Early lessons from the social investment model in New Zealand


September 9, 2016

That Australia and New Zealand share many similarities should go without saying. Language, culture, identity – the list goes on. Ours is a relationship of mutual respect – punctured by fierce rivalry on the sporting field – that also involves sharing lessons of success, particularly when it comes to government and the public services. That’s why we in Australia have paid close attention to New Zealand’s deployment of social investment in recent years.

The re-election of John Key’s government in 2011 saw the creation of a Better Public Services programme that identified 10 key priority targets to be achieved over the next five years – including reduced welfare liability. The country’s finance minister, Bill English, has told us, “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 social investment approach applied by New Zealand since 2012 focuses on moving people from welfare dependency to improve social outcomes, and in doing so reduce the country’s long-term welfare liabilities.

New Zealand’s policymakers use an actuarial model (like insurance companies) to identify individuals who are highly likely to end up on long-term welfare – including groups such as teenage parents and young unemployed people. The model itself – developed in 2012 but updated every six months – is used to devise programmes, many focused on prevention, to help support these individuals. Robust performance data is then used to stop things if they are not working, or extend them if they are.

Back to the classroom

Although the programme has not yet reached completion, we have identified five lessons for other countries considering adopting a similar approach.

  1. Set clarity on expected results and use these to establish a matching performance system. The 10 results that New Zealand has been working towards since 2012 have remained constant ever since. Two of them are focused on customer service and eight are about economic and social delivery, including one which is focused on bringing down long-term welfare dependence by reducing the number of people who have been on a working age benefit for more than 12 months. This stability provides direction and focus for ministers and departments, giving agencies a clearer purpose driven by a clear understanding of the priorities.
  2. It is important to focus on individual populations. Thanks to digital technology, being able to identify each individual in the population is no longer a faraway concept but a reality. This enables policymakers to move away from, for example, broad after-school programmes for early teenagers towards a bespoke after-school programme for specific young people who are at high risk of underachievement and long term welfare dependence.
  3. Policymakers need to ask three questions: which people where? (reiterating the point about focusing on individual populations); who can connect with them? (in some cases this will be through respected local leaders or schools not the welfare department directly ); and show us how you will know you are making an impact?
  4. Allow funds from different agencies to be pooled to address individuals. In New Zealand’s case, they created a “multi category appropriation to allow programme funding for a population to be bundled to address the population in a specific manner, while still meeting appropriation requirements.
  5. Ensure the approach is built into the mainstream, avoiding issues such as sidelining innovators away from core delivery to the identified populations. Governments also need to set longer term budgets of up to four years in order to focus spending on priority populations, rather than agency mandates, as well as appointing liability managers to maintain a strong focus on the desired outcomes For example, New Zealand’s policymakers are currently implementing a series of place-based initiatives in South Auckland. Their approach involves identifying and adjusting decision-making accountabilities and delegations for place-based initiatives that cross-over agency boundaries.

So far, so good

Governments worldwide – not just Australia’s – will be analysing how New Zealand has gotten on. The early signs are positive: Compared to pre-reform 2012 baseline forecasts, there has been a cumulative reduction in benefit payments of $1.3 billion over three years. About 70% of these savings can be contributed to welfare reform. Other headline figures include a reduction, since 2012, of jobseeker numbers by 14%, with individuals expected to spend about 900,000 fewer years on benefits over their working lifetimes. More than three quarters of this reduction in future years on benefits can be attributed to policy and operational changes.

The task of reducing long-term welfare dependency is never going to be easy. It is an issue that has taxed policymakers across borders and through the generations. New Zealand’s approach, though, shows that progress can be made.

As other governments gear up to start on their corresponding journeys they need to ask themselves how to extend the model to look at all lifetime costs and not just welfare costs; and how to use the output to prioritise decisions in areas such as education and health – which have a knock-on impact on welfare dependency. Identifying the right answers will help power them forward, bringing the goal of improved social outcomes well into reach.

Miguel Carrasco is partner and managing director at the Boston Consulting Group, Canberra.

Trish Clancy is principle at the Boston Consulting Group, Sydney.

This article was first published by the Centre for Public Impact.

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