4. Re-think the macro settings and assumptions of the public management system

This chapter looks at how the macro-level settings (macro settings) of the public management system have evolved over time. It then examines the ideas and assumptions that underpin the system, before setting out how we can redesign our macro settings to address persistent disadvantage and foster intergenerational wellbeing.

What are macro settings?

Macro settings are the high-level policies and the economic, financial, and institutional architecture that shape public policy, government investment, and how the public service operates. Macro settings are not always explicit or visible, but they signal intent, provide direction, and influence the flow of money and resources, as well as the ability to implement public policy.

The Public Finance Act 1989 and the Public Service Act 2020 outline high-level settings for how the public management system is funded, and how public servants are expected to work. These settings create the boundaries within which the public management system implements the policies of the Government of the day. They include incentives to align the system towards focusing on wellbeing while implementing government policies. Additionally, the Government’s fiscal management approach (agency baselines, operational allowances, and capital allowances) dictates how money is allocated, as well as providing another lever to focus the system on wellbeing.

The macro settings within the Public Finance Act and Public Service Act shape how the public management system operates, including the incentives (and disincentives) that guide the people within the system, and how the public sector interacts with the communities they serve.

Macro settings in the public management system have been changing to reflect a growing emphasis on wellbeing. Various Amendment Acts have modified the Public Finance Act 1989.¹⁸ The amendments have introduced wellbeing objectives to guide financial management, and the requirement for governments to report against those objectives.

The amendments built on existing principles and reporting requirements for responsible fiscal management that underlie the transparency and accountability of Aotearoa New Zealand’s public financial management. These include principles related to debt levels, net worth, and the prudent management of fiscal risks.¹⁹ When formulating its fiscal strategy, the Government must have “regard to its likely impact on present and future generations”.²⁰

Budget policy statements that precede the Budget must state the wellbeing objectives that will guide the Government’s Budget decisions.²¹ These wellbeing objectives “must relate to social, economic, environmental, and cultural wellbeing and to any other matters the Government considers support long-term wellbeing in New Zealand”.²² The fiscal strategy report that accompanies the Budget must then “explain how wellbeing objectives have guided the Government’s Budget decisions”.²³

Governments must also produce a Wellbeing Report every four years. The Wellbeing Report is a new document requiring the government to describe the state of wellbeing in New Zealand, how it has changed over time, and the sustainability of wellbeing, including any risks, based on key indicators. The first report was released by Treasury in late 2022.

Aotearoa New Zealand was an early adopter of wellbeing measurement frameworks and the introduction of a Wellbeing Budget, and we commend this growing emphasis on wellbeing. But these interventions are not sufficient in themselves; more is needed to create conditions that empower everyone to live better lives.

Macro settings are shaped by underlying societal, political and economic ideas and assumptions

Like all “human systems”, Aotearoa New Zealand’s public management system is shaped by its underlying ideas and assumptions – a set of mental models or mindsets (Frameworks Institute, 2020),²⁴ paradigms or norms that govern how to behave, what to prioritise, what and whose interests to protect, and what outcomes are sought. These assumptions flow into and underpin the system settings and policy approaches that filter, drive and direct public policy decisions and investment.

Assumptions may be explicit or implicit. Although they are not necessarily held by everyone, they are nonetheless embedded in ways of working that can enable or constrain progress. Assumptions in a human system are never neutral; they reflect the dominant values, mindsets and worldviews held by people in that system. Although people are often unaware of the assumptions they hold, these assumptions influence outcomes and can result in increasing inequity.

An example of an assumption is found in the tendency for policy agencies to consider disadvantage within individual policy or public service domains. The implicit assumption is that related challenges that are the responsibility of other parts of the system are being effectively addressed by other agencies. For example, the stress levels of many people experiencing disadvantage are heightened, which can impact their mental health. Policy advice directed at alleviating this may focus on the provision of mental health services, rather than addressing the underlying causes of distress. But if the underlying causes, such as housing instability or family violence, are not also addressed, the effectiveness of mental health services will be reduced (Ministry of Health, 2021).

Assessing and assigning the “returns” on such interventions remains difficult if the assumption that they can be independently addressed is not valid. Where people have complex, interrelated needs, resource-allocation decisions (including Budget bids) require more integrated assessments, rather than compartmentalised or siloed approaches. But integrated assessments require a supporting environment that is also integrated. If the system prioritises compartmentalisation in its design and functions, we first need to uncover the underlying ideas and implicit assumptions that hold this approach in place.

Finding 6

Similar to all “human systems”, Aotearoa New Zealand’s public management system is shaped by underlying ideas and assumptions. Assumptions in a human system are never neutral; they reflect the dominant values, mindsets and worldviews held by people in that system. These assumptions flow into and underpin the system settings and policy approaches that filter, drive and direct public policy decisions and investment.

Assumptions may be explicit or implicit. Although they are not necessarily held by everyone, they are nonetheless embedded in ways of working that can enable or constrain progress. The tendency for policy agencies to consider disadvantage within individual policy or public service domains is an example.

In Aotearoa New Zealand, persistent disadvantage continues despite repeated reviews that describe consistent themes and call for changes in policymaking and service design. Although the advances in wellbeing approaches set out earlier in this report are a good start, implicit and explicit assumptions within the public management system create challenges for implementing a comprehensive wellbeing approach.

We gave some examples of these challenges in our interim report (NZPC, 2022a, p. 82) and consider them further here.

These challenges have been discussed in a variety of studies that have examined Aotearoa New Zealand’s policymaking approach and system settings.²⁵

There is often a narrow focus on economic growth and material prosperity

This narrow focus sometimes stems from a view that even non-material aspects of wellbeing, such as health and life satisfaction, flow from increased individual and national prosperity, often measured using Gross Domestic Product (GDP). Yet, although economic growth in Aotearoa New Zealand in the last two decades or so has increased real household disposable incomes by more than 50%, it has not increased life satisfaction – “in fact, subjective wellbeing appears to have fallen slightly over the same period” (Hughes, 2022b, p. 96).

In addition, Māori and Pacific communities, among others, have consistently emphasised the value of wider dimensions of wellbeing, including culture, belonging, connection to place, and the environment.

The public management system has already started to respond by moving away from a narrow focus on economic growth. The Treasury has developed the Living Standards Framework, which includes multiple dimensions of wellbeing, and He Ara Waiora is a wellbeing framework that provides a Māori perspective on wellbeing.

It is consistent with concepts of wellbeing expressed in the Living Standards Framework and He Ara Waiora and in the landmark report on the Measurement of Economic Performance and Social Progress (Stiglitz et al., 2009) that a range of social and environmental objectives that affect wellbeing require as much attention as the objectives of economic growth and material prosperity.

