*Content supplied by The New Zealand Initiative think tank.
“Government is achieving poor outcomes for New Zealanders relative to the resources it is using.”
That is the key message in the report Fit for Purpose? Are Kiwis getting the government they pay for?, released today by The New Zealand Initiative.
“The smoking gun is the systemic lack of focus on value for money – that is productivity,” said Dr Bryce Wilkinson, author of the report and Senior Fellow at The New Zealand Initiative. “Productivity Commission reports have documented this deficiency.”
Perhaps one dollar in three of New Zealand general government spending is wasteful. That represents around 13% of GDP, or $20,000 per household annually.
Perhaps one dollar in six of school spending has been wasteful. By age 15, government will have spent more than $130,000 on the average pupil’s schooling. Yet about 17% will have failed to achieve basic numeracy and literacy. If that is not failure, what is?
In health, perhaps 2.5% less of GDP could be spent annually for the same health outcomes.
It is not so much that spending is being literally wasted. Rather the best performing countries are achieving much better outcomes relative to their spending.
The report also documents 20–30 areas of comparative weaknesses in our laws and regulations. For example, Australia rates much more highly than New Zealand for ease of enforcing contracts and for resolving insolvencies.
“These findings should concern people across the political spectrum” commented Dr Oliver Hartwich, Executive Director of The New Zealand Initiative. “Who would not want government to get the best possible outcomes for New Zealanders from what it is doing? On the evidence, government should be getting better outcomes from unchanged resources, or the same outcomes from fewer resources.”
75 Comments
I'm not a fan of either National or Labour, and i don't really know how to fix our education system, or more importantly the parents that are raising the kids that get fed into our education system, but there was never going to be any other conclusion from the NZI..
Let's discuss their ideas on how to improve it then.., is their anything they recommend that does not boil down to "big business wants less tax, so that's what we wrote"?
There wasn't in the section I quickly skimmed.
And referencing heritage foundation.. may as well just write "this is a right winger circle jerk" on the cover.
I will read the report out of curiosity when I get a chance but to answer your first point, if government spending is inefficient then the logical conclusion would be to leave people with more of the money they earned and give them more choice as that has been the most expedient way to improve other things historically.
To your heritage foundation comment, again are they right or wrong? If so, how? Play the ball not the man. If you keep discrediting entities you don’t like carte Blanche then you will miss when they’re right.
You think thats an ad-hom?
Unless you've got some evidence to back up the statement "...leave people with more of the money they earned and give them more choice as that has been the most expedient way to improve other things historically." i'm sticking with the dogma label. You may not be attributing it to a person, but it sure as hell comes from the right wing general education curriculum.
You could start by showing which of the high ranking countries in the PISA data doesn't have state funded education for starters. Here' s a time saving helper, don't bother looking at the top 6 countries in the mathematics scores, they are all govt funded (Japan, Korea, Switzerland,Estonia, Canada, Netherlands)
Evidence - how about the report we were discussing for starters, hence why I said “if government spending is inefficient...”
Regarding consumer choice being the best way to improve things, I bet what you’ve used to read and respond to this article was the result of competition (smartphone, computer etc). I propose the same for education. Important to note I didn’t say no govt funding (please don’t try to misrepresent what I’m saying), I would suggest a voucher system and more freedom for schools accordingly. This is the good kind of diversity where improvements come from.
Anyway, to try and bring this to a head. What are you actually arguing for?
Right, you didn't outright say "no govt funding", instead you said "leave people with more of the money they earned". ie, code for less money to the govt to spend on education. I'm not misrepresenting what you are saying, so please don't accuse me of doing so.
And you are overlooking the simple fact that leaving education spending decisons in the hands of parents locally allocating resources means that the standard of education that the "haves" receive will be bolstered by their resources, and the "have-nots" will simply get left further and further behind, which will just feed into more long term welfare beneficiaries, lower productivity, and increasing costs of incarcerating them. It's not win-win.. its lose-lose for everybody in the bigger picture.
Yes, the laptop i'm on is the final product of competition.. but the basic research into semiconductors that it builds on was govt funded, as was the beginnings of the internet over which we are communicating (US DARPA).
There are definately places where competition is warranted, and in fact essential.. but inside the bounds of a playing field overseen by a regulator that weilds a big stick to sort out miscreants that abuse market power.
I'm simply arguing against the libertarian /far right tropes that govt are crap at spending money, and lower tax and letting people decide for themselves works better. laissez faire bollocks.
