Public Finance (Wellbeing) Amendment Bill

Part 2 of the bill deals with the responsibilities of Treasury with regard to wellbeing reporting. Part 1 was about the Government of the day dealing with the fiscal strategy report, that the Government of the day is responsible for. Part 2 deals with Treasury producing an independent analysis of wellbeing in New Zealand.

There was some debate as we prepared this legislation about how regularly that kind of report should be delivered. Obviously, the Government delivers a Budget each year. So, in Part 1, the fiscal strategy report would reflect wellbeing objectives each year. In order for Treasury being able to produce that report and to do it in such a way with a decent amount of data available, being able to draw on data that doesn’t necessarily update annually but updates over a longer period of time, we determined that four years was the appropriate length of time.

The other reason for that is that there are two other elements within the Public Finance Act, within the public finance reporting that is mentioned in the Public Finance Act; that is, the statement on the long-term fiscal position and the Government’s investment statement. They are also four-yearly reports; so we thought it was best to line the three of those reports up on the same time frame in order to be able to get some consistency within reporting that the Government does under the Public Finance Act.

It is important for the integrity of this process that Treasury is able to do this work independently of the Government of the day, just as they do on all the other aspects of their reporting within the Public Finance Act framework. So this is the partner to the activities of the Government of the day, and Treasury will be producing these reports in line with their other fiscal reporting.

Thank you, Mr Chair. This is, of course, the Public Finance (Wellbeing) Amendment Bill, and we’re now on Part 2, which is the wellbeing report. We’ve traversed it at length, although I had wanted to question further this whole definition of wellbeing. If Treasury is then reporting on wellbeing, actually, every New Zealander should be able to understand what that means. I think, if you walked down Lambton Quay right now and asked 10 people what wellbeing is, you’d get 10 different answers. It’d be really interesting, actually, if you walk into the Treasury building, because you’d probably get 10 different answers as well.

So the questions I’ve got are around the work required to produce the wellbeing report, and, actually, what will Treasury stop doing, because, again, if you ask most people what Treasury’s role is, it is to provide economic advice to the Government of the day. As we saw, actually, in the Epidemic Response Committee, Treasury appeared on a number of occasions. One of the important things they did was to provide advice and forecasts, actually, on unemployment numbers. One of the key, probably indisputable, facts in terms of a component of wellbeing is has someone got a job, have they got the ability to earn an income and put food on the table?

So my questions are around Treasury’s role. How many people are employed in Treasury at the moment? How many people will be focused on the wellbeing report? What work that Treasury does now won’t be being done as a result of the change that the Government wants to put into this? As I said, Treasury’s role is really important in terms of independent, sound advice to the Government of the day. Actually, that’s what taxpayers want: taxpayers want to know that there is sound economic advice that’s being provided to the Government of the day, and that’s Treasury’s job.

So, with the change that this Government is proposing in adding in wellbeing to the Public Finance Act, it obviously provides quite a different focus for Treasury and where it should head. So my questions are around Treasury staff numbers—how many will be responsible for this wellbeing report? What are they not going to be doing? How much does this cost for the wellbeing report? It would be interesting to then know what decisions the Government made in terms of Treasury splitting its focus to focus on this wellbeing report instead of probably actually providing greater advice to the Government of the day, and actually improving their accuracy.

So, for example, the COVID-19 unemployment figures—the estimates have changed wildly in terms of unemployment numbers, but I think they’ve settled at about 9.8 percent as a peak. But the bit that is a bit concerning then is that it returns within a two- or three-year period to when, after the global financial crisis, it was 10 years. So we do want to know and we do want to be reassured that Treasury is focused on analysing Government spending, is focused on providing sound advice to the Government of the day into the effectiveness of Government spending, and obviously driving higher productivity in the public sector. So I’ve asked a series of questions and I’ll come back for some more.

So the factual questions that the previous member, Louise Upston, asked are around 600 full-time equivalent (FTE) staff that were employed by Treasury. Of those who are specifically dedicated to working on wellbeing and the Living Standards Framework, there are three full-time equivalents in the Living Standards Framework implementation team and four to five FTEs in the office of the chief economic adviser working on these matters. Three work on the technical side of the development and maintenance of the Living Standards Framework and the Living Standards Framework dashboard, and around about 1.5 FTEs are currently dedicated to the broader legislative work around the Public Finance Act. That includes the work on wellbeing. So it’s a small but perfectly formed team within Treasury who are working on this.

I would note that—and I did say this, I believe, in my first reading speech on this bill—of course, the Living Standards Framework, which sits at the core of how Treasury is working on wellbeing, was, of course, actually worked on under the previous National Government. The big difference between what happened then and what’s happened now is that this Government has decided that this piece of work is genuinely world leading and provides us with a much richer picture of our overall success as a country in the more narrow fiscal measures that are, of course, still very much a part of the Budget. So we took on that work that Bill English began and carried it on and extended it into the work that you see in the bill that we see in front of us today, with regard to the Public Finance Act.