The system struggles to recognise or account for the full range of impacts on wellbeing when making decisions

The still largely siloed nature of the current public management system means that decisions in one part of government may undermine efforts in another part to improve wellbeing. The current system settings need to change to enable the system to focus on complementarities, by encouraging policymakers to uncover and respond to the complex linkages between the decisions being made by different government agencies motivated by different wellbeing objectives. For example, investing in housing can improve health, education and employment outcomes.

The current system is overly focused on short-term outcomes and struggles to consider the future

The public management system is biased towards the short term. This is reflected in the Budget process, which focuses on the next four years of funding, and in agency statements of intent and reporting cycles, which are often shorter. This leads the system to highlight and therefore focus on short-term concerns and priorities.

Investment decisions give disproportionately greater weight to short-term benefits and costs, relative to the needs of future generations. System settings need to change so that policymakers give greater weight in planning and investment decisions to long-term challenges and the needs and rights of future generations.

The system struggles to respond to people experiencing multiple challenges at the same time

People experiencing persistent disadvantage often face multiple challenges at the same time. Yet the system attempts to achieve wellbeing outcomes for them through the accumulated efforts of individual agencies – each focusing on doing their job well but working in isolation. As noted by the OECD, “public policy makers have traditionally dealt with social problems through discrete interventions layered on top of one another. However, such interventions may shift consequences from one part of the system to another or continually address symptoms while ignoring causes” (OECD, 2017, p. 12). Shifting system settings to support a connected, multi-sector approach would enable the public sector to make more effective progress towards improving the wellbeing of people experiencing persistent disadvantage.

The system does not pay enough attention to the distribution of wellbeing across individuals, families, whānau and communities

Another challenge is the need to give more emphasis to the distributional impacts of policies and programmes, so individuals, families, whānau and communities most in need get the attention and resources they require. Shifting system settings to give greater consideration to distributional impacts (which may result from a range of factors, including power imbalances and access to genuine opportunities and resources) would help to improve wellbeing for a greater number of individuals, families, whānau and communities – particularly for those experiencing persistent disadvantage.

Although there is much agreement about these challenges among those who work in the public management system, there is less clarity about what needs to change to address them. The next section explores how the settings in the public management system could be redesigned to address the challenges highlighted here.

How might macro settings be redesigned?

The actions we propose to shift assumptions and redesign systems settings are outlined in the following sections and reflected in our recommendations. Note that the relationship between assumptions and actions is not linear or “one to one”. Rather, all these actions enable broader perspectives, understanding and values within the public management system. The following sections discuss and detail the actions listed below.

• Broaden the values within the system to include all dimensions of wellbeing in He Ara Waiora.
• Set long-term wellbeing objectives, noting that cross-party agreement will be essential for sustaining long-term commitment.
• Represent and protect the interests of future generations to mitigate the transmission of disadvantage across generations.
• Establish a social floor that includes the dimensions of wellbeing.

The system (implicitly) prioritises “western” ways of doing things over indigenous and/or more diverse views of wellbeing. This has resulted in the prioritisation of the individual as the focus of policy action (individualism), rather than prioritising collectives, such as family, whānau and communities (collectivism). In contrast, He Ara Waiora, and the All-of-Government Pacific Wellbeing Strategy emphasise a more collective and intergenerational perspective on economic and community activity.

The Living Standards Framework was initially developed “in response to criticisms of being too focused on income (GDP) as the overriding policy goal” (Engelbrecht, 2013). Early versions emphasised material over non-material aspects of wellbeing and reflected individualistic notions of wellbeing. This is despite Aotearoa New Zealand’s population including people from diverse cultures, where collectivism is the well-documented norm.²⁶

The latest (2021) version of the Living Standards Framework introduced “the concept of collective wellbeing to reflect the importance of families, whānau and community to the wellbeing of Māori, Pacific Peoples, and many other New Zealanders”. This change is yet to be fully implemented.

As Treasury noted in Te Tai Waiora, its first wellbeing report, “most indicators and data focus on individuals, and are limited in what they can say about collective and whānau wellbeing” (The Treasury, 2022, p. 63). These data limitations reflect data collection across the public sector, which is often focused on individuals or households and generally does not represent specific communities particularly well. This issue was highlighted by submitters such as Asian Family Services (sub. DR119) and ChangeMakers Resettlement Forum (sub. DR150), in our wānanga with Māori and in our talanoa with Pasifika community leaders. We discuss this issue further as part of the learning system in Chapter 6.

As noted previously, He Ara Waiora, which was introduced in 2018, now sits alongside the Living Standards Framework. Although He Ara Waiora recognises collective values, there remains a tendency for wellbeing policy and investment analysis to default to the types of values set out in the Living Standards Framework alone. Box 5 discusses values and how they filter information, impact our reasoning, influence intentions and determine actions.

In short, we reiterate the view expressed in our interim report (and strongly supported by submitters and via our other engagement) – that frameworks such as He Ara Waiora and the Pacific Wellbeing Outcomes Framework need to be given greater centrality and weight, both in policymaking and in the expectations placed on how public servants should uphold the “spirit of service”.

We are not advocating for one dominant approach to be replaced by another; rather, we are arguing for a more pluralistic and multicultural approach. In practice, that will require additional, deliberate and sustained investment in operationalising such frameworks, so they are truly seen as equally valuable.

Finding 7

He Ara Waiora recognises collective values, and the latest version of the Living Standards Framework introduced the concept of collective wellbeing. Giving such frameworks, including the Pacific Wellbeing Outcomes Framework, greater centrality and weight would help in broadening the values, both in policymaking and in the expectations placed on how public servants should uphold the “spirit of service”.

Clarify how He Ara Waiora can guide how public servants work

We encourage Treasury to accelerate and extend its work on implementing He Ara Waiora as a tool for policy and investment analysis, and to invest in its use as a measurement framework. Beyond this, we recommend consideration of how He Ara Waiora could be incorporated into how the public sector does its work, the values it upholds, or how it demonstrates the “spirit of service to the community” as now required by the Public Service Act 2020.

This recommendation recognises that public service ethics and values are an important contributor to the wellbeing of New Zealanders. Moving beyond the current provisions in the Public Service Act to lift the cultural competency of public servants and we recommend strengthening the Public Service Act to require the public service to have a greater focus on te ao Māori and give effect to te Tiriti in all activities, and to be accountable for the wellbeing for all New Zealanders.

The values and principles codified in the Public Service Act set out expectations for public servants to maintain public service integrity. We consider that integrating He Ara Waiora values and tikanga (see Box 6) would strengthen the public service’s commitment to pluralistic and multicultural approaches, including long-term stewardship. It would also be more explicitly in line with te Tiriti.

