Source: New Zealand Government
Good morning, kia ora koutou.
Thank you, Liz, for your introduction, and to you all for the opportunity to speak to you today.
It’s a pleasure to be here. And it’s a particular pleasure to continue a tradition that was started by one of my predecessors Sir Bill English. I’m told the finance minister has presented this address every year since 2009.
I would like to acknowledge the role the institute plays in promoting excellence in the public sector.
I also want to take the opportunity to voice my appreciation for the work public servants do to keep New Zealanders safe and ensure people receive the public services on which they depend.
I respect your enduring commitment to public service and the integrity with which you approach your work, remaining focused on the New Zealanders we each serve, evolving and adapting as the political tides come and go.
As a – still – proud Wellingtonian, I have had the pleasure of knowing and working with a broad spectrum of public servants throughout my career. I admire the thoughtfulness, tenacity, and earnestness I have seen in so many of you.
I am grateful that while our Government is facing into a particularly challenging set of economic circumstances, we do so with wise and experienced public servants at our back and by our side.
This is not as easy time for our country. A sustained cost of living crisis has left New Zealand with highly constrained government finances, recessionary conditions, rising unemployment and a range of new pressures for everyday Kiwis, both in their family and working lives.
That’s not a political observation, so much as a statement of reality.
Nor is it a reflection on the professionalism, skill or commitment of New Zealand’s public service.
The nation’s position today is a consequence of a global pandemic and of choices made by the previous Government.
This is not the forum for politics, and it is not my intention to make a political speech. The facts speak for themselves. In the past six years, there has been an 82 per cent increase in government spending and an additional $118 billion of debt added to the government books. As a country we have been living beyond our means. And now, we must correct course.
The good news is that there is light at the end of the tunnel. Inflation has returned to the Reserve Bank’s target range of 1 to 3 per cent for the first time in more than three years, interest rates are coming down and business and public confidence is increasing.
There is no escaping the reality, however, that many families and businesses are doing it tough. Inflation has increased household costs and squeezed business margins.
Partly for that reason, and also because it is good practice, our Government’s focus on fiscal discipline is going to continue. It is not a one-off, one-Budget affair. It is an ongoing state of mind.
As a government we are committed to getting the books back in order and bringing debt down, but our aspirations go far beyond changing the colour of the ink in the government’s accounts. We want to do more than simply deliver better value for money. And we are interested in far more than simply ticking off actions or delivering to targets.
We are intent on improving lives.
You and your colleagues in the public service have a critical role to play in this because, frankly, what we’ve been doing in recent years hasn’t worked for too many New Zealanders. Some of those who most need help haven’t been getting it.
That comes at an economic cost to the country, but more importantly it comes at a human cost. People are our greatest asset and delivering for people is our greatest purpose. In recent times, New Zealand has failed too many of its people: both economically and socially. Falling levels of educational achievement, poor housing, rising welfare dependency and an economy that is not growing quickly enough have denied opportunity to those who most need it.
I’ve said this a couple of times before to particular groups of public servants. Now, I’ll say it to a broader group.
Now is the time for your best and boldest ideas. As a government we are not interested in treading the same path that has denied opportunity to some of our most vulnerable. We want to make a difference to lives.
That’s the reason the Government has brought back public service targets: to focus the public sector on driving better results in health, education, law and order, work, housing and the environment. We understand targets aren’t a perfect mechanism, but past experience has shown they do help to focus attention on the things that make a difference.
It’s also why this Government is determined to scale up the efforts that have gone into social investment so far.
The philosophy underlying social investment makes sense to everybody.
Given the choice, what New Zealander would choose to pay for an ambulance at the bottom of the cliff when we could instead build a fence to prevent the fall? They key is working out where the fences are needed and for who, ascertaining who is best placed to build those fences, and then rigorously testing whether they’re actually preventing the fall.
This is a moral imperative, and it’s also a fiscal one.
The difference to the taxpayer between a life in and out of the prison system and a life spent in productive activity is in excess of a million dollars. More importantly, for the individuals concerned, and their families, it can be the difference between a life of fulfilment and a life of misery.