On the member’s wider set of questions, I do think she is at risk of contradicting her earlier contributions on Part 1 about what really matters to New Zealanders. It is absolutely clear that New Zealanders have an inbuilt sense of understanding of the fact that, yes, it’s important that we manage our finances carefully, that we save for the rainy day, as we’ve experienced in terms of COVID-19, but the very thing the member asked for—the impact of our spending—has to be seen in the context of those four capitals, on how we’re improving the experience of people’s individual lives, how we’re improving the strength and connection of our communities, and how we’re improving and supporting our environmental outcomes. All of those things matter, and now we have a framework that is world leading—regarded well all over the planet and being picked up by countries all over the world because it’s capturing a much wider sense of our success as a country.

So, actually, by giving, under Part 2, Treasury the responsibility of producing that report, it means that there is an independent source from the Government of the day, of measuring that success against that set of objectives. So I understand that the member feels a need in this particular environment we’re in now to raise questions that, you know, I think have already been answered, but I just reinforce the point that this is developing work that had already started. I think New Zealanders should be extremely proud of the fact that we are leading the world in genuinely measuring the value of our spending. We don’t just value our people as numbers on a spreadsheet; we value our people in terms of the outcomes, as a Government, that we are helping those people in their communities to achieve. Every four years, Treasury is going to now have the responsibility under Part 2 of this bill to report back to New Zealanders on that, and I think it’s a good thing.

Thank you, Madam Chair. I think it’s a great opportunity just to put on record, you know, the acknowledgment for the Rt Hon Bill English for instigating the framework with Treasury. I think it’s important at this point for the National Opposition to get a few things on record for those that are listening into the debate. This is not a debate about whether or not we think the Government should be supporting people’s wellbeing; that’s a no-brainer. Governments left, right, and every other colour had been doing that for generations.

I made that point in my first contribution, which, unfortunately, I think the Minister—so, you know, my point was actually that this is not a debate about wellbeing; this is a debate about whether wellbeing should be sitting in the Public Finance Act, both in terms of the objectives in Part 1 and, in this instance, the report and whether or not it is a core function for Treasury to be doing that and producing a wellbeing report, because actually there is a social wellbeing agency. It was previously the Social Investment Agency. So why is it that we have two different departments, two different agencies potentially doing the same work?

So this bill is all about the Public Finance Act and whether or not it should be changed to include the wellbeing objectives and the Treasury reporting back on progress. That’s this particular debate. The debate isn’t whether or not we believe as a party that there should be outcomes and there should be measurable progress towards the outcome, because that was the Better Public Services targets. That was not just a function for a few people sitting in Treasury writing a report; that was a whole-of-Government approach. It was a whole-of-Government approach, with Ministers taking accountability for the results being produced and the outcomes that my colleague Andrew Bayly was speaking about before, the very people collectively our Parliament serves—whether it was reducing the number of victims of crime, whether it was getting people into work, whether it was reducing family violence, whether it was increasing the rate of immunisation to keep children in greater health, whether it was increasing educational achievement. So this is a debate about the mechanism.

Actually, in terms of wellbeing, the architect of this, the Rt Hon Bill English, and the architect of social investment, was all about the previous Government’s focus on producing outcomes. So this is a debate about changing the Public Finance Act and saying actually, you know, most people would recognise Treasury’s role in providing sound economic advice. So my questions now are: why is it that this work is being shifted to Treasury when we have a social wellbeing agency that actually has a role already and actually, if anything, their responsibilities have been stripped back? So when you have an agency that is dedicated to wellbeing, why is it that you now have another agency that is writing the report?

It’s interesting, because if you look at social development, for example, I think there are 111 people in their insights team. So they’re measuring things all of the time. You now have—well, it was the Social Investment Agency; it’s now the Social Wellbeing Agency. So why is it that this change in legislation actually then means in this particular part that the wellbeing report sits with Treasury to measure the state of wellbeing in New Zealand? I’ve asked a series of questions there that I’d like the Minister to answer.

Effectively, the answers to the member’s questions come down to one very fundamental principle: how serious a Government is about holding itself accountable for the overall effects and outcomes of the programme of its work. At Budget time each year, the Minister of Finance, since 1989, has stood up and been held accountable for the fiscal outcomes of the Government. Our view is that that’s not good enough; that, actually, a Government should be responsible across the board for outcomes, not just in a narrow set of fiscal indicators. So it’s actually about how seriously our Government thinks it should be held accountable and how serious it is about the overall wellbeing objectives and outcomes for New Zealanders. We believe, on this side of the House, that we should be taken seriously and that we should have accountability for those things, and the Public Finance Act and Treasury’s role in both monitoring that Act but also in monitoring the overall outcomes means that they are well placed to produce this report.