The vision expressed in He Ara Waiora is one that will benefit all in Aotearoa New Zealand. A framework that centres on the mana of individuals and communities sits at the heart of who we uniquely are as Aotearoa New Zealand and is to be embraced. (sub. DR 18, p. 1)

Recommendation 1
Give effect to te Tiriti o Waitangi
The Government should give better effect to te Tiriti o Waitangi, by embedding tikanga frameworks such as He Ara Waiora into the public management system, so that holistic, intergenerational values guide wellbeing policy and investment, and ongoing public sector reform.

Recommendation 2
Clarify the role of the public service in improving wellbeing
The Government should amend the Public Service Act 2020 to clarify the role of the public service in improving the wellbeing of all New Zealanders, and to clarify how the values set out in He Ara Waiora and other indigenous frameworks could guide how public servants work.

As discussed previously, changes to the Public Finance Act 1989 require wellbeing objectives to be included in the annual fiscal strategy report and budget policy statement. The Act requires these objectives to contribute to the long-term wellbeing of Aotearoa New Zealand but is silent on the duration or timespan over which those objectives should be met. Currently there is no explicit requirement to set a long-term strategic direction, wellbeing objectives that are long term in nature, or to review government investment to track its intent against the impact or outcomes it delivers.

Although the intention has been for these objectives to be more enduring and provide medium-term direction (New Zealand Government, 2022c), there has been a tendency for these wellbeing objectives to be revised annually as part of the Budget process, and for them not to operate as intended.

By not setting explicit long-term wellbeing objectives, the public management system is limited in its ability to deal with complexity and uncertainty, and to fully understand the risk of intergenerational challenges like persistent disadvantage, or of climate change and ecological breakdown (BarBrook-Johnson et al., 2023).

Several submissions on the interim report also supported the idea of setting clear long-term wellbeing objectives, alongside developing a set of wellbeing principles to give greater direction to policymakers and ministers on what they need to take into consideration when designing and prioritising policies – particularly the need for equity. This has already been done for fiscal management and monetary policy. For example, the Public Finance Act provides direction on the management of public finances and the primacy of responsible fiscal management. Similarly, the Reserve Bank of New Zealand Act 2021 provides direction on monetary policy and financial system stability, alongside stated objectives of low inflation and maximum sustainable employment.

The principles for wellbeing could be set out in an amendment to the Public Finance Act to better support the interpretation of what wellbeing means to the public management system. Other legislation has examples of similar principles that could be examined, such as child-related and policy-related principles in the Children’s Amendment Act 2018 that operationalise the Child and Youth Wellbeing Strategy, and the health principles in the Pae Ora (Healthy Futures) Act 2022.

We consider that Part 2 of the Public Finance Act (Fiscal responsibility and wellbeing) should contain explicit definitions and principles of wellbeing to guide policymaking and funding decisions, similar to the principles of responsible fiscal management set out in section 26G of the Act.

In addition, we recommend that the Public Finance Act be amended to include provisions for the setting, planning for, and reporting on long-term wellbeing objectives. Alternatively, these requirements could be incorporated into the proposed Commissioner for Future Generations role and/or the proposed Social Inclusion Act.

International examples of setting long-term objectives

The OECD’s good practice Policy Coherence for Sustainable Development Toolkit (2015) outlines methodologies for developing long-term objectives. They start with a shared understanding of the long-term desired future state, or setting a generational goal, supported by objectives and milestone targets in priority areas.

The Swedish Government’s approach to long-term objective setting in social and environmental policy provides some lessons for Aotearoa New Zealand on the benefits and risks in their methodologies (see Box 7 for more details on this approach).

Finding 8

Wellbeing approaches will not achieve their full potential to address persistent disadvantage until there is direction and prioritisation within the public management system. This direction and prioritisation require long-term objectives that better drive purpose and explore co-benefits and complementarities across the public management system.

What could long-term objective setting look like?

To be most successful, long-term objectives must be enduring, sit above party politics, and run across successive governments (and even multiple generations). Government agencies will need a greater mandate and sufficient resources to plan beyond the short term, along with the shift in mindset and culture discussed above. The following approaches are used internationally to navigate the challenges of long-term thinking.

• Emphasising foresight – anticipating and preparing for future challenges and opportunities will involve placing greater emphasis on foresight activities, such as horizon scanning and scenario planning, in order to identify and understand emerging trends and potential future scenarios that may impact the country’s long-term objectives.
• Engaging diverse voices in a participatory process – future challenges and opportunities are complex and uncertain, and they require input from Tiriti partners and diverse stakeholders with different perspectives and knowledge, including marginalised groups, youth, and experts from different fields.
• Prioritising resilience – building resilience to future shocks and stresses (such as climate change, economic disruptions, and pandemics) means setting long-term objectives that promote adaptive capacity. Building such capacity includes investing in sustainable infrastructure, promoting social cohesion, and enhancing disaster preparedness.
• Encouraging innovation and experimentation in response to uncertainty – adapting to emerging challenges, risks and opportunities. This means fostering a culture of experimentation and innovation, such as through pilot projects, sandboxes and open innovation platforms.

Drawing on the international approaches to setting long-term objectives, the following would be central aspects of any process for Aotearoa New Zealand.

• A participatory process – working and engaging with the public, iwi/Māori, and stakeholders to define and set long-term wellbeing objectives that extend beyond the current budget cycle and are aligned with the country’s overall vision for the future.
• A long-term planning cycle for wellbeing – requiring central government agencies to develop long-term plans as part of a long-term planning cycle, which would involve setting long-term objectives, assessing progress toward those objectives (including via the four-yearly Wellbeing report) and making adjustments as necessary.
• Reporting on progress toward long-term wellbeing objectives – requiring Treasury (and relevant agencies) to report regularly on progress toward achieving long-term objectives, including any changes to those objectives or the strategies being used to achieve them.
• A long-term wellbeing investment framework – requiring Treasury (and relevant agencies) to develop a long-term investment framework, which would guide the allocation of resources toward achieving long-term wellbeing objectives.
• Review the wellbeing objectives at least every fve years. These reviews could provide an opportunity to assess progress against existing objectives, identify emerging issues, and set new long-term objectives that reflect changing priorities and circumstances.

In setting long-term objectives, it would be prudent to draw on Treasury’s four-yearly Wellbeing Report and learning system insights (discussed in Chapter 6) to set long-term objectives.

Track all government spending and its impact on long-term wellbeing objectives

The establishment of long-term wellbeing objectives requires setting milestones and reporting progress on achieving the objectives in the public management system – moving beyond Wellbeing Budgets to understand impact.

One focus for this progress reporting will be to track the effectiveness of all government expenditure in achieving long-term wellbeing objectives. Currently, annual budgets focus on how “new expenditure” will be allocated, and they provide an opportunity for ministers to focus on current public priorities, with limited attention to the impact achieved via baseline spending. The new spending in the Government’s annual Budget is a small fraction of its total expenditure, and all spending needs to be reviewed, not just spending on the margins.