Infrastructure (and yes, I include core health and education as infrastructure) is something that is too large in scale, complex and difficult for individuals to do efficiently, when short term self interest beats out the bigger less apparent benefits to wider society, particularly over long time periods.
As I didn’t outright say “no govt funding” you shouldn’t assume it. You did misrepresent what I said.
I think you missed the point of vouchers, it doesn’t give rich or poor more or less it gives them choice.
Touché about semi conductors, I don’t mind tax for science, it has demonstratably improved our lives.
Govt is crap at spending money and most of our issues especially currently are do to poor regulation to which they then propose to take more money to spend their way out of the issues they’ve created (definitely not an efficient use of money).
I disagree with the infrastructure premise. Most of the time it seems things fail because they are too big/centralised. I would rather see more control locally that way we don’t all suffer, the failure is more localised and easier to turn around.
Is laissez faire really bollocks? Or did you prefer Muldoon’s style? Seems those who bag it forget what it replaced and how it shot NZ forward in the world to one of the leaders.
Crap at spending money? yet when you compare ours and indeed many public health services V the USA V GDP our service cost roughly 1/2 the USA's cost and for better outcomes.
Poor regulation? doubt it somehow, certainly even sub-optimal regulation is way better than (effectively) none, again we can see this by looking at the USA.
The US is in a complete mess at the moment, I would rather have our health system too. Do remember though that ours is affordable as we plagiarise the advancements that they have made. Off the top of my head, approx 75% of medical innovations have come from the US and their for profit model.
Poor regulation definitely. Look at our housing crisis, an astronomical amount of the price is due to zoning and govt regulations. Have a look at Tokyo and Houston for regulation that actually allows building. You might have to elaborate your US example for this one as I don’t get it? Their houses cost less than ours (in relation to income) and I would hazard a guess that they are better made as well?
anyone sick of putting up with the rubbish spouted by those of a neo-liberal outlook to justify their greed, and avarice as being OK.
meanwhile,
Thanks for the wikipedia entry - that doyen of academia.
Tell me, which renowned Economics faculties include "neoliberalism" in their course cirricula?
The term is a pejorative, pure and simple.
It's a dead give-away for people with a particular ideological "outlook".... they of little economic / intellectual substance.
From my '30 second politics' book by Steven L Taylor:
"Neoliberalism refers to a set of economic policy prescriptions emphasising the primacy of the market over the government. 'Neo' indicates that it is an updated version of classical realism, dating back to the political theorist Adam Smith in the 18th century. Neoliberalism asserts that both economic growth and prosperity are best achieved by drastically cutting government spending, privatising state-owned industries, deregulating, expanding trade and encouraging foreign investment." P. 128
It's dogma that fails to see itself as such ;-)
Here's the economic prescription that often gets linked to the neoliberal political ideology - although the economist who created the 10-point prescription (Williamson) argues it is an inappropriate linkage;
https://en.wikipedia.org/wiki/Washington_Consensus
Here's his explanation:
I of course never intended my term to imply policies like capital account liberalization (...I quite consciously excluded that), monetarism, supply-side economics, or a minimal state (getting the state out of welfare provision and income redistribution), which I think of as the quintessentially neoliberal ideas. If that is how the term is interpreted, then we can all enjoy its wake, although let us at least have the decency to recognize that these ideas have rarely dominated thought in Washington and certainly never commanded a consensus there or anywhere much else..
A bunch of stuff here,
1. who the hell are you? A. a self interested lobby group.
oh, that's ok then, remind me again who pays you.
2. So, "The" government, as in all the enduring bureaucratic machinery, or just this Labour leadership, like, was it the same under National? A. yes.
Hmmmmm.
3. Did you think we did not already know that democratically elected politicians have no motive for productivity as it does not get them re-elected. What does get them back is conspicuously pandering to special interest groups in front of the cameras and that takes money regardless of the outcome. A. Well, yes but we must justify our existence somehow.
4. I think this counts as fake news.
The conclusion is a good indication of the waste of time this whole report was:
"Such savings [the result of "doing a better job"] could be used to raise New Zealanders’ wellbeing in any combination of the following two ways:
• maintaining government outputs, while cutting tax revenues;
• increasing government outputs from unchanged government spending.
The discussion of those choices is outside the scope of this report."
Basically cut taxes or at least don't increase them as there is plenty of fat already and the Government needs to get leaner.
No shit Sherlock. How to achieve this is the $100b question. Cutting taxes and hoping for the best is not a good answer.
