What should the new government do about social investment?
15 November 2017
Social investment in the welfare system has been the National Coalition’s and specifically Bill English’s flag-ship policy, linking welfare reform with improving outcomes for disadvantaged New Zealanders.
There are three main propositions behind National’s social investment approach. The first is a belief that people on welfare suffer long-term social and economic costs. The second proposes that these costs are best mitigated by making long-term investments in those people. The third proposition is that the best way to assess the government’s performance in reducing these costs is by the savings made in long-term benefit payments, which can be calculated by actuaries. I believe this third proposition is likely to result in unintended and perverse outcomes for the people invested in.
Social investment makes extensive use of joined-up government data sets (“Big Data”) to guide decisions to invest in areas where actuaries say the benefit savings will be greatest. Further, National’s prioritised Better Public Services goal uses the reductions in welfare spending – calculated by actuaries – as a measure of government success. They have even set up a stand-alone agency, the Social Investment Agency, to further develop the actuarial measure.
Social investment has attracted mixed reviews. Some have praised the model, and seen it as a successful appropriation of social democratic ideas and ideals by National, undercutting the centre-left. Others have expressed concerns about the limits of Big Data for making high-quality decisions, and have raised privacy issues around its use. Yet others (myself included) have criticised the success measure for not focussing on reducing the social and economic costs to people in the welfare system. Nor does it measure what should be the main aim of social investment – better social and economic outcomes for the people.
Because it is a National government creation and has been criticised by some on the centre-left, the social investment apparatus is vulnerable under a new centre-left government. What, then, should the new government do with it? Abolish it entirely?
In my view, the new government shouldn’t abolish the Social Investment Agency, nor the social investment approach. English and National should be congratulated on a great idea, but one badly implemented. Their acknowledgement of social costs disproportionately falling on people on welfare is refreshing. It is true that we also need to think about tomorrow, rather than simply today, when making policy. We need to take an integrated view of people’s lives and use all available information – conditional on respecting privacy – to make good spending decisions to improve those lives.
So, the new government should fundamentally re-orientate, not abolish, social investment, in a way that renders it intellectually coherent and consistent.
They can do so by making social investment truly about people’s lives. It is in this light we should consider our interventions in the social welfare system. Yes, costs of raising taxes are a part of this calculus; but they are subordinate, not central.
Let’s make social investment about answering the following core questions. Is our spending making a positive difference to the lives of people on welfare and the children and others they care for? How can we increase this positive difference? Are Work and Income helping put people in jobs? Are those jobs good, in the sense that they are stable, secure, pay well, enhance people’s mental health, make it easier to raise kids, and promote work-life balance? Do the social and economic gains from our interventions exceed the costs?
Measuring disadvantaged people’s wellbeing and how best it can be enhanced by government interventions must become the central focus of a re-orientated Social Investment Agency.
The Better Public Services actuarial measure must go because it has little to do with helping disadvantaged people. Resources that have until now been wasted on expensive actuaries can be re-allocated into measuring and valuing the outcomes of people who are subject to social investment.
Only by reconceptualising social investment will we be in a situation to significantly reduce the high social and economic costs currently falling on disadvantaged New Zealanders.
Dr Simon Chapple is Director, Institute for Governance and Public Policy, School of Government, Victoria University, Wellington. He was formerly Chief Economist for the Ministry of Social Development and a Senior Administrator in the Social Policy Division of the OECD in Paris.
A version of this commentary was published in the Spinoff.