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Treasury mindful of gaps in living standards framework

Wednesday 19th June 2019

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Treasury has identified parts of its living standards framework where more information is needed and says some of its work is pushing the boundaries of economic theory.

Deputy secretary Struan Little, who was filling in for Secretary Gabriel Makhlouf, told Parliament's finance and expenditure committee that the well-being budget had attracted a lot of attention at an OECD meeting he attended a couple of weeks ago, with most developed countries interested in how to use the framework to then allocate resources. 

Tim Ng, Treasury's chief economic adviser, told MPs the living standards framework was trying to overcome the competing demands of different sectors, and instead change the system so the likes of health, education and justice departments work to a shared purpose. He pointed to the government's major mental health initiative as an area where the framework can add value. 

Ng said the Treasury has identified where there are evidence and data gaps. "There are some places where more data would be better. There's some work we'll do on that."

He told MPs that adopting the framework was also testing the way Treasury officials are thinking about good economic policy and what that means for distribution and sustainability. 

"Conceptually, I have to be honest, this is pushing at the boundaries of our practice as economists," he said. 

The living standards framework had its genesis under former Secretary John Whitehead who wanted to formalise the department's more qualitative policy assessments. It was further developed by his successor, establishing the regime where financial and physical capital, natural capital, social capital and human capital are seen as the four components essential to current and future living standards. 

The Labour-led coalition government picked it up and Finance Minister Robertson told MPs today that the well-being budget was materially different in how analysis is done, and when ministers get involved. 

He reaffirmed plans to change the Public Finance Act to ensure governments are required to do well-being analysis and look to amend the State Sector Act to get more collaboration across the state sector. 

When asked by National MP David Carter whether the well-being initiatives will extend to state-owned enterprises, Robertson said they currently operate under their own legal obligations and it isn't a focus for him.

Some SOEs are already looking at a broader approach to well-being and Robertson said ministers will work with them through their statements of corporate intent. 

"We made a good start this year with core govt operations, but as I say we'll work with SOEs through normal channels and see how that evolves," he said.

National Party finance spokeswoman Amy Adams and Act Party leader David Seymour noted the absence of Makhlouf during Treasury's annual hearing on the budget economic and fiscal update. 

Little said the department's executive was of the view that MPs would be better served by other members of the senior leadership team appearing given Makhlouf's pending departure to take up the position as head of the Irish central bank.

Adams called that a "nonsense", saying there was "no downside for the continuity or public confidence perspective in asking the secretary who's head of the Treasury during the preparation of this document to be at this hearing".

Mahklouf's leadership has been criticised in recent weeks after the National Party was able to access budget documents prior to their release. That is now the subject of an investigation. 

Robertson later told MPs the decision on who presented to the committee was the Treasury's to make.


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