The existing budget process is inherently incremental, with the Treasury and Ministers reviewing budget bids and choosing among them based on static, marginal cost-benefit or similar analysis. The Government needs to implement a strategic investment approach that is Government-led and based on risk-opportunity analysis that, in particular, focuses on the most vulnerable. (Rewiring Aotearoa, sub. DR128, p. 7)

Similarly, there is no clear system in place to evaluate whether government spending decisions made previously were effective in achieving their intended goals, nor recognition that present-day decisions can have long-term consequences (Boston et al., 2019, 2020). To support the implementation and achievement of wellbeing objectives, there needs to be a system to undertake retrospective analysis of budget and baseline spending impacts on wellbeing priorities and objectives.

The current wellbeing approach should be extended from just considering new Budget expenditure to a constructive review of existing public expenditure as well as decisions made by central and local government authorities. Devolving funding to entities closer to affected communities will deliver greater outcomes suited to local needs. Adding a wellbeing analysis to Treasury’s Regulatory Impact Assessments and Crown Entities annual reports would be an easy and practical change. Within public management we need more tools to complement existing initiatives such as Treasury’s CBAx tool such as multi-criteria analysis and risk and opportunity assessment.” (Wellbeing Economy Alliance Aotearoa, sub. DR151, p. 4)

The McGuinness Institute submission recommended the use of year-end reporting (like in the United Kingdom), informed by public participation (such as processes employed in Korea), and development of pre-execution budget profiles and projections (as undertaken in Ireland) as potential mechanisms to address concerns around reporting of impacts on wellbeing outcomes (sub. DR154).

Building on research by Murray Petrie (2021, 2022) around improving fiscal responsibility for environmental outcomes, and the recommendations of the OECD good-practice approach to performance-informed budgeting (OECD, 2019b), spending reviews may be another possible way to improve the link between fiscal policy decisions and wellbeing outcomes. Such reviews can vary in scope (that is, targeted or comprehensive reviews), focus (that is, baseline reviews or strategic funding reviews), and timeframes. Such reviews have been considered as a tool for “austerity”, but that is not the purpose of this proposal. Instead, the purpose is to enable investment decisions that best support long-term wellbeing objectives, and their design should reflect this.

There is an opportunity to leverage off the Wellbeing Report (which has a four-year timeframe) and the Statement of Long-term Fiscal Position produced by Treasury. A spending review function in the cycle of these two processes could improve the setting of priorities and strategic long-term objectives.

Clear objectives are required before tracking can occur

As the Office of the Auditor-General stated in its submission on the interim report, it is often not clear to Parliament or the public what outcomes are being sought by government, how that translates into spending, and ultimately what is being achieved with public money (sub. DR114, p. 2).

The Parliamentary Commissioner for the Environment (2022) found that the ability to meaningfully track budget spending to environmental objectives is lacking – due in part to a lack of clarity around what those objectives are. In addition, they noted that, given the current structure of budget appropriations, tracking expenditure may require agencies to identify suitable measures within appropriations – for example, through tagging key initiatives by particular outcomes (Parliamentary Commissioner for the Environment, 2022, p. 82).

SSPA would like to see the final report reflect a strong recommendation around how the public finance system can be strengthened to be more transparent, enable equitable outcomes [for] tāngata whenua consistent with Te Tiriti o Waitangi, drive investment over the long-term to address persistent disadvantage, and prevent siloed vote appropriations from being a barrier to mauri ora. (Social Service Providers Aotearoa, sub. DR129, p. 10)

Internationally, there are examples of tracking expenditure against all-of-government national objectives, such as the French “Green Budget” described in Box 8.

We recommend Treasury (and relevant agencies) develop a framework to enable tracking of all government expenditure, and its impact on wellbeing objectives and reducing persistent disadvantage. Further, we propose evolving performance management tools, such as the Performance Improvement Framework and spending reviews, to enable agencies and groups of agencies to better understand their effectiveness in reducing persistent disadvantage.

This effort would support our recommendation to strengthen the implementation of wellbeing and the learning and accountability systems (see Chapters 5 and 6).

Again, we do not propose using these changes as tools for “austerity” or measures to reduce government spending, but as an effective way to better enable strategic budgeting – to better realise long-term wellbeing objectives and provide a mechanism for long-term risk reduction.

Governments will soon be forced to look critically into ways to prioritise expenditure and facilitate reallocation of fiscal resources. If applied correctly, spending reviews can be an important and useful tool in improving fiscal outcomes in the coming years. (Tryggvadóttir, 2021, p. 14)

As a step towards deeper embedding of wellbeing in decision making, we make the following recommendations.

Recommendation 3
Pursue cross-party agreement on generational strategic objectives
The Government should pursue cross-party agreement to develop and implement generational (20- to 30-year) strategic objectives for the nation to help support long-term policy pathways to address intergenerational issues, such as persistent disadvantage.

Recommendation 4
Embed and action wellbeing objectives in the public management system
The Treasury (in collaboration with the Social Wellbeing Agency, population agencies and others) should advise on changes to the Public Finance Act 1989 and other required legislation for the following purposes.
• Set long-term wellbeing objectives and all of-government priorities consistent with
improving the wellbeing of current and future generations.
• Set out an explicit interpretation or principles of wellbeing in Part 2 of the Public Finance Act 1989 to guide policymaking and funding decisions, in the same way that section 26G already sets out principles for fiscal responsibility.
• Ensure that the definition of fiscal responsibility is consistent with the broader principles
of wellbeing (as reflected in, for example, He Ara Waiora).
• Strengthen the link between the wellbeing objectives and long-term policymaking by adding a requirement that the Government of the day sets out a statement of long-term priorities, which should include explicit details of long-term wellbeing goals and how they will be achieved.
• Require the Government to report progress annually towards wellbeing objectives and priorities, and to address issues identified in the Wellbeing Reports required by the Act.
• Track expenditure related to reducing persistent disadvantage and/or enhancing wellbeing in all agencies (consistent with the suggestion for environmental spending by the Parliamentary Commissioner for the Environment) and require an all-of-government report on agencies’ contributions to addressing persistent disadvantage against agreed outcome targets as part of annual reporting.
• Develop and implement a spending review function, informed by OECD good practice, which has the objective of assisting agencies and groups of agencies to better understand their effectiveness in reducing persistent disadvantage and improving the wellbeing of current and future generations.

Connect central and local government to ensure wellbeing objectives flow into all levels of the system

We received several submissions from district councils, local government professional bodies and other organisations regarding the importance of involving local government organisations in national planning to address persistent disadvantage in communities, and vice versa, so that planning is more connected. For example, the Ōpōtiki District Council mentioned the need for central government agencies to respect the “legitimate roles and plans of whānau, hāpū, iwi and local government”.

