The New Zealand Prime Minister Jacinda Ardern has made a strong impact on the world stage with her vision of liberal progressive politics that promote wellness and kindness. Doubters and opponents say economic realities could defeat her.
Ardern’s proposal to produce a “Wellness Budget” in New Zealand this year attracted world attention when she attended the World Economic Forum in Davos. She spoke of boosting the “wellness” of New Zealand society while not ignoring economic bottom lines.
She said Brexit and trade wars reflected growing general frustration with political and economic systems and considers issues of well-being are starting to destabilise democracies and affect economic growth. People who feel they don’t get a fair share of prosperity blame trade and immigration, and their dissatisfaction, disappointment and disillusionment is damaging democracies.
She believes the emphasis on wellness is not ideological. It is a matter of building trust in institutions and it makes economic sense in the longer term. The wellness approach is an effort to ensure more people’s lives are improved and prosperity is more widely spread.
To address these concerns in New Zealand the annual budget will use a complex system that measures social well-being. It will be a “wellness” budget.
In an interview with The Economist Ardern said she wants wellness principles to be entrenched so they persist beyond New Zealand’s three year political cycle. This would be achieved by changes to the Public Service and the Public Finance Act.
Wellness for the nation involves going beyond the traditional methods of assessing costs and benefits while not ignoring economic measures. Dealing with wellness issues should reduce future welfare and medical costs.
For example, child poverty statistics will be included in every annual budget to help focus public policy towards an area that will make a difference morally, but also improve the future health, welfare and productivity of citizens.
The New Zealand Treasury has established a Living Standards Framework (LSF) to analyse and measure intergenerational wellbeing and to help develop policies. It is based on thirty years of research and follows the wellbeing approach used by the Organisation for Economic Co-operation and Development.
A Living Standards Framework dashboard contains a broad range of indicators that measure factors that influence New Zealanders’ well-being. They are organised into three groups: The people, the country and the future.
The section on the people uses data from surveys and other sources to describe the distribution of wellbeing for eight different population groups of New Zealanders, using characteristics such as sex, age, ethnicity, family type, region, hours worked and neighbourhood deprivation.
The section on the country describes the current wellbeing of New Zealanders at a national level with comparisons within New Zealand population groups and other OECD countries, using 38 indicators that measure 12 wellbeing domains.
The section on New Zealand’s future assesses the resources that underpin the ability to sustain higher living standards in New Zealand. The critical areas are Natural Capital, Human capital, Social capital and financial/physical capital.
This web of data, some of it from surveys and some from comparisons with OECD information will be used alongside traditional financial calculations to determine the deployment of resources in future annual budgets.
One of the priorities for the next budget, due in the next three or four months, will be mental health and wellbeing especially of under 24 year olds. Every year mental health will be measured, reported on and targets set. The economic justification is that improved child health supports long term wellbeing and productivity.
Ardern gives an example of the way wellbeing factors have already been used in government decisions on resources. When the Labour coalition came to power in late 2017 there was an existing proposal to build a 2,500 bed prison. This size was considered to be the most cost effective in terms of price per cell.
The new Labour led coalition government wanted to address wider issues of prisoner re-integration, mental health and drug and alcohol addiction so the cabinet chose to build a 500 bed prison with a mental health facility and extra investment to deal with re-integration and addiction issues. It was considered that long-term economic and wellness benefits out-weighed the short term costs.
The National Party opposition and doubters in the community ask where the money is coming from to pay for policies that don’t concentrate solely on balanced budgets.
Ardern said there is a perception that Labour Governments are not good economic managers, yet the last Labour government in New Zealand was nine years in office, had nine budget surpluses, net crown debt was very low, unemployment was amongst the lowest in the OECD and the country experienced the strongest continuous economic growth since World War Two.
To ensure good financial management the Labour Party and its coalition party the Greens have agreed five Budget Responsibility Rules, including delivering budget surpluses, getting crown debt down to 20 percent of GDP, prioritising sound investments like restarting contributions to the Superannuation Fund (the Cullen fund, a sovereign fund to help pay for pensions in the future) and to create a fairer tax system.
Ardern said the government will work within these rules even in a budget that provides for wellness issues.
The government reported a substantial surplus last year and economic indicators have been sound ever since. New Zealand would not be immune from global economic problems which many are predicting. However the Coalition is convinced wellness budgets are fiscally prudent and economically justifiable.
The Wellness Budget and the work around it is just one part of a busy and interesting year for the Labour-led Coalition.
A large number of consultations and projects are under way to make substantial changes to New Zealand society. They include the politically risky reform of the tax system and the troublesome business of building more affordable houses.
Next year is election year. Time is a scarce commodity in New Zealand’s three year election cycle. The coalition can expect powerful push-back from the National Party but Ardern said it is up to politicians to choose whether to promote fear or hope.
Max Hayton is a former political correspondent and Foreign Editor in New Zealand.