This "fat" ppl speak of, cant see it myself. What I do see is the service level dropping as the money dries up. This then seems in say health to push ppl into paying for private healthcare as the only way to actually get any healthcare woohoo for these bums and stiffs in think tanks like this and that is all it is IMHO a way for a few to get rentier incomes by destroying the competition. This then takes us down the road to privatisation by default where in the US they spend close to twice what we spend in GDP terms but dont live as long.
The Q I ask is why are we seeing articles from such extremists? Giving them air time is like doing a "balanced" article on CC by incl the climate deniers. However some news organisations like the BBC have finally got round to realising isnt real balance unlike some here in NZ it seems.
Are you looking for the "fat"? Are you an auditor for Government Depts? Unless you are off course you can't see it.
The one thing I agree with in the report is there is a lack of Government oversight into the efficiency of Government spending. Private businesses have the market to keep them honest e.g. add value or go under.
IRD, Hospitals, Councils etc... do not go under so who is keeping them honest?
No I am saying you cannot measure a public service that saves lives like a business that provides goods. As an example a business can accept warrantee claims as part of doing business, for a hospital that is deaths which are not. A business can accept going out of business due to events outside of its control as an acceptable risk, a hospital on the other hand does not have going out of business as an option.
That was my point. An inefficient hospital can continue on inefficiently forever unless someone fixes it, unlike a business which would go down the drain very quickly. Does that make sense to you?
The article/report refers to a study by the OECD that concluded that:
"... New Zealand might be able to spend around 2.5% of GDP less on health in 2017 for no cost to projected life expectancy gains. This is IF it were to achieve efficiency gains that the assessment considered to be plausible."
Don't we want to make efficiency gains to either save tax dollars or get even better results? It seems like you are opposed to any performance review of our hospitals/Government Departments.
Oh and in terms of GDP our public health service consumes about 1/2 that of the USA's private system and ppl live longer, pretty good indication we are doing alright.
Also the voter is still in play to keep them honest. In fact its one of the oppositions primary jobs to unearth Govn failings for the voter to see and consider in the voting booth.
Is that how you determine efficiency. "USA is hopeless when it comes to health care expenditure but we are 1/2 as hopeless as them... so we must be great."
As for the politicians keeping Government Depts honest where are you getting this information from? The positions taken are political and bare little resemblance to an analysis of efficiency. For example
Left - Social services need more money as kids are going hungry...
Right - Social services have more than enough money and need to be more efficient...
An independent auditor's office to review efficiency of Government spending should be established as I would guess the truth lies somewhere in the middle of those two positions.
I actually said the opposition should keep the Government of the day honest. How often do we see the opposition pointing out valid failures? if not very often there cannot be much if anything to see.
An auditors office would be yet another level of cost we have no need of.
I am totally unsurprised that its 33% , I was expecting it to be more , especially in Auckland Council where fruitless and wasteful expenditure is endemic .
I recently got a $200 fine on an expired warrant in my driveway on the Queens Birthday weekend ( and while I was not even in New Zealand ) so I challenged it in a written submission
I knew they had no legal grounds to stand on whatsoever, and demanded it be withdrawn .
Auckland Transport refused to back down , so I wrote them a second snotty letter and told them I would see them in Court .
They went ahead and we got a court date
I then proceeded to have fun with the legal system which involved no less that 5 Auckland Transport staff including a Senior AT Prosecutor ( who I assume earns over $100k) in the District Court in Henderson (dont ask why Henderson ) FOR THE WHOLE DAY ( 9AM TO 3.00 PM ) over a $200 fine.......... which they could never win .
I put all the department staff in the dock and questioned them, and they were hopelessly unprepared .
And of course I won .
I still manged to do about 4 hours work on my laptop , while the well paid Council officials sat around kicking their heels .
The worst thing about the whole fiasco is that the AT staff were issuing fines in Greenhithe over the Queens Birthday weekend .............
Why you may ask ?
Well , its simple , they earn double pay on public holiday weekends
Utter waste , incompetence and just taking the piss out of us Aucklanders
Tax sucking bastards
I beg to differ.
They are paid-up economists - an organisation that has completely sold-out to partisan political interests... of the variety you mention....
Guess who was commissioned to write a preordained report on nationalising our Wholesale Electricity Generation Market (just about as loony left as it gets)?...