Tangata whenua and local communities have aspirations, plans and long-term strategies designed with and for their communities. They have multiple accountabilities. Local government in particular has to follow stringent processes laid down by central government to engage community in long term and annual planning, and to regularly report on progress. Sadly, there is no corresponding requirement on central government to engage with, plan and report to communities in this way. (sub. DR123, p. 2)

The Manawatū District Council made similar statements in its submission.

Local government’s knowledge of, and connection to, local communities, and our role in promoting community wellbeing, means that we are uniquely placed to act as an advocate on behalf of the community, or to design and deliver local services. (sub. DR 12, p. 1)

Taituarā, the member organisation for local government professionals, recommended adopting a mechanism for central and local government to undertake joint planning for intergenerational community wellbeing that also involves Māori and NGOs from across the community. They see the need for a single framework across national and local levels for thinking about and acting to promote wellbeing.

It concerns us that there are a multiplicity of competing frameworks in the policy space – the Commission’s, the Treasury’s Living Standards Framework, and the four wellbeings of the Local Government Act. We also concur with the conclusions of the McGuiness Institute that these are fragmented and overall hinder progress. (sub. DR121, p. 4)

A similar approach has been adopted as part of the Well-being of Future Generations (Wales) Act 2015, which established public service boards to “…improve the economic, social and environmental and culture wellbeing in their area by working together to achieve the well-being goals” (Welsh Government, 2015a).

We have not had the capacity to explore these ideas in depth as part of this inquiry, beyond setting out the need for shifting decision making and funding (in Chapter 5) to enable and sustain more locally led, whānau-centred initiatives. We note that the role of local government in delivering community wellbeing outcomes is also canvassed extensively in the current report of the Review into the Future for Local Government (2022). Joint wellbeing planning should be explored further, as the final recommendations from that report and the recommendations we make in this inquiry are considered, particularly Recommendation 4 on the proposed Wellbeing for Future Generations Act and Recommendation 14 on enabling and sustaining more locally led, whānau-centred initiatives.

Recommendation 5
Align wellbeing roles and responsibilities of local and central government
The Government should consider how to align the respective roles and responsibilities of local and central government in planning and delivering wellbeing outcomes, taking into account the final recommendations from the Review into the Future for Local Government and our recommendations on supporting more locally led, whānau-centred and centrally enabled initiatives.

Embed and steward wellbeing outcomes across the public management system

The recommended reforms above will take time to implement. In the meantime, complementary changes are needed to address our finding that wellbeing approaches will not achieve their full potential to address persistent disadvantage until they are embedded throughout every aspect of the public management system (NZPC, 2022a).

The current wellbeing approach employed in Aotearoa New Zealand needs to be better operationalised to meaningfully guide policymaking, government investment decisions and how the public management system operates now and in the future.

Successive governments have progressed elements of a wellbeing approach. However, to date, operationalisation has been unsystematic and patchy, with inadequate tools (Babian et al., 2021), and unclear agency roles and responsibilities. There is still no straightforward path from measuring wellbeing to integrating it into policy analysis and selection, nor to learn whether investments have worked (see sub. DR121, 124, 134, 138, 141, 153 and 154). For example, the Wellbeing Economy Alliance Aotearoa stated:

We absolutely support a continued and strengthened need to anchor a wellbeing approach at the core of public services and policy making. While Wellbeing Budgets, the Treasury’s Living Standards Framework and Long-term Insights Briefings have all been positive developments, more is needed to fully address the complexity and interconnection of factors that create and embed inequities in people’s lives.…The current wellbeing approach should be extended from just considering new Budget expenditure to a constructive review of existing public expenditure as well as decisions made by central and local government authorities. (sub. DR151, p. 4)

To address this, we recommend that central agencies – in association with the Social Wellbeing Agency and other Social Wellbeing Board agencies – develop a Wellbeing Policy Implementation

Plan that:

• sets out a plan with milestones for implementing the system changes recommended by this inquiry, including who will be accountable for their delivery;
• builds on the findings of this inquiry by undertaking a stocktake of local and international evidence for wellbeing approaches and wellbeing economics, including kaupapa Māori approaches;
• mandates Treasury and the Department of the Prime Minister and Cabinet to build the public service’s capability to undertake wellbeing-related policy and investment advice, including by strengthening the adoption of the Living Standards Framework and He Ara Waiora to guide policy and investment advice, Budget bids and evaluation plans across the public sector, and report on agency progress; and
• develops an enhanced set of wellbeing policy analysis tools.

The Wellbeing Policy Implementation Plan should also clarify the central agencies’ respective roles with regard to enabling a fully embedded wellbeing approach.

Recommendation 6
Develop and resource a Wellbeing Policy Implementation Plan
Central agencies should develop and resource a Wellbeing Policy Implementation Plan, aimed at implementing the system changes recommended by this inquiry and clarifying agency roles and responsibilities.

The debate about the future…is not simply about the virtue of long-term thinking. This is a debate about what is owed to future generations. (Oxford Martin Commission, 2014, p. 10)

Many of today’s challenges transcend generational and geographical boundaries, and decisions we make now shape the future for the next generations. However, as already established, short-termism is a significant feature of the current system, limiting the ability to consider medium- and long-term trends and impacts of today’s decisions, and to make decisions across multi-generational timeframes.

The UN Secretary-General Antonio Guterres released the report Our Common Agenda (United Nations, 2021, p. 4) in September 2021, which proposes the appointment of a special envoy to ensure that policy and budget decisions take into account their impact on future generations – with the potential consideration of a UN Declaration on Future Generations.

In the past, Aotearoa New Zealand has experimented with independent bodies to advise governments on medium- to long-term issues, including the Planning Council (1976–1991) (which had a medium-term focus) and the Commission for the Future (1976–1983) (Boston et al., 2019). But nothing has endured; and it is timely to reconsider this systems gap.

As discussed in the interim report (2022a, p. 118) other jurisdictions have been developing and implementing future generational commitments formally in legislation, mostly to address concerns around sustainable development from a socio-ecological perspective. There is increasing acknowledgement domestically of the need to better prioritise future generations to address social inequality. Dale (2021) noted that the Welfare Expert Advisory Group documented “emerging social distress around child poverty, increasing inequality, inadequate social support and unaffordable housing”. This suggests “current financial policies are unsustainable and intergenerationally inequitable… A government agency that takes a long view of the way different generations will be affected in the future and plans for more equitable outcomes is desperately needed” (Dale, 2021).

Our analysis has identified inter-related gaps or weaknesses in current public management system macro settings in relation to the interests of future generations. These include:

• lack of capability and necessary infrastructure to understand and assess future risks and opportunities (that is, to be anticipatory);
• lack of agreement on what constitutes “long-term”, alongside lack of thinking past a 3- to 10-year period in important policies and decision making;
• absence of specific forums and instruments to protect the interests of future generations, at all levels of governance; and
• lack of future-facing accountability mechanisms.

