Nicola Willis Resurrects 'Social Investment'

While the 100-day deadline looms

Last Thursday, Minister of Finance Nicola Willis gave a speech at Waikato University that indicated some of the government’s aims beyond its ‘first 100 days’. (And, further down, you can mark Luxon’s homework on those 49 goals.)

There were two things that stood out for me in Nicola Willis’s speech. The first was her reference to a ‘social investment’ model, which sounds similar to, if not the same as, the one Bill English and Paula Bennett initiated over a decade ago.

Willis defined social investment as ‘using data, evidence and modern analytics to invest in earlier and better intervention that can effectively break cycles of disadvantage, dependence and despair.’ The aim is to help people who’ve been disadvantaged or gone off-track to find opportunities and realise their potential. Sounds fine, if that’s what it does.

Australian actuaries Taylor Fry do the data analysis that estimates the lifetime cost to the NZ government of current working-age welfare obligations. Previously, this was used to identify which benefit types and which cohorts of beneficiaries drive the largest long-term costs in the system. It provided a framework for targeting support to sub-groups of beneficiaries that were estimated to pose greater fiscal risk, or long-term or repeated reliance on welfare. The Ministry of Social Development then targeted its spending on return-to-work support, in light of long-term savings. As those who go on benefits before the age of 18 pose a heightened risk of greater lifetime welfare costs, an extra focus on and investment in the 16-17 age-group may be warranted, for example. (Did the government need to pay a very expensive consultant to figure that out?)

Given past performance, ministers will use any reduction in the estimated forward liability to make bold claims about how many billions they’ve saved the taxpayer ‘in the long run’ – even though such estimates fluctuate widely with changing economic projections of growth, unemployment rates, etc.

According to the 2016 Valuation of the Benefit System for Working-age Adults, ‘the cumulative impact over five years of change to the way the Ministry works with people is approximately a $13.7 billion reduction in the welfare system’s future lifetime cost. Those changes have meant that compared to the pre-reform 2012 valuation clients are expected to spend about 1,300,000 fewer years on main benefits over their working lifetimes. Over three quarters of this reduction in future years on benefits can be attributed to policy and operational changes.’

Under this social investment model, the incentives for the Ministry are to deter people from applying for benefits, even if they’re legally entitled, and to deprive people considered ‘low risk’ of job-search assistance in favour of others rated ‘high risk’. The idea that citizens have equal rights goes out the door. And there’s always the awkward question of how ethnicity gets counted as a risk factor.

The social investment model registers as a ‘saving’ those beneficiaries who exit the welfare system because they’ve gone to prison. From a whole-of-government viewpoint, that doesn’t make social or economic sense. Policy driven by actuarial valuations of the social security system, and by projected fiscal goals, underestimates the value of real-world human and social goals. We’ve been down this road before.

For those who’d like a critical economic analysis of the social investment model developed under the Key government, there was a great article by Simon Chapple back in 2013.

The second point that got my attention in Willis’s speech was one that she didn’t raise. Naturally the minister talked up the new government’s ‘back to basics’ policy for compulsory education. But, even though she was speaking in a university setting, tertiary education was conspicuously absent from her notes.

The Luxon government has, coincidentally, signed a memorandum of understanding with Waikato University to develop a third medical school, so the finance minister was on friendly territory. But…

If this government is serious about social outcomes, then tertiary education, especially in trades training, should be a central part. People from disadvantaged backgrounds may not aspire to a medical degree and a career as a rural GP (although good on those who do!) but surely they need skills to get them into higher-paid jobs and professions of one kind or another – and so to contribute to a more productive economy.

Aside from a brief announcement confirming ‘the process of disestablishing Te Pūkenga as part of its 100-day plan’, the Beehive webpage of tertiary education minister Penny Simmonds is, as I write, silent. This is a portfolio in which the Labour government performed very poorly. Tertiary education institutions are in a mess all over the country – some more than others. It appears that the Luxon government has no plan here, other than to demolish Hipkins’s megalith.

The minister of finance never mentioned tertiary education in the context of either social investment or the country’s future productivity and prosperity. Skills development is one positive thing that governments can do to lift incomes and reduce inequality. But it’s likely that the new government may follow the last one, and the one before that, and simply import migrant labour rather than develop the people already here.

Remember how former PM John Key said in 2016 that, compared with migrant labourers, some of the locals ‘won't pass a drug test, some of these people won't turn up for work, some of these people will claim they have health issues later on.’ It was easier just to leave them on the heap. That was one outcome of National’s social investment model.

Why are ‘the first 100 days’ a big deal?