Only 1 house in the country ever takes these jobs.
https://www.interest.co.nz/sites/default/files/BERL%20Economic%20impact…
NZ needs to rethink about current systems to select the country's leader and public sector leaders at different levels.
Is a three year election cycle good for NZ's strategic long term planning?
Is the political system suitable for the current economic development and will it be sustainable in the future?
I think we need this system more than we think. Mainly because it allows the majority of our public to pin the blame for their own incompetence and failures on the system, the government, elected politicians, etc.
Countries like Taiwan, South Korea and Singapore could not afford a public system until a couple of decades ago but successive generations took it upon themselves to break through socioeconomic barriers and continue to do far better than the "first world".
Is any system? none I see anywhere around the world is even close to "sustainable" (oh what an over-abused word).
Certainly a democratic system like MMP has more chance of being fairer than anything else I can see.
Would going to 5 years be any better? one of the cost savings of going to 3 was to get rid of the NZ senate I believe thus reducing the "overhead"
The Qs you ask are not bad but should really be of the voter not the Government ie the failing(s) is down to the voter not doing the right job.
Hard to disagree with that line of thought but the Socialists here seem to argue that you only have that money by virtue of being a part of Society at large so it’s really not your money. You just get to work for their money to then give them back what was theirs all along.
Yeah, we seem to have very nominally held beliefs in capitalism and libertarianism in NZ.
Everyone's in favour of capitalism on tax day, when their money might contribute to public services or works or assistance for others...but come Pension day or time to send the kids to school, everyone's a socialist again.
"Perhaps one dollar in three of New Zealand gerneral government spending is wasteful".
Wow really difinitive, well backed up argument there.
I'm not saying they're wrong but you need to do better than basing your argument on uneducated guess. Does prove their point on our education system though.
I have said it before and will say it again .............. Any Government will spend the money it takes from you in taxes , a lot less carefully than you would ever spend your own money .
Its the nature of the beast .
The best we can do is have a few weeks of feigned outrage in the media, and let the Government make some hollow promises to change their ways .
Don't hold your breath
When there is no market then don't expect there to be market outcomes - governments have no competition to worry about and resources are allocated on political grounds rather than economic. This is hardly a surprise as it is kind of what governments are about. This report is a good challenge for the Government and future governments that before raising taxes or saying there is not enough money to do xyz they should look at productivity like everyone needs to do.
Market outcomes in education.. Let the under-resourced die off and fall out of the system? Not sure that is a useful educational outcome for the person that is involved, or the business that needs skilled employees, or the business that wants to sell them stuff, when without an education they will most likely end up a permanent employee of WINZ..
I am unsure I actually said what you are now implying. We have been pouring money into the state system for years and the result are not great for every student. Right now we have under-performing schools that limp along for decades as they never have to account for their performance.Some students their entire educational time and end up at WINZ regardless. Compare that to charter schools where if they fail they fail quickly and the students do not waste too much time.
Where a man's treasure is where his heart is too. And for a lot of government departments, not just schools, their treasure is not on outcomes efficiently. The market has a great way of focusing the mind.
Results are not great for every student... but then again since every student is not identical, there is always going to be a range of outcomes. By any objective measures (https://www.radionz.co.nz/news/national/319783/nz-scores-drop-but-ranki…) we do a pretty good job overall.
Could we do better, sure. Could we do better for less money, possibly, and i'd support anything that would support such an outcome.. so long as it didn't mean the top and middle rise and the bottom end drops even further. We already have enough of a permanent underclass, the last thing we need is to make that more of a problem.
And the whole market forces thing.. doesn't work so those that are locked out of the market and get the leftovers nobody wants, which is IMO where the real problem is.
so like they want mental health services to all be cut so people will have more money and can then buy their own St John's Wort or therapy sessions. Cut all health then people can afford health insurance because we know that works well in other countries.
The bottom line is though if everyone had a big tax reduction you would have two things. Consumer and probably housing inflation jumps and a stagnation in wage growth or a possible fall as people will have effectively got several years pay increases at once.
Disappointed they cite the Heritage Foundation which is an American conservative think-tank, to me drawing a conclusion from this would now be to eat of the fruit of a poisonous tree. I'm actually willing to accept there might be a good argument for efficiencies but you'll need to do the independent leg work to convince us and you need a more robust analysis method than inter-government comparison.
It's a really worthwhile read, but that headline number (i.e., one-third of government expenditure is wasteful) is just a very small part of the wider report - and the assumption is based on a single piece of research which used a unique (i.e., one-off) methodological basis to determine the world's most cost-effective government: that being South Korea.