Finding 9

Short-termism within the public management system limits the ability to address long-term challenges and take decisions with multi-generation timeframes. This is compounded by the absence of forums, instruments or institutions protecting the interests of future generations, and by the lack of future-facing accountability mechanisms.

Better represent and protect the interests of future generations

There is increasing recognition that our responsibilities to future generations and protecting their interests are under-represented within political structures, public policy systems and public discourse globally and domestically (Boston et al., 2019; Graham & Bell, 2021; Jones et al., 2018). Short-termism, discussed in Chapter 2, is pervasive. In essence, the system is not “anticipatory”, and we need to do better to bring the long term into the short-term focus and ensure tomorrow’s interests are actively considered – and properly represented – in today’s decisions. As Jonathan Boston concludes:

Efforts to counter the presentist bias in contemporary democracies have generated a plethora of ideas … While determining which proposal might best enhance long term governance is difficult, several conclusions are clear: First, no single prescription is universally applicable across all contemporary democracies or policy domains … Second, good-long term democratic governance almost certainty depends upon good governance in general. Robust, effective, deliberative and participatory institutions are thus critical … Finally, countering the presentist bias requires a broadly-based, integrated and systematic approach – that is, a strategy of embeddedness … Put simply, the future must be brought constantly into short-term focus rather than being mostly ‘out of sight and out of mind’. (Boston, 2021b, p. 12)

Focusing on long-term wellbeing will make previously hidden trade-offs more explicit. For example, it would expose the wider costs of building housing on flood-prone land and of failing to address persistent disadvantage. Some of these trade-offs can have confronting implications: as with any investment they may require limiting short-term economic growth, income and government revenue in the interest of long-term sustainability.

Recognising the need to look further ahead, the Public Service Act 2020 created a requirement for public service departments to develop Long-term Insights Briefings every three years. However, critiques of the Government’s approach to foresight or long-term insights (by foresight experts including Boston et al. (2019), Washington (2021), Boston (2021b), Menzies (2022)) have identified that our legislation, governance and institutions lack “teeth” or the ability to require action from the public management system in response to these foresight investigations.

As a short-term step, one submitter has called for the Office of the Auditor-General to undertake a performance audit of the first set of Long-term Insights Briefings, including whether these have met their purpose, and how they might be improved (Taituarā, sub. DR121).

The public service does not currently have the right legislative settings, institutional settings, infrastructure and capability to be anticipatory. Menzies (2022) points out that although Aotearoa New Zealand has tried several times to make futures thinking mainstream, “in a world of policy and decision making that aspires to draw on advice that is evidence based, the absence of evidence coming from the future presents a major challenge” (Menzies, 2022, p. 55). As outlined by the OECD and Washington (2018), there is a need to broaden policy toolkits and evolve current approaches

to be more anticipatory. Similarly, evaluation and monitoring largely has a historical focus, looking backward at what has happened. The public management system is not even doing this very well, as demonstrated by the failure to apply the lessons from the past into practice, let alone anticipate the future. Chapter 6 looks at this in more detail.

Strengthen foresight

Aotearoa New Zealand has various institutions that have as part of their mandate a responsibility to be forward-looking, assess long-term risks and serve as an advocate for future-oriented interests. These include the Parliamentary Commissioner for the Environment, the Retirement Commissioner (who heads Te Ara Ahunga Ora Retirement Commission), the Productivity Commission, the Climate Change Commission, and the Children’s Commissioner. However, these independent Commissioners hold only partial or specific responsibilities for considering long-term, future interests, which creates a fragmented network, gaps, and issues of accountability.

According to Boston et al. (2019), Aotearoa New Zealand’s institutional arrangements for foresight – including the assessment of major trends, risks and technological developments – are relatively weak compared to other OECD countries.

Currently, there is no dedicated foresight unit in a central agency, such as the Department of the Prime Minister and Cabinet (DPMC), and little investment by government departments and agencies in foresight activities. This stands in sharp contrast to the pattern in many other democracies, including smaller jurisdictions such as Finland and Singapore. (Boston et al., 2019, pp.180–181)

Boston et al. suggest four main approaches (outside of reforming parliamentary structures and processes) that governments around the world pursue to improve governance for the long-term, taking account of the future, none of which are mutually exclusive:

• establishing new institutions with specific mandates to protect future-oriented interests
• enacting legislation to enhance the quality of long-term reporting and performance management
• strengthening the quality of foresight within the executive branch
• requiring all proposals for legislative reform to include assessments of their consistency with principles of intergenerational fairness and/or the goal of sustainable development. (2019, p. 181)

Enhance anticipatory governance

Many submitters endorsed our interim report recommendation that central agencies explore an anticipatory governance (see Box 9) model (sub. DR121, 132, 138, 140 and 141), and they provided a range of suggestions on how this could be achieved. These mirror longstanding calls in Aotearoa New Zealand to re-establish a futures function within government, or to develop an independent Commission to improve responsibility and accountability of the public management system to future generations (Boston, 2021). Complex and multi-dimensional issues like persistent and intergenerational disadvantage cannot be addressed through reactive and conventional measures (OECD, 2022).

There is a range of options to enhance our future-oriented governance and accountability arrangements, and a range of international models that Aotearoa New Zealand can look to for guidance. Analysis of these examples must acknowledge the different geopolitical and legislative contexts, consider how effective they have been, assess how well they can be applied to Aotearoa New Zealand’s specific context, and therefore discern their implications for design decisions in this country.

Finland’s cross-Parliament Parliamentary Governance Group for Future Generations, Wales’s Future Generations Act and Commissioner, and the Wellbeing of Future Generations Bill are examples that are now being considered by the UK House of Commons (which has similar features to the Welsh legislation).

In particular, we have examined the key features of the Well-being of Future Generations (Wales) Act 2015 and the role of the Future Generations Commissioner for Wales. According to Boston et al. (2019) the Welsh Well-being Act is “comprehensive, ambitious and demanding” and, when it was established, was “the first legislation of its kind anywhere in the world” (p. 130). Box 10 summarises the key features of this Act, and more detail is provided in Appendix A.

Recognising future generations in the Aotearoa New Zealand context

We have considered whether strengthening the mandates of existing institutions that include addressing long-term issues (for example, through additional resourcing or enhanced statutory provisions) would be sufficient to overcome the weaknesses in Aotearoa New Zealand’s anticipatory governance. Given the weight of the status quo bias present, we do not consider that this would be enough, nor do we anticipate that it would necessarily be a cheaper or faster solution.

In summary, we consider that, to better represent and protect the interests of future generations, the public management system must be adapted, to:

• strengthen our capacities to understand and assess the future,
• build long-term thinking into public policy processes; and
• enhance governance, decision making and accountability arrangements – for example, creating specific infrastructure (such as legislation and functions) to protect the interests of future generations at all levels of governance.

