The major economic policy event in most countries is the delivery of the Government’s Budget each fiscal year, in which it announces its revenue and expenditure plans. In May 2019, New Zealand attracted international attention for launching the country’s first Wellbeing Budget, which committed to putting people’s wellbeing and the environment at the heart of its policies.
The Wellbeing Budget is designed to use social and environmental indicators, along with economic and fiscal ones, to guide the Government’s investment and funding decisions.
“The purpose of government spending is to ensure citizens’ health and life satisfaction, and that — not wealth or economic growth — is the metric by which a country’s progress should be measured. GDP alone does not guarantee improvement to our living standards and does not take into account who benefits and who is left out.” – Jacinda Ardern, Prime Minister of New Zealand
The official Wellbeing Budget document describes the design principles behind this novel approach to economic policy: it breaks down agency silos and works across Government to assess, develop and implement policies that improve wellbeing; it focuses on outcomes that meet the needs of present generations at the same time as thinking about the long-term impacts for future generations; and it tracks the Government’s progress with broader measures of success, including the health of the country’s finances, natural resources, people and communities.
Focusing on outcomes that meet the needs of present generations at the same time as thinking about the long-term impacts for future generations.
- Breaking down agency silos and working across government to assess, develop, and implement policies that improve wellbeing.
- Tracking progress with broader measures of success, including the health of people, communities, the environment and public finances.
1. Wellbeing Priorities
The Budget began by answering the question, “What is wellbeing?” The Wellbeing Vision, resulting from this reflection was:
“Wellbeing is when people are able to lead fulfilling lives with purpose, balance and meaning to them. Giving more New Zealanders capabilities to enjoy good wellbeing requires tackling the long-term challenges we face as a country, like the mental health crisis, child poverty and domestic violence. It means improving the state of our environment, the strength of our communities and the performance of our economy.” (The Wellbeing Budget, 30 May 2019)
The Budget cycle began with the Cabinet selecting a small number of Wellbeing Budget priorities, using a collaborative and evidence-based approach. Statistical evidence on wellbeing and its distribution among the population, from the Treasury’s Living Standards Framework (LSF), was combined with advice from sector experts and the Government’s Chief Science Advisors. The LSF is divided in two sections:
- Current wellbeing (income, housing, security, education health etc.); and
Future wellbeing (land use, skills and knowledge, health, natural and social environment).
Some measures are taken annually, some quarterly and some more often. The aim is to take into account both the quality of economic activity and the long-term impact of current policies.
After this period of research, five wellbeing priority areas for the 2019 Wellbeing Budget were set, based on where evidence showed the greatest opportunity to make a real difference to the lives of New Zealanders: aiding the transition to a sustainable and low-emissions economy, supporting a thriving nation in the digital age, lifting Māori and Pacific incomes, skills and opportunities, reducing child poverty, and supporting mental health for all New Zealanders. New Zealand allocated NZ$25.6b over four years into the Wellbeing Budget, with spending on the five priority areas representing roughly 5 percent of total expenditure.
2. Ways of Working
Ministers and agencies then developed initiatives targeting international wellbeing outcomes, analysed using the LSF. For each outcome, the Government has selected a set of statistical indicators for monitoring trends over time. Government Ministries and Departments collaborated in budget bids for new funds, to show how proposals would contribute to the priority areas. An example of this was 10 agencies coming together to jointly put in a bid to help address family and sexual violence.
The Cabinet then agreed on an integrated programme of policies to meet its prioritised wellbeing outcomes. The standard Budget documentation was redesigned to make clear how any policy or initiative, including the government’s balance sheet and asset management, contributed to improvements in wellbeing. This practice is spreading throughout the public service. The Treasury, for example, has begun to evaluate and communicate how the government’s balance sheet and asset management contributes to improving wellbeing. The Government of New Zealand has embedded this wellbeing approach into legislation through the Public Finance (Wellbeing) Amendment Act 2020.
3. Tracking Progress
While the Wellbeing Budget 2019 only accounted for new spending for one fiscal year, it made good progress in investing in priority areas. Sustained investment is needed to tackle long-term infrastructure and social deficits; such complex issues cannot be fixed in a single Budget.
“Achieving genuine and enduring change in the way Budgets and policies are developed takes time. We know that we cannot meaningfully address long-term problems like child poverty, inequality and climate change through a single Budget. This is why the Government committed to taking a wellbeing approach to Budget 2020 and beyond to build on the successes of our first Wellbeing Budget.”
The New Zealand government has embedded this wellbeing approach into legislation through the Public Finance (Wellbeing) Amendment Act 2020. It is continuing, and in some cases expanding, the work started within its 2019 wellbeing priorities. The 2020 wellbeing goals are:
- Just Transition – Supporting New Zealanders in the transition to a climate-resilient, sustainable, and low-emissions economy
- Future of Work – Enabling all New Zealanders to benefit from new technologies and lift productivity through innovation
Māori and Pacific – Lifting Māori and Pacific incomes, skills and opportunities
- Child Wellbeing – Reducing child poverty and improving child wellbeing
- Physical and Mental Wellbeing – Supporting improved health outcomes for all New Zealanders
The 2019 Wellbeing Budget was a bold experiment in not only shifting understandings of progress but also embracing a new way of designing policies.
This wellbeing approach contributed to the Government’s swift and effective management of COVID-19 pandemic, as their first priority was protecting the health and wellbeing of their citizens rather than the growth of their economy. At the time of writing, New Zealand has one of the lowest COVID fatality rates in the world with only 25 people having died since the start of the pandemic. They have also used a wellbeing approach to help inform their COVID-recovery efforts and to bolster spending in critical public services such as health, education and green infrastructure.
Barriers to change include the need for further clarification on how to compare policy proposals that had different impacts on wellbeing. While the Treasury has provided some monetarisation estimates for different types of wellbeing impacts, this remains a work in progress.
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