The headline number is then derived from this comparison: therefore if New Zealand's government were as cost-effective as South Korea's government, we could save around 33% (in government expenditure).
And, when the methodology was applied across all the OECD countries;
For 22 OECD member countries, the potential percentage reduction in their ratio is greater than the one-third reduction for New Zealand. For 11 of them it is over 50%.
In other words, 22/36 OECD countries ranked worse using this methodology - some far, far worse - than our government did in comparison with South Korea's government.
But, as I say, that aspect of the report is a very, very small part (2 pages out of 57 pages in body text)... and the rest of the report has some really interesting, and extremely positive aspects about New Zealand society.
As I read it, I was surprised on just how many international measures we are doing extremely well. Punching well above our relative wealth as a country.
The author does a really good job of giving credit where credit is due, as we rank extremely high on overall performance - and he then digs deeper into some of these global rankings to analyse the individual measures that drag our overall performance down (but we're never at the bottom of any pile!!!).
He summarises these international benchmarks in Appendix 2;
A2.1 Where New Zealand scores in the top 10 of the world
Ease of Doing Business Index – ranked 1st overall in the World Bank’s 2018 report out of 190 countries; 1st in the sub-categories of Ease of Starting a Business, Registering Property, and Getting Credit; 2nd for strength of minority investors protection index; 3rd for ease of dealing with construction permits; and 9th for ease of paying taxes
Legatum Global Prosperity Index – Ranked 2nd most prosperous country in the world (2017)
Political freedom ratings – Political rights and civil liberties both rated 1 (the highest score available)
Press freedom – Ranked 8th for press freedom in 2018 out of 180 countries
Global Peace Index – 2nd in 2018 at 1.192
Corruption – Least corrupt of 180 countries in the Corruption Perceptions Index 2017
Economic Freedom – 3rd freest at 82.1 on the Heritage Foundation’s Index of Economic Freedom 2018, and 3rd also at 8.48 on Fraser Institute’s Economic Freedom of the World index
A2.2 Where New Zealand scores less well
The (Swiss) IMD Business School’s 2018 World Competitiveness Ranking report (16th out
of 63 countries).GDP per capita – 34th highest (Heritage 2018, PPP basis), at US$37,294
Income Equality – 25th most equal out of 34 OECD countries and a post-tax and transfer basis in the late 2000s (Gini Index)
Unemployment rate – 61st highest rate, at 5.2% (Heritage Foundation’s 2018 database)
So, it's good news folks - the list of stuff we need to work on is much smaller than the aspects which we've got pretty right.
I remember studying in Quality Management some years ago. The proportion of waste in manufacturing was about 20-25%. In service industries it was more like 30-35% (logical, eg you can keep making smart phones one after another, but if a patient fails to make an appointment, the dentist's time is wasted). The government is all about services not production.
So the NZ Initiative is simply repeating the obvious. I wonder how much time they WASTED in finding this out? 100%?
Ho hum, a right wing "think" tank thinks too much money is being spent, on health even. Who'd a thunk it? Surely this is their default setting, so why would anyone be even mildly surprised to find them coming to this conclusion?
We have a national health system in this country, it has been underfunded for years, especially mental health, it bloody costs to sort it. Of course, we could just carry on ignoring them I guess, after all I can't imagine what else their solution might be, and what are jails for, anyway?
I am about sick of them, to be honest.
"By age 15, government will have spent more than $130,000 on the average pupil’s schooling. Yet about 17% will have failed to achieve basic numeracy and literacy. If that is not failure, what is?" - so presumably we shouldn't spend money on education and just let our kids live in ignorance? That would be cheaper...but might also lead to serious retardation.....
Surely if we measure so bluntly we must also conclude that the 60% of our social welfare budget we hand out to old people regardless of need is an unjustifiable waste, too. Young people could be allowed to keep more of their pay packet if they didn't have to fund the lifestyle of wealthy old people as well as the schooling of kids who are failing at basic numeracy and literacy. Spending on either is extravagant indeed.
And keeping more of one's pay packet is what it's all about, as noted.
They're right. We need to move to a system more like the US privatised health system. Which has enviable health outcomes........ hmmm maybe not that argument ..... Which costs a far lower proportion of GDP than other OECD countries ..... hmmmm maybe not that argument either ...... Which has a much lower level of waste than comparable countries ..... hmmmmm not getting much traction.
I'll think of a better argument & post it. Watch this space.
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