On balance, we consider that new legislative tools and functions that recognise the interests of future generations are necessary. In particular, we recommend that the guardians of the wellbeing of future generations be established as an institution independent of the Government of the day – as an institution of Parliament.

The Government should introduce a Wellbeing of Future Generations Act that would establish a Parliamentary Commissioner for Future Generations whose statutory role is to represent the interests of future generations. The role may include a range of activities, as listed in Recommendation 7.

We suggest that the Department of the Prime Minister and Cabinet, in conjunction with an oversight board – made up of independent and Parliamentary Commissioners (for example, the Solicitor General, Controller and Auditor General, Children’s Commissioner and Parliamentary Commissioner for the Environment), and iwi/hapū Māori representatives, and academic expertise and youth representation. This board should oversee the development of the Act and establishment of the Commissioner as a way of making explicit commitment to long-term decision making and intergenerational equity.

Establishing this new institution will require long-term, multi-partisan support and funding, take time to develop, and require a significant shift in mindset, given the short-term focus of the current public management system. The creation of this new Parliamentary Commissioner may have implications for the existing role of the Parliamentary Commissioner for the Environment, which will need to be considered (Boston et al., 2019).²⁷

Develop a mechanism to undertake national conversations to develop a shared understanding of wellbeing for future generations

In our interim report (NZPC, 2022), we recommended that a national conversation take place to reconsider the system’s underlying assumptions and values, so that we can reach a shared understanding of the future state we want to achieve for our society, environment and economy. Without such a shared understanding, policymakers will continue to lack the confidence to reorientate the public management system; to commit resources at the scale needed long term; and to make the compromises required to address intergenerational issues, such as persistent disadvantage.

A national conversation was a popular idea with submitters, although many of them saw obstacles to making it a reality. Many submitters suggested that guiding this process using the principles of He Ara Waiora could overcome the obstacles and increase the conversation’s chances of success, and that changes to the public management system needed to be non-partisan (NZPC, 2023a). For example, the Waikato Wellbeing Project stated:

[A national conversation] should not only be about the machinery of how wellbeing is delivered but also what wellbeing is, the priorities to be invested in, and not assuming that the three-yearly electoral cycle is sufficient mandate on its own. These conversations should not be one-offs, but an ongoing series of regular check-ins with the community about what matters to them and how they would like to see services and wellbeing delivered to them. (sub. DR124, p. 1)

Taituarā put it this way:

The Commission is right to be exploring the Wellbeing in Wales Act as a model. While there will never be anything approaching a political consensus on means and values, the so-called Welsh model has provided for a degree of bipartisanship in agreeing upon the ends (i.e. wellbeing objectives). This provides some degree of consistent overall policy direction. (sub. DR121, p. 4)

Some submitters, like the New Zealand Council of Trade Unions, also urged that a national conversation should also ensure that privileged and powerful voices do not dominate the conversation:

Enabling a national conversation, the cocreation of new system settings, and ongoing engagement in public accountability will only be possible if social partners are adequately resourced to participate. If this does not happen, then existing power imbalances will simply be reproduced. (sub. DR134, p. 13)

Reflect how we value the future in the social discount rate

Governments regularly make decisions that have significant implications for future generations. One of the inputs into the analysis of options that involve costs and benefits across time is the social discount rate. In such analysis, a positive social discount rate gives greater weight to costs and benefits accruing over the short term, and less to the costs and benefits that may be incurred by or accrued to future generations. The extent to which the future is discounted depends on the rate used – the higher the discount rate, the greater the discounting of future benefits and costs.

This weight needs to be explicitly cognisant of, and consistent with, the cross-party agreement on long-term direction setting, to ensure that funding decisions do not underinvest in activities designed to break the cycle of persistent disadvantage.

A detailed analysis of the use of discount rates and how a wellbeing approach could be applied in the context of improving long-term environmental outcomes was presented in a report by the Parliamentary Commissioner for the Environment, which included a recommendation that the Government:

Modify the social discount rate currently used to evaluate initiatives and replace it with one that better reflects the longer-term, intergenerational costs and benefits that pertain to the environment…The Treasury should be responsible for co-ordinating a public review on the use of social discount rates across government. This review should have Māori representation. (Parliamentary Commissioner for the Environment, 2021, p. 6)

The values underpinning the decisions between investments now and in the future, and who makes them, are both important. Therefore, for similar reasons to those identified by the Parliamentary Commissioner for the Environment, we endorse the need for a public review of the social discount rate used in the public management system.

Recommendation 7

Introduce a Wellbeing of Future Generations Act and establish a Commissioner for Future Generations
The Government should introduce a Wellbeing of Future Generations Act to establish a Parliamentary Commissioner for Future Generations, whose statutory role is to represent the interests of future generations. The Future Generations Commissioner may have the following functions.
• Facilitate a national conversation to develop a shared understanding of wellbeing for future generations, with a specific focus on inequality and distributive fairness.
• Review and advise on a range of a methodologies such as foresight and scenario modelling to develop an anticipatory governance model for the public management system, informed by He Ara Waiora and other tikanga frameworks.
• Review and advise on the capability needed across the public service for integrating long-term thinking into policy development, learning and evaluation, and producing informative and illuminating Long-term Insights Briefings.
• Provide independent analyses of the Government’s long-term wellbeing objectives and the Government’s response to Wellbeing Reports.
• Advise on the appropriateness and consistent application of Aotearoa New Zealand’s discount rate policy, which determines how much weight is placed on future outcomes relative to present-day outcomes when analysing social policy investments.
• Advise on the impact of the Budget on future generations.

Humanity is undergoing a phase of transition and deep change, which will transform not only our economy, but also our ideas about the economy. This is destabilising for decision makers, but it also presents an opportunity to reshape the future society and economy that we want. The primary rationale of economics as a discipline is the existence of constraints. A constrained set of resources brings to the fore the need to decide where and how to apply such resources for production and consumption, and the inherent prioritisation and trade-offs in such decision making.

Economic activity needs to operate within binding constraints

It is only in recent decades that such constraints are being increasingly seen as more binding on our individual and collective choices. The most prominent of these constraints are in the environmental and ecological fields. Descriptions and measurement of planetary boundaries (Andersen et al., 2020) are now central to efforts and obligations to minimise environmental and ecological harms accruing from human and economic activity. However, despite the increasing acknowledgement of these boundaries, the degree to which the boundaries are currently binding remains contested.

Further, in more recent years, there has been a view that economic activity must also acknowledge the implicit constraints on activity arising from the need to ensure community or social acceptance of such activity. The importance of the so-called “social contract” (Cottam, 2020) has increasingly been discussed from a perspective of distributive fairness. This was well articulated in an April 2020 Financial Times editorial, “Virus lays bare the frailty of the social contract”.