In terms of the second set of questions, which are really around the role of the Social Wellbeing Board that used to be the Social Investment Agency, it does bring us back to the difference between the last Government’s approach to these issues and this Government’s approach. Yes, Treasury developed the Living Standards Framework under Sir Bill English’s tenure as finance Minister. He, however, didn’t see that it had a role clearly within the Budget process. The National Party have changed their position on that, because Todd Muller said two Sundays ago that he does see it having a role in the Budget process, but Bill English didn’t. Bill English allowed the work to continue and supported it, I’m sure, at a conceptual level, but he didn’t see it as being closely involved. The member is correct in saying that Mr English was very focused on the social investment approach. Personally, and from this Government’s point of view, that was a very narrow way of looking at wellbeing, because what it did was take an actuarial approach: put people, really, as numbers on a spreadsheet and move them around. This approach is much broader; this approach is clearly about making sure we look at a range of wellbeing objectives, not just fiscal ones, and I’ve been through the four capitals of the framework several times in my interventions.

So, from the member’s perspective, she’s asking, “Well, why Treasury? Why the Public Finance Act?” Because Treasury is responsible for the overall value for money of our spending, and that includes more than just dollars and cents; it includes the outcomes that we want for New Zealanders.

I have three particular questions for the Minister. In his first contribution, he acknowledged that this approach by this Government was world leading and that “many other countries are now following this approach.” I wondered whether the Minister could give us a list of the many other countries that are following this approach.

The second point I want to ask questions to is the requirement for the Minister to, effectively, report and present to the House at least every four years.

💬 Hon Grant Robertson: It’s not; it’s Treasury.

It’s for Treasury to report to the House at least every four years, and for the Minister then to present that report to the House of Representatives. My question is: why up to four years? Because it seems to me that’s completely inconsistent with the current regime we’ve established around the Public Finance Act and the Fiscal Responsibility Act, where annually we get very exact positioning of the financial structure of this country. What does surprise me is that we had all the fanfare in Budget 2019 around the Wellbeing Budget and leading the world, and then, effectively, no mention of it at all in Budget 2020. So I think comments on that from the Minister would be very helpful.

The third thing I want to know is how much resource and how much progress Treasury is making in developing its wellbeing report. And I think, if I heard the Minister right, there are 600 employees in total and three full-time equivalents working on this. I want him to comment on the Newshub story of April 2019, as to the accuracy of the story, that, apparently, Treasury officials were playing with wellbeing cards. I know this sounds incredible, and it might not be true, but it was certainly in the media and I didn’t see a comment from the Minister then denying it. But the Treasury officials were sitting down apparently playing with cards they’d devised—such cards as the “sun feeling card” and the “moon feeling card”, as they were busy trying to develop the criteria—

💬 Hon Tim Macindoe: What was that about?

Well, I think Treasury, to be fair, have been handed this bomb by the Minister when he now, for an hour or so, hasn’t been able to explain what wellbeing objectives mean, and now he’s handing the responsibility to Treasury and saying, “Well, it’s your job, Treasury. You’ve got four years to do it, but get on with the job.” So their first attempt, in April 2019, was, apparently, to develop a set of wellbeing cards. So I’d be very interested if the Minister could sort of tell us the progress that Treasury’s making. We’re struggling on this side of the House to understand the progress that Treasury’s making. They’ve not been able to do it. They’ve got up to four years to do it; I accept that. Now, they might have made tremendous progress; they could have been able to present it in association with Budget 2020—well, clearly they weren’t able to do that.

The final point that worries me greatly about this is that Treasury is respected for its independence and its expertise around financial and economic matters and the advice that it then gives to Government. It appears to me that it will almost be impossible, as they develop their report and their objectives, for Treasury not to be compromised and, effectively, be dragged into commenting on Government policy. I think, if that is where this heads, Minister, that will be a sad indictment of a Government then interfering with the independent role of Treasury. So a number of questions there; I’d be grateful for answers to all of them.

I thank the member for his questions, some of which have already been asked; so I will repeat the answers for the benefit of the member, but they have already been asked. The ones that haven’t were around other countries, and it was interesting, actually—was it yesterday morning or the morning before—that I had a conference call with the Canadian Minister of—a fantastic name for her portfolio, I might say—Middle Class Prosperity. She is also an associate finance Minister in Canada and she specifically initiated the call to be able to learn about the experience that New Zealand had had when it came to our Wellbeing Budget. It was a very useful and interesting conversation. I find I learn a lot from those conversations as well, as different countries are embracing this approach of not just valuing the narrow numbers on a spreadsheet—

💬 Rt Hon David Carter: Just one.

