English eyes major data centric reforms to Budget reporting after the election

Finance Minister Bill English has signalled there will be major changes to the way Government spending is reported and organised, from next year's Budget onwards.

Speaking to a business audience at a NZ Data Futures Forum event in Auckland, English said the Government wanted to use its data to better understand the effectiveness of its investment-led spending in reducing future liabilities. The Government would evolve its budgeting systems to focus more on the end results of the spending, rather than simply the amount of spending, he said.

"We're now starting to adopt an investment approach. Where you would say we invest now for income later, we're saying we invest now for cost reduction later, such as in our sole parents under 20," English said, referring to how the Government had reduced the number of single mothers under the age of 20 by 2,600 or 40% over the last three years, thus reducing future liabilities by hundreds of millions of dollars.

English referred to the development by Statistics NZ of its Integrated Data Infrastructure, which allowed various Government departments to link the names and birth-dates of the recipients of health, welfare and education spending over 35 years to better track and understand the performance of that spending.

The Government had opened up these data sets to the research community to better understand these trends, "so they can chew on our mountains of data."

"We've got a data analytics unit at the Treasury and in the next Budget round, should we have the privilege of being able to be the Government, we'll probably reshape how we do the Budget - the most significant change in about 50 years - because we want to go direct to the customer," English said.

"People don't live in Government departments. They live in communities and families. The allocation of our resource should be based around them, not around the delivery units who have completely dominated how Government uses your resource. That's the power the data gives us, and over time that's going to mean quite dramatic shifts for the way Government does its business," he said.

"(That's) simply because the decision makers called ministers can know a hell of a lot more and understanding of what we're trying to do is not controlled by the entities between us and the customers."

English gave examples of how Government and business could work together to better understand or help people in need of help. He pointed to how the Government often struggled to find young single mothers or children who had been through many schools, or former students who were living overseas and not repaying their loans.

He also pointed to the Government's measures of the future lifetime liability of the welfare system, which was NZ$76.5 billion at the end of June 2013, down NZ$10.3 billion from a year earlier. See Paula Bennett's January 15 statement for background.

"We don't understand patterns of behaviour we're trying to change. A lot of long term welfare dependency that drives that NZ$76 billion is about behaviours that we probably make worse by the way Government interacts with them. How they move around, how they spend their money, tells us an awful lot about what behaviour we need to change, not in a coercive sense, but in a supportive sense," English said.

"We didn't know much about that in the past. We haven't really cared, but now we do," he said.

Results framework

English said the Government had created a results-based framework for measuring performance, which was increasing Government's demand for data. He pointed to the Government's Better Public Services targets .

"The effect is our government agencies need to know about their customers. Think about Government and customers in this way. You need to understand them because they drive revenue. We need to understand them because they drive cost and in our case service failure is one of our biggest cost drivers," English said.

He referred to the costs of offenders, 60% of whom re-offended and had to be imprisoned at a cost of NZ$105,000 per year. He also referred to the long-term costs of a sole parent under 20, who was subsequently expected to be on benefits for 20 years on average.

"In the past the Government has, like others, run a large passive industrial model of service delivery. We are in the process of changing that to a more individualised understanding of what each person needs, what support they need, what obligations would benefit them and what reciprocity should go on," he said.

English talked about Government being able to connect up its data from early childhood to employment to make better informed decisions.

"Too often Government is flying blind. You let us get away with getting up and saying 'we spent NZ$20 million on a problem that shows we care.' And you say: 'Isn't that nice.' You have no idea whether it works, and nor does the Government. And when it's not sure, it just announces another programme and you go: 'fantastic, they care, they know what they're doing'," he said.

'Evolution, not big steps'

English was later asked in a panel session about the form the Budget reporting changes could take if the Government was re-elected.

He referred to changes to the Public Finance Act to create more room for MSD to make discretionary decisions based on their actuarial models about where to spend its next NZ$10 million. English said the current Budget system tracked money coming into Government and how it was spent, but not necessarily its success in achieving targets such as the Better Public Services targets.

"It's a bit of a camel. We've got to graft it on to a Parliamentary system. You have to do that through evolution, not by big steps. You've got to respect the constitutional process otherwise it will do you in," he said.

Contestable funding?

"The next step in that process is to say, when we spend our extra NZ$1 billion a year, what are we trying to do with this? Are we trying to make an announcement about how much we've spent on health? Or are we saying, our biggest fiscal and community exposures are around this type of community, for instance, with a high incidence of diabetes, or the quite predictable dysfunction and imprisonment rates, and so we're going to spend the money on them, so make the institutions line themselves up," he said.

English suggested Government departments could "basically run a Dragon's Den."

"They come along and say: 'this is how I can service that customer. At the moment we give it to the Government department. People don't live in Government departments. They live in supermarkets and houses and they live in communities. They beat each other up. They drink too much. That's all the stuff that costs us money."