Budget was supposed it be it, but given the amount of discoverable evidence around to the contrary, it will be stretching credibility to claim it as all its own creation, after all.

The Government is already facing criticism that is all spin and lacks substance, and presenting a vaunted Wellbeing Budget that is really just a repackaging of the approach of most of the last decade would merely confirm that criticism. But given the skeletal comments from Ministers so far and their own Budget Responsibility Rules it is difficult to see how the Wellbeing Budget can be anything else.

With Kiwibuild, the work of the Tax Working Group, District Health Board budget deficit blow-outs, to name a few, this Government already has a reputation for talking big, but never quite managing to deliver. All eyes will now turn to the Budget, and whether it will demonstrate the “economics of kindness” the Prime Minister earlier this year told London’s Financial Times it would, or whether it will really be no more than a continuation of the trend of the last seven Budgets, albeit it under a different name.

The odds are heavily on the latter. Bill English can relax. His legacy is intact.

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