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The “social investment approach”: what it means for New Zealand

The “social investment approach”: what it means for NZ

Government is increasing the number of social agencies that are targeting their spend to improve the lives of at-risk New Zealanders.


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Adrian Wimmers - KPMG NZ - Partner

Partner - Deal Advisory, Head of Infrastructure

KPMG in New Zealand


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The take-out:

We’re seeing the Government further commit to its “social investment approach” – by increasing the number of social agencies that are using evidence of what works to target their spend and improve the lives of at-risk New Zealanders.

The key Budget measures:

  • $200m over the next four years to support the overhaul of Child, Youth and Family (CYF) into a new vulnerable child delivery agency
  • $145m over four years to meet increased costs of children and youth in care
  • $50m to assist people with complex health needs back into employment
  • $40m increase to Whānau Ora, which aims to support around 2,500 more whanau and families
  • $20m to support recently released prisoners reintegrate into communities and thereby reduce rates of recidivism
  • $18m in the Health package focused on reducing preventable illness for young people living in unhealthy homes
  • A further $18m to insulate a further 20,000 rental homes through the Warm Up New Zealand insulation programme.

What’s driving this:

This Government is highly focused on driving increased value from the money it spends on social services. It is much more focused on the ‘value’ side of the equation than the sheer amount of money spent.

We’re seeing an ongoing shift in the way the Government defines ‘value’ from the efficiency focus of earlier budgets under this National-led Government to the effectiveness of social expenditure i.e. whether it has actually improved an individual’s situation. Or as Bill English said in a recent speech: “Instead of mindlessly paying a sickness benefit for 40 years, we’re taking steps to intervene now to help vulnerable New Zealanders lead a better life and save the Government money in the long run.”

What this means for at-risk families & individuals:

The main focus of the Budget 2016 initiatives are vulnerable children and youth. The reform of CYF is one of the most ambitious public sector reforms undertaken by a New Zealand government in a long time. This Budget means that vulnerable children will be eligible for care and protection until a later age, they will have access to an independent youth advocacy service, more and better trained caregivers, and workforce training measures. The aim of this increased expenditure is to improve the life course of vulnerable children and youth in care.

The back-story:

The Investment Approach started in earnest in 2012 with the Government’s Welfare Reforms, and has been building ever since. Essentially, it looks to evaluate the long-term return from investing in social services, and to use this information to target future spending.

To use a business analogy, it makes sense to prioritise investment in those areas that deliver an effective return. In a similar way, the Government is generating a positive feedback loop – by drawing insights from government data, assessing what works, investing more time and resources into that, measuring again, and so on. It’s all about tracking your return on investment as you go.

These types of initiatives are increasingly using data from Statistics New Zealand’s Integrated Data Infrastructure (IDI), as well as collecting other relevant data.

Following MSD’s use of its own data around lifetime liability, other big social agencies like the Ministry of Justice and the new Vulnerable Children’s department are following suit. The ‘investment approach to justice’ was launched on May 2 by Justice Minister Amy Adams, and takes the same approach to predict long-term patterns of offending and future criminal activity. Similar activities are underway in education and social housing.

Bill English has claimed some victories already – saying recently that the welfare system’s future lifetime cost has reduced by $12 billion over the last four years as a result of government actions – which equates to 60,000 people each spending 15 years less on a benefit.

The KPMG view:

Although it has some critics, we think the logic of the social investment approach is pretty compelling. Effective social intervention is not only good for the people it’s helping - it’s also good for the Government’s books and a more prosperous New Zealand overall.

The social investment approach is also likely to survive this Government in some form; given that the idea of using data and analysis to inform evidence-based spending decisions is hard to argue with. This is reinforced by the fiscal benefits – reducing future social spending gives future governments more discretion over where government expenditure is applied.

The groundwork has been laid by the National-led Government in recent years, and today’s measures will help reinforce this as a core tool in the public sector management toolkit.

However the pace of adoption – particularly when it comes to agencies finding new ways to work together – is slower than the Government would like. The challenge is to get the momentum moving faster, and see the results sooner.

© 2020 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

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