Thanks to the work started by Bill English we now have a very good idea of where to direct our efforts.
For example, Stats NZ’s Integrated Data Infrastructure research database enables us to identify common factors in the lives of those who interact most frequently with state agencies. The factors themselves won’t come as a surprise to anyone. They include poor education, benefit dependency, multiple admissions to hospital emergency departments, being victims of violence and being perpetrators of violence.
But put the data together and you get a compelling case for targeted intervention. The IDI tells us that a 22-year-old with eight to 10 of these factors is, by the age of 27, 116 times more likely to have a child placed in care, 69 times more likely to have served a prison sentence, 22 times more likely to have been the victim of family violence and five-and-a-half times more likely to have been hospitalised for attempted suicide.
The data is not determinative. Many outstanding New Zealanders have emerged from extremely challenging circumstances and some of those who end up falling foul of our justice system and dependent on welfare come from privileged backgrounds.
But the data does give us a good sense of where to direct the scarce resources of the government. No country can afford to fund every good thing. Every dollar spent comes at the opportunity cost of a dollar spent elsewhere. We must always be working to focus funds where they can have the most profound and enduring impact. The prize for that effort is the most important prize of all: it is a child fulfilling the full human potential with which they entered this world.
There is no shortage of data in government. The challenge we must now address is how we use this this data to practically make a difference to lives.
Social investment approach
In July this year, the Government established the Social Investment Agency to lead, build, and demonstrate a social investment approach.
As a mark of the importance we attach to this work, the agency was established as a central agency. That is because the Government wants to see system change across the public service.
To this end we are asking the public service to think about service delivery in a different way. We are asking for more purposeful thought about how we invest for the New Zealanders in most need. Going beyond the easy platitudes of good intentions and instead moving towards a world of far greater accountability for what results are delivered.
This demands us to think much more purposefully not just about what we want to change but how best to make it happen. We want to see more devolution of power, more clarity about what works for who, and much more space for innovation. In accountant-speak, our focus is shifting from outputs to outcomes. That means asking ourselves the right questions.
First: what are the outcomes we want to achieve? That is a different question from the question that is often asked by governments – ‘what can we give people’. And it is a question that leads to different outcomes.
Second: who needs help? Not ‘how shall we distribute these services that we already have?’ That means putting the needs of the people who need help ahead of the needs of organisations providing services.
Third: what services should be prioritised? Not ‘what shall we add to the service mix?’ That means identifying what is working and, just as importantly, what is not working.
This is one of the most challenging issues governments face because stopping programmes that are not performing well affects the people involved and can be interpreted as an admission of failure.
But, if we are serious about making a difference to the lives of our most vulnerable, we have to be rigorous about directing resources away from initiatives that are not making a difference towards initiatives that are.
Fourth: how do we enable providers to achieve the outcomes we want? Not, ‘how do we manage providers so they do what we want’ but how do we empower them to achieve the outcomes we all want to see?
And fifth and finally: ‘How will we know if what we are doing is working?’ This is a question that is not asked often enough and the failure to do so is at the root of too much inefficiency in our social system.
Drawing on evidence and being clear about the answers to these questions, gives us the best chance of changing lives. It also ensures we get value for the money we spend.
Social outcomes contracts
Another important aspect of social investment is recognising that not all the answers to the challenges we face can be found in Wellington office blocks, or the Beehive, for that matter.
Communities often know what the best solutions for their people are. We need and want to foster genuine partnership between the public service and proven community-based providers.
I’ve heard time and time again from those working with communities that the way the government contracts and commissions programmes is broken.
I know that you too will have received feedback from service users, non-government organisations, iwi, and communities that current contracting arrangements fail to focus on the thing that really matters – whether the service makes a difference for people.
When I talk to and visit providers, they tell me about the multiple overlapping contracts that they have with different agencies who do not seem to be talking to each other.
They tell me about how government ties their hands by requiring specific outputs that prevent them from innovating to provide services more effectively.
