Will Simeon Brown sink Nicola Willis' social investment strategy?

Nicola Willis’ annual Minister of Finance address to the New Zealand Institute of Public Administration is well worth a read. On the one hand she stressed that the government’s focus on fiscal discipline is going to continue stating “it is not a one off, one budget affair. It is an ongoing state of mind.”

On the other hand she presented a vision of a government focused on well-being with statements such as “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.” and “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.”

The linking mechanism between the two different visions is social investment enabled by the work of the Social Investment Agency. The Minister expects the use of data the government holds, primarily through the Integrated Data Infrastructure managed by Stats NZ, will allow the government to identify common factors in the lives of those who interact closely with the state agencies and provide a compelling case for targeted intervention.

But this is only half the story. The minister is asking the public service for more purposeful thought about how government invests for the New Zealanders in most need. In this paragraph she recognises the challenges this will present:

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.

There is a commendable awareness social investment demands very different thinking about how services are designed, targeted and delivered, and how to know whether they are being effective to achieve the desired outcomes. Specifically, the Minister emphasised that “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.”

This statement opens the way, quite directly, to asking the question if not always Wellington office blocks, or the beehive, then who else should be involved in finding the answers required to questions about how best to promote the outcomes social investment seeks to achieve.

The minister’s answer to this question is delivered in the context of revisiting the way in which government contracts with community providers stating “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.” Note; throughout her speech the minister makes no reference whatsoever to local government or any role councils may have in improving outcomes for individuals and families within their district even though many community providers will have strong links with and receive essential support from councils.

Much of the rest of her speech details the multiple problems which community-based providers have raised with her regarding existing central government contracting practices. She recognises that “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.”

Her proposed solution is contracting with providers to deliver outcomes rather than outputs with the social investment agency tasked to take the lead in developing prototype outcomes contracts.

It’s an approach which will be very much welcomed by community-based providers representing a massive reduction in unproductive and often conflicting compliance requirements. There is however a separate question over whether this by itself will be sufficient to facilitate delivery of the outcomes the social investment strategy is intended to achieve.

First, there is potentially a mismatch between the needs of the individuals and families who will be targeted by the social investment program, and the capabilities of individual community-based providers. It is likely that most if not all of those being targeted will have multiple problems resulting from a range of causes including uncertain employment, functional illiteracy, poverty, inadequate or unstable housing, family violence, substance abuse, health issues, neurodiversity, inadequate diet… In contrast, even the best community-based providers are unlikely to have the capability to take the holistic approach dealing with multiple problems may require.

An holistic approach may well require a community hub strategy able to bring together different providers, and those deemed to need their assistance, in a single and trusted place. Alternatively, or as well, it may require a rethink of how the government manages social housing. In New Zealand it is still common to treat social housing simply as a solution to a housing problem. An option, employed effectively in other jurisdictions, is to see social housing as the node around which a range of support services can be based, an approach which requires collaborative working amongst a range of different providers.

There is a further and important dimension likely to be crucial for achieving the outcomes the minister seeks; the nature, quality and functioning of the communities in which targeted individuals and families live. There is increasing awareness internationally of the importance of communities in supporting well-being of individuals and families, including those who are hardest to reach. This awareness includes the realisation effective communities require some form of structure and capability support.

Experience, as identified by research[1], makes it clear that enabling and supporting effective communities is uniquely a role for local government. Central government simply lacks the knowledge, networks, capabilities and capacity required. Instead its necessary role is more one of being able to listen to and respect community voices.

The Minister’s speech suggests that, presented with the evidence on the importance of communities, she would be open to understanding why strong communities matter for achieving the objectives of the social investment strategy, and that empowering and supporting communities is uniquely a local government role. This may present her officials with a challenge given central government’s lack of understanding of local government and in particular of emerging practice internationally with empowering communities. Officials could see getting to understand this as a response to the Minister’s expectation of how she expects the public service to respond “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.”

Enter Simeon Brown. This minister’s requirements of local government will make it very difficult, if not impossible, for councils to play an active role in empowering and strengthening communities. Without council involvement, what will actually be an essential element in delivering a successful social investment strategy will simply not be available.

Consider how government policy will impact on any initiative to strengthen communities. Councils are to focus on ‘need to haves’ with the government’s intention looking very much as though this means infrastructure, regulation and other ‘core’ business, not strengthening communities. Additionally, government intends imposing a legislative cap on councils’ ability to apply rates towards the cost of delivering ‘nice to haves’.

Perhaps less obvious to the casual observer, but very concerning to individual councils, is the impact on their capacity and capability of a number of major central government policy initiatives. The financial demands of local water done well could effectively crowd out any significant capital investment regardless of whether councils retain water services or outsource them to a CCO or similar arrangement. Whatever the arrangement, the cost of servicing the additional capital to implement LWDW will push total costs to many ratepayers/water users well into the unaffordability zone. Furthermore, the ring-fencing arrangements, and the likelihood that most water services will be shifted into a CCO structure,  will remove a lot of strategic capability from individual councils and result in significant downsizing of their financial and activity planning capabilities.

That’s not all. For territorial local authorities the loss of any significant involvement with land use planning and of their Building Consent Authority status will make a lot of embedded capability in systems, IT et cetera redundant.

This is likely to be a double whammy for councils. First, a diminished management capacity will be faced with very significant organisational change, attempting to right size stranded investments in operational management. It is quite likely this could be accompanied by a reduced ability to attract and retain the capabilities needed for the effect of ongoing operation of the council in what will still be a very turbulent policy environment. Secondly, what is already regarded as the challenging task of attracting well-qualified candidates for elected office, will become much more difficult. The job of elected member is likely to be both much less significant given the reduced scope of activity. Instead it will feel much more like simply the opportunity to ask how high when the Minister says jump and much less like any real governance role in relation to the communities the council is supposed to serve (caveat: there is still a possibility for local government to play a much more strategic role but the absence of strong septal leadership casts doubt on this happening.)

The Minister of finance may want to see more devolution of power, more clarity about what works for who, and much more space for innovation. The Minister for local government appears to want to see the exact opposite.

The Minister of finance has a delicate decision to make. Does she accept that the Minister for local government has autonomy within his portfolio, with the result that a critical enabler of the success of the social investment strategy will not be in place. Alternatively does she assert her seniority to ensure that supporting and empowering communities is seen as core business for local government.

Acting (carefully and with subtlety) to ensure the Minister for local government’s policy initiatives do not sink her social investment strategy will be one of the most important achievements of her time as Minister.

[1] for those unfamiliar with research on the role and significance of communities, UK think tanks such as New Local, Locality, the Institute for Public Policy Research, Demos, Localis and the Carnegie UK Trust, and US think tanks such as the Kettering Foundation, the Centre for Public Service at Portland State University and the Democracy Collaborative will provide useful background.