A Black Box Wellbeing Budget: Lessons for the Regions

The Wellbeing Budget was the Government’s first chance to transform the Treasury’s Living Standards Framework into an objective process for allocating government funding.

But unfortunately, guidance given for how the Government weighted various aspects of wellbeing in decision-making was wishy-washy.

This blog summarises the take homes for decision-makers in the regions, who are trying to imbed wellbeing ideals into budgeting, policymaking, and business case writing in an applied setting.

Developing a Wellbeing Budget

You will read numerous economic wonks’ reviews of the Budget bottom line in terms of surpluses and borrowing. The take homes from that angle were easy – borrow a little more, spend it on the vulnerable, and don’t worry about the books because strong forecasted growth will keep taxes growing and surpluses entrenched.

By all accounts an inclusive and balanced budget.

But frankly these details were secondary to me while reading the Budget. I was more interested to learn about how the Government weighted various aspects of wellbeing in its decision-making processes.

After all, understanding the new rules of the Budget game are going to be important for bidding for money from government departments.

To my immediate disdain, the level of objectivity imposed in the decision-making process for the Wellbeing Budget was more muddied than that previous used for formulating budgets.

The following diagram from deep within budget documents shows that developing the Wellbeing Budget essentially boiled down to collaborative horse-trading between Ministers.

My read of the Wellbeing Budget process is that it differs from traditional budgetary approaches in two key ways:

  1. An initial evidence-basis is used to determine themes, or priority areas, that underpin the focus of each Wellbeing Budget. The themes chosen this time around were: taking mental health seriously, improving child wellbeing, supporting Māori and Pasifika aspirations, building a productive nation, and transforming the economy.
  2. These themes are then used as anchors, which Ministers and their agencies use to develop potential initiatives which target intergenerational wellbeing.

The actual decision as to which policies ultimately make the cut, and which policies are out, is then left to horse-trading between Ministers. Apparently this process is more collaborative than in the past – though it is not immediately obvious what collaboration means in practice beyond trying to break down silos across government.

The real frustration for me surrounding this part of the process lies with the lack of structured guidance regarding how Ministers objectively compared the different potential policies around the Cabinet table.  

A magic wand was waved, and the Budget merely states that consideration was given to impacts assessed by the Living Standards Framework.

But what on earth does that mean? The Living Standards Framework contains 12 different domains of wellbeing and four types of capitals.

Various policies will touch on different areas of the Living Standards Framework. There still needs to be some way of weighing up the diverse metrics of wellbeing to determine which policies offer a better wellbeing return than others.

This part of the process is a black box and the absence of a clear framework for weighing up policy options leaves too much room for subjectivity.

And this level of subjectivity scares me because it removes an element of transparency and could ultimately lead to inconsistent assessments of policy options.

When allocating scarce resources, you need to be consistent, and remove temptations to cherry pick pet projects. Otherwise you perversely run the risk of undermining efforts to improve wellbeing.

What does wellbeing mean for making real world decisions in the regions?

The initial take home from my comments may be disappointing for decision-makers in the regions. Particularly those who had been waiting for a clear answer regarding how they should weigh up the various aspects of wellbeing when making decisions.

But all is not lost.

Although no clear steer was given for weighting wellbeing, some guidance was at least given to how central government departments formulate their own budget bids to Ministers.

Following the bones of this process will help regional decision-makers sing from the same song sheet as central government. Not a bad thing when accessing money from government departments or applying for funding from the Provincial Growth Fund.

In my opinion, the bones of this process which are important for regions, when guiding business case development, are:

  • Show you have worked collaboratively with stakeholders in your area to formulate policies, and that the implementation of your policy will be collaborative.
  • Your policy focus is long-term so that intergenerational aspects are considered.
  • Your business case contains an assessment of outcomes against the Treasury’s Living Standards Framework.
  • You show strongly how your proposal addresses the priority areas that are guiding central government’s Wellbeing Budget process.