Radical reforms are required to forge a society that will work for all … As western leaders learnt in the Great Depression, and after the Second World War, to demand collective sacrifice you must offer a social contract that benefits everyone … Today’s crisis is laying bare how far many rich societies fall short of this ideal … The economic lockdowns are imposing the greatest cost on those already worse off … Sacrifices are inevitable, but every society much demonstrate how it will offer restitution to those who bear the heaviest burden of national efforts.

The Treasury’s Living Standards Framework recognises these non-material types of constraints in the form of social cohesion, human capability, and culture (as part of Aotearoa New Zealand’s wealth); in the importance of “institutions” such as whānau, hapū and iwi, families and households, and civil society; and in wellbeing domains such as engagement, voice, family, friends and subjective wellbeing.

The goal of operating economic activity in a space bounded by the ecological ceiling and a social foundation is the premise of the “doughnut economy” (Raworth, 2018). It should be noted that similar concepts are also prevalent in indigenous frameworks and perspectives – for example, the reinterpretation of the “doughnut” from a te ao Māori perspective (Shareef & Boasa-Dean, 2020).

The Welfare Expert Advisory Group report Whakamana Tāngata: Restoring Dignity to Social Security in New Zealand (Kiro et al., 2019) suggested the concept of an income adequacy for meaningful participation in the community, alongside a mutual expectations and responsibilities framework.

This concept of income adequacy focuses primarily on access to goods and services in order to minimise material deprivation. Such a concept fits well from the perspective of minimising material deprivation, but likely falls short of our aspiration of enhancing mana and mauri ora or wellbeing.

A baseline standard of living

A broader perspective is encompassed in a “rights-based” approach. These, as described by the Aotearoa New Zealand Association of Social Workers, “recognise the inherent value, worth and dignity of every single individual and community” (sub. DR141, p. 2).

Several other submissions also emphasised that Aotearoa New Zealand’s obligations under United Nations human rights charters, such as the Universal Declaration of Human Rights (UNDHR), the Declaration on the Rights of Indigenous Peoples (UNDRIP), the Rights of Persons with Disabilities (UNCRPD), the International Covenant on Economic, Social and Cultural Rights (ICESCR), the Sustainable Development Goals (SDGs) and the Convention on the Rights of the Child (UNCROC) are vehicles for strengthening intergenerational wellbeing by establishing a “social floor” or a baseline standard of living (sub. DR117, 120, 122, 127, 129, 139, 141, 142 and 150). This was articulated by the New Zealand Council of Christian Social Services.

A comprehensive policy commitment to wellbeing, as advocated for in the report’s recommendations, must be guided by our responsibility to uphold dignity, to provide an adequate standard of living, to enable access to housing, healthcare and education, and freedom from discrimination... we must ensure that our commitment to these rights and responsibilities are explicit in any discussion regarding the purpose of our public management system and the wellbeing of our people. (sub. DR120, p. 3)

Despite Aotearoa New Zealand being a signatory to the above obligations, there is ongoing criticism of the Government’s commitment to implementing them or to upholding those rights in practice. For example, the Auditor-General’s (2021b) review of New Zealand’s implementation of the Sustainable Development Goals found that the Government has not been clear about what it will achieve and how it reports on progress to hold itself or the public management system to account as required to meet the 2030 Agenda.²⁸

A social protection floor has been described as “nationally-defined sets of basic social security guarantees which secure protection aimed at preventing or alleviating poverty, vulnerability and social exclusion (International Labour Office, 2012). These guarantees should ensure at a minimum that, over the life cycle, all in need have access to essential health care and basic income security” (International Labour Office, 2012, p. 5). Such a floor is necessary to give effect to the implied social contract that enables economic and business activity. Macro-level assumptions and guidance in the current system are not consistent with the concept of a social floor underpinning a social contract. Moreover, the concept of income adequacy is also absent from the current system. To date, there has been an aversion by successive governments to explicitly acknowledge either a minimum level for income adequacy, or the elements that would constitute a protective social floor.

Recognising the constraints on economic activity should be central to our economic decision making. Mana tautuutuu reflects the concept of a social contract in the form of mutual and reciprocal obligations and responsibilities. A right to a social floor sits alongside respecting planetary boundaries that recognise obligations to future generations.

Income adequacy is necessary but not sufficient

Establishing a social floor would also need to be consistent with Tiriti obligations of both partners. At the same time, it should recognise that although a social floor for economic activity is a necessary condition for individuals, whānau and communities to thrive (that is, it should address their income and many of their material needs), it does not address their non-material needs. It is necessary, but not sufficient for social inclusion, human capability and culture.

At a minimum, the authorising environment and tools to establish an explicit social (protective) floor, which flows through investment and policy directions, would assist in breaking the cycle of persistent disadvantage. Although what we recommend prioritises material wellbeing (or income), we acknowledge the need for deeper thinking into non-material wellbeing aspects of a new social contract. We see this as a start or a step toward better providing for mana tautuutuu, mana whanake, and mana āheinga.

Recommendation 8
Establish and maintain measures describing a social floor
The Treasury – in consultation with Tiriti partners, other government agencies, representatives of people experiencing persistent disadvantage, and the public – should develop and maintain measures describing levels of both material and non-material wellbeing necessary for social inclusion as defined in this report.

As a first step this should begin with quantifying and maintaining the level of incomes required for a range of families and whānau to meet the material requirements for social inclusion, noting that these are not the only requirements for social inclusion.

The levels should be designed to achieve social inclusion for individuals, their families, whānau and communities, recognising the interconnection between the needs of people and the context in which they live.

The levels should be based on criteria including the factors required for social inclusion described in the reports of this inquiry, the standard of living needed for social inclusion, and Aotearoa New Zealand’s human rights statutes and international commitments.

These outcomes and measures should be incorporated in the Living Standards Framework and He Ara Waiora, alongside other measures required for a sustainable and equitable environment, society and economy.

The Social Inclusion Act (see Recommendation 13) should require that the extent to which this baseline social floor is achieved be monitored and reported on.

Current work related to protective factors should be expedited

The systems changes required to break the cycle of persistent disadvantage will require long-term efforts, some of which will be in areas that are beyond the scope of this inquiry. The Government should continue to develop and fully implement reforms in related policy areas,²⁹ particularly the reforms identified in the Welfare Expert Advisory Group recommendations (Kiro et al., 2019). Although these reforms are part of the solution to addressing persistent disadvantage and may assist in providing basic living standards as part of the protective social floor, the recommendations in this report are also needed, to address the complexity and interconnection of factors that create and perpetuate inequities.

Recommendation 9
Expedite work related to protective factors
Progress, expedite and resource existing work programmes that protect against persistent disadvantage.