Friday 26th July 2019
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Finance Minister Grant Robertson says too much government time is spent juggling small funding pools rather than focusing on strategic issues and getting value for money and he plans to introduce greater flexibility to its financial management.
The government has already made changes to the Public Finance Act requiring the finance minister to report on child well-being and child poverty at every budget. Robertson will introduce legislation to amend it further by requiring the government to show how its well-being and fiscal objectives will guide its budget and for the Treasury to report on the state of current and future well-being in New Zealand at least every four years.
Robertson today told a Victoria University conference recognising the 30th anniversary of the Public Finance Act that the legislation and public finance system have limitations that undermine the government's pursuit of well-being goals.
"While the original intent of the reforms may well have been to bring about greater flexibility, the way they have been operationalised has sometimes had the effect of putting an 'electric fence' around parts of the fiscal management system," Robertson said.
"This can hinder co-operation and innovation, create silos, and make it harder to help people who have needs or problems that fall across agencies."
The framework means the annual budget cycle focuses on marginal increases in funding rather than total government spending, annual appropriations are too rigid to adapt to changing circumstances, and performance accountability conventions restrict innovation, he said.
Robertson unveiled his first well-being budget this year. The government plans to report more broadly what its policies and spending programmes are achieving, rather than simply posting the numbers.
The 2019 budget also introduced a multi-year allowance for capital investments, which, combined with the new Infrastructure Commission, is hoped to bring greater certainty to a construction sector that's been contending with tight margins and limited labour availability. Separately, State Services Minister Chris Hipkins is eyeing major law reform to force far more collaboration between government agencies on the biggest policy challenges.
Robertson said his three main themes to align the system to a well-being approach are embedding well-being in the legislation, making the financial management framework more flexible, and incorporating existing spending into the budget.
He said changes to the financial management framework aim to make it smarter and more flexible, and get people thinking differently about planning and reporting.
"Our current system has a very high degree of regulation, which means we spend far too much time and resource on authorising, managing and keeping track of a large number of small funding pools, rather than focusing on the strategic issues and value of spending – the areas where we can make a difference," he said.
"Although the system does give some flexibility to shift funding across pools, and to move it from programmes that aren’t working to those that are, this can be difficult and have high transaction costs."
Robertson also wants better strategic planning by government agencies, because too many plans involve significant time and effort, "but end up sitting on the shelf gathering dust".
He plans to take a proposal to Cabinet to improve strategic planning, testing a fundamentally different approach with one or two pilots, each of which will shine a spotlight on a specific long-term issue.
Robertson said about 98 percent of government spending sits outside the budget process, which means the annual centrepiece is largely reactive and often too late to respond to major strategic moves.
A baseline review of the Ministry of Social Development found "years of under-investment in case management meant that services had become run down, meaning fewer people getting into work, and driving up costs to the taxpayer." It also highlighted how reactive processes saddled the agency with expensive, inefficient and risky IT systems which will take years to address, he said.
A baseline review on defence spending has already been started and Robertson plans to accelerate that work so larger agencies can come under the microscope.
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