They tell me about the time they waste producing reports that don’t seem to inform future conversations and contracting decisions, and the teams of people they have to employ to produce reports that aren’t read.
They tell me about being forced to ‘contract farm’ to secure piecemeal funding across multiple contracts in order to ensure they can stay afloat and serve their communities.
All of this is a drain on their resources which means they have less time to deliver outcomes for vulnerable New Zealanders. They have less time to think creatively and less ability to adapt and flex how they deliver.
Social investment suggests that one of the solutions to these problems is contracting with providers to deliver outcomes rather than outputs.
That means that once contracts have been negotiated, providers can choose how best to achieve the outcomes everyone wants. Outcomes-based contracts allow providers to flex their services around the needs of the people they are working with and to develop new solutions. To move away from a focus on serving the needs of a government department and instead take radical accountability for the results they deliver for the people they serve.
Outcomes-contracting also creates data-rich feedback loops to inform ongoing improvements to service delivery and future contracts.
It requires a conversation and agreement between funders and providers about data. What outcomes will be measured? How will those outcomes be measured? How will providers demonstrate that they are learning what works and doing more of it? How will funders use this data to inform decisions about future investments?
It’s not about elaborate evaluations and literature reviews – it’s about real-time insights into what’s working, what’s not working and what to do next to get the result that matter for the people we serve.
Changing the way that social services are commissioned will be a critical component of the social investment approach.
Therefore, I have asked the Social Investment Agency to lead work with other agencies to develop prototype outcomes contracts to replace the current set of criss-crossing and overlapping outputs-focused contracts. This will provide a blueprint for other commissioners and providers of services to follow.
Contracting in this way has the potential to raise the bar for investment decisions across the public service. Not only does it require agencies to understand the needs of different groups, it requires them to assess the impact of the services they have delivered by measuring and comparing results.
The Government is also progressing work to establish a Social Investment Fund that will directly commission outcomes for vulnerable New Zealanders and work with community, non-government organisations and iwi providers.
The fund will be managed by the Social Investment Agency and will serve as a testing ground for innovation which – when successful – can be applied more broadly to the social sector.
Initially the fund will be small and targeted, but I anticipate it will grow over time and become an increasingly important vehicle for empowering innovation and testing new approaches. My ambition is that the fund will eventually be an effective vehicle not just for Government investment in changing people’s lives, but also as a home for funding from philanthropists, investors and anyone who wants to deploy their money in service of social good.
Not every initiative it funds will be successful, but that is the point of a testing ground, to identify what works and, just as importantly, what does not. Better to fail fast in a test environment and learn from the results than to keep doing the same thing that history has shown does not deliver results.
Conclusion
In conclusion, this is a government that is intent on making a difference. We are not going to keep doing things simply because that is the way they have always been done. We want to make New Zealand a better place for everyone, particularly our most vulnerable citizens.
We know change can be unsettling and we know we are asking a lot of you and your colleagues in the public service.
At the same time that we’re making savings across the public sector, we’re not just asking you to deliver business as usual, we’re challenging you to think and operate differently. For me, wrestling with that reality conjures up a phrase attributed to that great New Zealand pioneer, Ernest Rutherford: We haven’t got the money, so we’ll have to think.
I am confident in your ability to rise to the challenge.
What I am hearing from many public servants is that you welcome the opportunity to think differently about how we tackle some of our biggest and most entrenched challenges.
That does not surprise me. I know the reason most, if not all of you, joined the public service is to serve your fellow New Zealanders and contribute to making New Zealand a better place.
I encourage you to be bold and put forward your best advice. I also encourage you to work as closely and openly as you can with those you are seeking to serve – local decision makers, iwi and Māori providers, as well as the private sector. Central government does not have a monopoly on good ideas.
Together, we have an opportunity to reduce welfare dependency, improve health, raise educational achievement, lower rates of offending and address increasing rates of inequality. Without adding to the spaghetti of bureaucracy.
Let’s seize that opportunity with both hands. Thank you.