No, I was giving you the latest example, Mr Carter, and others include France, Italy, Spain, Wales, Scotland, the United Arab Emirates, and Costa Rica. These are all countries—and the member may be interested; in fact, I’ll invite him, given he’s so interested, to have a look at the network of countries that work on these issues. I know that when I delivered a speech about this at the London School of Economics in January last year, this is now a field of very serious endeavour within the study of economics and wellbeing economics, and so this is genuinely a topic. And I know the member was looking for ways of coming up with questions, but that is the answer to his question.

The matter of why it’s four years was answered in an earlier question. It’s to align it with the investment strategy and the long-term statement of fiscal position so that those are four-yearly reports, and so I have already answered that on the minute. On the member’s final matter, what I can say to him is that the two events, the wellbeing outlook and framework and the Treasury’s particular health and safety and operational matter, are utterly unrelated things. So the work on the wellbeing approach is not related at all to what was an internal operational matter around how—

💬 Rt Hon David Carter: So they’re still playing cards.

—to support New Zealanders well. You’d have to ask the Secretary to the Treasury that, but not related in any way whatsoever, Mr Carter, to this bill.

Thank you, Mr Chair, for the opportunity. I wanted to talk about two things. I don’t think the Minister’s answered David Carter’s question around the four years, and I just want to understand why four years, not just because other reports are done four-yearly, but I want to know why four years. David Carter sort of suggested annually—you know, quite short—or at least asked the questions. My question is why is it not five-yearly or six-yearly, because these “Titanics”, these targets, take a long time to turn to make a difference, and to me, at least, four years seems to be quite a short period of time. I understand that it’s good that it’s not a three-yearly political cycle—I get all that. But I want to know his thinking around why four years, and I don’t want to hear the answer “Well, just because there are other reports that are reported four-yearly.”

The second question I have is around the definition of “independent”, relating to Treasury’s report. David Carter also sort of hinted and got to part of my question, but, again, it wasn’t addressed by the Minister. The Minister talked about the Labour Government’s framework and targets being able to be slotted into this bill, and another National Government will be able to create their own framework or targets and it would neatly—but have to turn their mind to these certain things. So I get all that. So my question is: when Treasury is doing their report, when you talk about, Minister, “independent”, does Treasury consider the Government’s framework and targets and emphasis or not? Is Treasury purely independent and do they have absolutely no consideration of the Government’s emphasis, whether it’s a National Government or a Labour Government’s emphasis, and look to conduct their own independent surveys of what New Zealanders wish to focus on and want to define as “wellbeing”, and go out and survey globally what Australians, the UK, Canadians consider to be wellbeing?

Because it’s quite difficult—we’ve talked about the definition of “wellbeing” and we’re not going to go there again, but I want to understand what “independent” means as far as Treasury’s role in producing this report. Is Treasury going to be dragged in, as David Carter suggested, to comment on the political nature of the Government’s frameworks, the Government’s emphasis, you know, the pillar that that particular Government wants to focus on, or is Treasury absolutely not considering the Government of the day’s framework that is inserted into this bill?

As I said in my answer to the Rt Hon David Carter, this is a matter I traversed in an earlier question, but I will repeat my material for the member Alastair Scott’s benefit. So not only is it to line up with the other long-term reporting obligations that are in the Public Finance Act which are four-yearly; it is also because of the way that data does arrive. We’re obliged to do a Budget every year, but, actually, a lot of the data that we rely on as a country in terms of wellbeing does not come annually. The General Social Survey is the core, actually, of a lot of the data that is part of Treasury’s Living Standards Framework. That is not produced in a way that can be updated every single year; so a four-yearly framework provides the ability to have the richest set of data. Four years is the judgment of where we can get that data and it will be meaningful and that it lines up with the other elements of Treasury’s reporting framework.

In terms of the member’s second question around their independence and what they will measure, I just refer him to section 26NA(4), inserted by clause 7, which includes with the amendment here that “The statement of responsibility must state that the investment statement has been prepared by Treasury using its best professional judgements.” So this is about Treasury’s judgment, and in actual fact, it’s in many ways a recognition of the fact that the annual wellbeing objectives and reporting will reflect the Government of the day’s view, the four-yearly one will actually reflect Treasury’s view, and to be very specific on the member’s question, they may well differ from what the Government of the day has said its wellbeing objectives are.

I move, That the question be now put.

The question is that Part 2 stand part. All those in favour say Aye—

I raise a point of order, Mr Chairperson. The member has just moved that the question be now put. We need to vote on that.

Yes, that’s right, and I did not accept that motion. No other member stood to take a call. If they had, they would have got the call. Therefore, I must put the question. I’ll repeat the question.