“I think that we all wanted the opportunity of a little quiet thought to examine and assimilate in a mental picture the crowding events of the hundred days which had been devoted to the starting of the wheels of the New Deal.” President Franklin D. Roosevelt, Fireside Chat no. 3, 24 July 1933.

That, I believe, is the earliest reference to a new administration’s first one hundred days. Notice, though, how FDR was taking time out to reflect on the one hundred days that had just passed.

Like Halloween, ‘the first 100 days’ is a cultural import from America. And it’s become a period for which to plan ahead, with a spurt of frantic action, rather than a moment to stop and recollect. Luxon & Co are using it to show off how they ‘get things done’ and ‘actually deliver’. They’ve made it into a tick-box exercise with 49 goals, most of which are unambitious and/or undo things that the previous government had done.

I wish Luxon had FDR’s command of the English language, and his vision.

“That is why I am describing to you the simple purposes and the solid foundations upon which our program of recovery is built. That is why I am asking the employers of the Nation to sign this common covenant with me -- to sign it in the name of patriotism and humanity. That is why I am asking the workers to go along with us in a spirit of understanding and of helpfulness.” (FDR).

Oh well, getting back to reality… Mr Luxon’s speech on Sunday diagnosed ‘the state of the nation’ as ‘fragile’. This, of course, he put down to the failings of the last government. But he can only go on blaming Labour for so long, and will soon have to shoulder full responsibility. Accordingly, he talked up the potential of the country and the things his government will do to realise it. That included getting rid of some regulatory obstacles that hold back enterprise, and showing beneficiaries some ‘tough love’. Beneficiaries have a ‘responsibility to look for a job, or to train for new opportunities [or] there will be consequences’. That’s where the social investment model alluded to above kicks in with targeted and punitive benefit rules. But, so far, I see no serious action on Luxon’s point here about ‘training’ in the sense of substantial upskilling – and not just training in how to do your CV and dress for a job interview.

Luxon’s 100-day plan: Is he actually delivering?

Most of the 49 goals for the new government’s first 100 days have been achieved, and the deadline is 8 March. I’ve written notes in bold next to those items that, as far as I can tell, haven’t been achieved yet.

If I’ve missed something, or have been unfair, please use ‘Comments’ to steer me towards some evidence.

Which goals have not been achieved yet?

I’ve kept the original numbers:

4. Begin efforts to double renewable energy production, including a NPS on Renewable Electricity. No sign of progress.

7. Make any additional Orders in Council needed to speed up cyclone and flood recovery efforts. I can’t see any new OICs under new government, but there’s evidence of needs not being addressed, and there has been an ongoing review of the OICs.

10. Introduce legislation to remove the Auckland Fuel Tax. No Bill yet but announced to end in June.

12. Begin work on a new GPS reflecting the new Roads of National Significance and new public transport priorities. No info online about this work.

19. Begin work on a National Infrastructure Agency. No sign of work, although it may have ‘begun’.

21. Repeal the Spatial Planning and Natural and Built Environment Act and introduce a fast-track consenting regime. Legislation repealed, new Bill on the way.

24. Begin work to enable more houses to be built, by implementing the Going for Housing Growth policy and making the Medium Density Residential Standards optional for councils. No sign of ‘work begun’.

26. Introduce legislation to ban gang patches, stop gang members gathering in public, and stop known gang offenders from communicating with one another. No Bill so far. But they say that rushed law is bad law.

27. Give Police greater powers to search gang members for firearms and make gang membership an aggravating factor at sentencing. No Bill so far.

28. Stop taxpayer funding for section 27 cultural reports. A bill will be introduced. But legal aid hasn’t been ‘stopped’ yet.

31. Enable more virtual participation in court proceedings. No sign of work.

32. Begin to repeal and replace Part 6 of the Arms Act 1983 relating to clubs and ranges. No sign of action.

42. Set five major targets for health system, including for wait times and cancer treatment. Not finalised.

43. Introduce legislation to disestablish the Māori Health Authority. Under dispute in Waitangi Tribunal.

47. Begin work to repeal the Therapeutics Products Act 2023. Work may have begun, but no sign of a repeal bill.

48. Establish a priority one category on the social housing waitlist to move families out of emergency housing into permanent homes more quickly. Not done yet.

That makes 16 out of 49 goals either not done, or only partially done; 33 out of 49 are ticked off, or 67%. Luxon has earned a B so far for his first assignment. But his deadline is 8 March, so he still has time to improve his grade.

The National Party joined the Pride Parade in Ponsonby on Saturday evening. Labour and ACT were also there. I didn’t see a Green Party contingent.

But Mr Luxon was forced to beat a retreat from the Big Gay Out event due to protestors.