Bill English’s lessons of impact-led reform and institutional change

By Miguel Carrasco

Friday February 19, 2016

Bill English

Better public services and reduced spending. This is an outcome that policymakers the world over pledge to deliver, but the record of many governments suggest it is more wishful thinking than reality. Sceptics who think it isn’t possible should take a good look at New Zealand. Its government — re-elected in October 2014 — recently balanced the books for the first time since 2008. For Bill English, the country’s finance minister, it is clear that their journey is still a work-in-progress.

English lessons

When the NZ government — headed by prime minister John Key — was re-elected in 2011, it created a Better Public Services program. English explains that “instead of hundreds of performance indicators, we identified 10 key areas and set measurable performance targets for the public service to achieve while, at the same time, meeting efficiency savings of 3%-6%.” The targets ranged from reducing welfare liability to reducing the number of substantiated physical assaults on children. “These targets were deliberately designed to be difficult to achieve. They are also designed to require significant focus on the customer by multiple agencies in order to achieve them.”

“The key thing for me and my ministerial colleagues is that all this is focused on customers,” he explains. “We have overcome some of the technical and data challenges, but one of the big remaining issues is how to properly incentivise larger social spending departments. They are all servicing the most vulnerable 10%-15% of the population — sometimes effectively, but often in a shambolic, supplier-driven model.”

To address this challenge, there has been a fresh push to embrace digital technology, and public servants have also been asked to work together in new ways, with agency chief executives being given joint responsibility — along with their ministers — for meeting these targets. English says that the initial signs are good, but there remains much work to do.

“I think we are still in the early stages of the kind of institutional change it needs to drive,” he admits. “People are clearer about what we are trying to achieve — and there has been some real achievement with particular targets around educational achievement and reductions in crime — and this progress has been sufficient for people to believe that this is a worthwhile exercise. But to get further gains will require new toolkits and a different way of working.”

This, he continues, is because delivering genuine impact for customers is what matters, and there is considerable scope for improvement. “The public service is recognising that working together is one aspect of it, and is getting better at it, but the hard bit is being able to deliver impact at the frontline,” says English.

English admits to moments of frustration. “There is a genuine concern that, when pushed hard, departments don’t actually know who is getting the services and what impact it is having — all while spending billions of dollars a year,” he adds. “They should know, and this is why we have to open up the data and our institutional arrangements.”

He believes that public servants have in general been amenable to the changes that have been required of them, but it was never going to happen overnight. “We’re trying to change the system and not just do pilots. This is something that takes time, and it affects ministers too,” he says. “Ministers like their territory — the traditional Cabinet system is siloed and not lined up with a customer base that cuts across departments. But people are starting to take it more seriously. They can now see that they need to change how they are organised, so we can improve our impact.”

New Zealand’s investment-based approach

A core part of the reform is leveraging the power of data and analytics to shed new light on what government is delivering and, more importantly, what it is achieving for its customers. “We now have, for instance, probably one of the best repositories of government administrative data, that can give us a very detailed understanding of the lifetime journey of our customers,” says English.

“This has helped people realise that services are not generally geared to work effectively with high-needs customers. For example, we’re just going through the analysis of the 0-24 age group and working out how to segment them better. These large groupings have been too amorphous for anyone to be able to focus on, but now we can segment them by risk factors and geography down to relatively small numbers.

“The next stage is to change the funding and decision-making. Our big challenge is the institutional change that will enable the focused investment and, I must say, this has got the attention of the public servants.” Now, alongside the typical annual budget submission, government departments are required to look longer term and show the public impact of their spending programs. They also need to be able to show flexibility and adapt their services to maximise impact.

“The broad framework is understood,” he concedes, “but creating the feedback loop from the frontline is proving to be quite a challenge.” However, he is also keen to stress that evidence already abounds of how the new system has worked to create positive impact for customers. “Looking at welfare recipients, it became clear that sole parents, as a group, had one of the higher individual lifetime liabilities,” he says. “So we moved to a new more intensive and individualised servicing model and we now have the lowest number of sole parents since 1986 with, in particular, some real success in the under-20s. The number of sole parents under 20 has dropped by more than 40% over the last five years.”

He goes on to explain that this tailored approach is delivering rich dividends for both the individuals concerned and the government’s bank balance. “Some of the improvement is purely demographic, some is the availability of long-term contraception, and some of it is down to our individual contact with them and the interventions we have put in place,” he explains. “The cost of these interventions works out at about $7000 per person. It sounds like a lot, and traditionally someone in Treasury would say this is too expensive, but when you look at the liability in the long term it saves money, because the more successful young women are now on welfare for an average of seven years, as opposed to the average of 22 years prior to welfare reforms.”

Such examples showcase the real progress of recent years. Work is under way to expand the investment-based approach from welfare to education, health and other areas. But while English is happy to have government funding back in the black, he says that financial pressures will continue to build up in the years to come.

“We’re pragmatic about it — we know that we have a fast population growth and this has to be funded for existing services and we have to meet pay rounds for public servants,” he says. “But government departments can only get greater investment if they can genuinely demonstrate the positive impact they will achieve in future years. We’re here to reduce misery, not service it — and that’s the bottom line.”

This article was produced by the Centre for Public Impact.

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