In the middle of 2018, the New Zealand government slashed the size of a planned “American-style mega prison” to be built at Waikeria, south of Hamilton, from 2500 beds to 500.

Instead of super-sizing the prison, the government wants to put in an additional 100-bed mental health and substance abuse rehabilitation centre.

The idea is that supporting offenders’ mental health will drive down recidivism rates and help stem the growth of New Zealand’s prison population.

The government touts this as an early example of a new approach to managing its finances, which will be more fully fleshed out in May when it unveils a Wellbeing Budget, claimed as the world’s first.

Policies will be considered under a broader wellbeing framework that focuses on the longer-term benefits for communities rather than the inputs (the dollars) and the outputs (the numerical results). 

How different this will be from the previous National-led government’s social investment approach remains to be seen.

GDP is not the only measure of success

The intention is laudable. The concept is logical. Few would disagree that we need to move beyond relying on GDP as a key driver of policy decision-making and as a measure of the nation’s economic wellbeing. GDP is an inadequate test of success because it measures economic activity but not the welfare and prosperity of our society.

As CA ANZ argued in The Quest for Prosperity, a 2017 thought leadership paper on New Zealand’s living standards, “without broader indicators, communities are less able to hold governments accountable for delivering the future that citizens value.”

What New Zealand Finance Minister Grant Robertson delivers in May promises to be ground-breaking – a national budget that puts wellbeing at the heart of policymaking.

“GDP is an inadequate test of success because it measures economic activity but not the welfare and prosperity of our society.”

Successful policies will deliver outcomes linked to the health of finances, natural resources, people and communities.

It won’t be the first or last time that New Zealand pioneers a new approach. New Zealand was the first country to change its approach to government budgeting – the first that fully adopted cost-based accounting and budgeting and the first to require advance specification of the outputs to be purchased.

The government has confirmed its five priorities for this year’s budget:

• A sustainable and low emissions economy
• Innovation and digital connection
• Maori and Pasifika income, skills and opportunities
• Tackling child poverty and promoting the wellbeing of children
• Mental health.

We’re likely to see new initiatives, and sizeable resources, devoted to these areas. What will be different to previous years will be the wellbeing lens.

Implementation of the new approach to budgeting and policymaking will be key. It will be an organic process that plays out over the years ahead, and we need to give it time to succeed.

How to measure the Wellbeing Budget’s impact?

That said, it is critical that success is measured robustly and transparently along the way. Given the new approach requires achievement of social and environmental outcomes as well as traditional financial outcomes, measuring success won’t be easy.

It will have to be done, even if it is difficult. As the accounting profession knows, verification and assurance of the results will be critical, too.

New Zealanders and economists, politicians and commentators in the rest of the world (or at least those not distracted by Brexit and Trump-style politics) will be watching this development with interest.

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