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Video transcript: The Treasury's Living Standards Framework

Transcript for a video of a presentation about The Treasury's Living Standards Framework filmed at the 2019 Audit New Zealand client updates.

Title: The Treasury's Living Standards Framework

Diana Cook

 

Thank you for the opportunity to be here today to talk with you about the Treasury’s Living Standards Framework. My name is Diana Cook. I am the Deputy Chief Economic Advisor at the Treasury. I just wanted to start by acknowledging that Peter and I feel very humbled to be here in Christchurch today. The events of 15 March still feel very recent and very raw, and I would like to say that we both bring with us the aroha of the Treasury to Christchurch and to the family, friends and communities that were affected. In many ways, those terrible events reinforce the importance of taking a well-being approach to policy – for example, thinking very clearly about our risk and resilience as a country. And the way in which Christchurch and New Zealanders rallied around these events also says a lot about our social capital as a country.

So I am relatively new in my role as the Deputy Chief Economic Advisor, which is a bit of a mouthful. Yes, it is. We’ll have to come up with a more catchy title. But I have been working at the Treasury for quite a number of years, since 2010. And what really excites me about the Living Standards Framework is the opportunity that it provides us to lift the quality of our advice to governments of the day around how to improve New Zealanders’ living standards. And a living standards approach feels particularly relevant or necessary in the face of the complex and cross-agency policy challenges that we face now and into the future.

For example, we know that we have technological change. That brings great opportunities, but it also creates challenges for some people to adapt to a changing nature of work. We know we have disparities across many of the domains of the Well-being Framework, and that we have a number of New Zealanders who face significant barriers to social and economic participation. We have challenges to ensure that our natural resources and our environment are well managed for future generations. And, like other countries, we need to grapple with how we manage the transition to a low-carbon economy, as well as actually, how do we cope with the impact of climate changes on our economy and environment? So these wider global challenges actually reinforce the importance of the Treasury and the wider public sector providing high quality policy advice.

And that’s what the Living Standards Framework is about. It’s a tool to help us provide good advice, to ensure we’re thinking broadly about the range of strategic challenges that New Zealand faces, and also that we’re thinking broadly about the benefits and costs of different policy options when we’re providing advice to Government. We are still an economics and finance ministry, so the LSF complements, rather than replaces, our traditional economic and fiscal analysis and tools. And the focus on well-being doesn’t mean any less focus on those things that Treasury has always held dear, like fiscal prudence, macroeconomic stability, value for money, and economic performance. But we see the Living Standards Framework as strengthening and enriching those core aspects of our work.

So, as I said, the LSF is a tool that helps us use well-being data and evidence in our advice to Government, and that’s because those complex problems that I spoke about at the start, they really demand a well-being approach. So, for example, when we’re assessing budget initiatives or analysing value for money, we want to make sure that we’re bringing the same level of rigor to thinking about the broader impacts, the social, the environmental impacts, as we are to the economic and fiscal implications. Or, if we’re giving advice to the Government of the day around how you might lift economic performance, we want to make sure we’re advising on the wider and the distributional impacts of different policy options.

So I’m not saying that we’ve not traditionally done those things; it’s not that Treasury has been blinkered and only ever looked at GDP capital as a success measure. But it’s about, how do we make sure we more consistently take the broader perspective and look across different aspects of well-being in all of our advice? So this is our conceptual framework, the LSF framework the Living Standards Framework. And, at the heart of the Framework is a capabilities framing. And what we mean by that, as we’re thinking about well-being, is about New Zealanders having the capability to live their lives to the full as they would see it, or to live the lives they want to lead. And this framework includes the domains that we think matter for New Zealanders’ well-being, and we’ve constructed a Living Standards Dashboard to measure well-being outcomes.

And the Dashboard includes indicators for the 12 current well-being domains, as well as indicators for the four capital stocks, which are the foundations for our future well-being. And the Dashboard also lets you look at the distribution of these indicators, where data is available, across things like age, gender, ethnicity, and region. Now, risk and resilience is a third dimension of the Living Standards Framework which, unfortunately, is not yet in the Dashboard. But risk and resilience is about the quantity and the quality of our capital stocks, and so the extent to which they enable us, as individuals and as a country, to adapt to unexpected events or shocks.

Now, while we are still doing more work on the Dashboard, we did want to release it early so that people can start using it. We thought it would be useful for people to use in policy and other analysis. And also, by people using it, it gives us really valuable feedback that we can use in the review of our dashboard, which we are undertaking at the moment and we hope to release a new version of the Dashboard in 2021. So the release of the Dashboard was a milestone for us, but it is the beginning and not the end. We still have a lot more work to do on understanding what matters for New Zealanders’ well-being and how you might measure it, and also how we embed a well-being approach in our work at the Treasury and our advice to the Government of the day and our engagement with agencies.

So the slide identifies four areas where we’re really keen to strengthen both the Living Standards Framework and the Dashboard. So those are child well-being. There’s limited data around about the well-being of children as opposed to adults, but, given the importance of that to the future well-being of New Zealand, that’s a big gap in our work. How do we bring Te Ao Māori and Pacifica perspectives on well-being into the Framework and the Dashboard? And, linked but not the same as that, is how do we better reflect cultural identity into the Dashboard? Do we need a separate measure of cultural capital, or can we actually integrate cultural issues across the four existing capitals? And the last one of those are risk and resilience, which I mentioned before. So how do you actually conceptually think about what that means across the different capital stocks, and how would you measure that?

So there’s more work for us to do also around our alignment with indicators Aotearoa New Zealand, and also to identify where there are opportunities for more cross-government engagement or coordination across well-being frameworks. In terms of IANZ, that’s a much more comprehensive set of well-being data, and you may have seen the release of the list of indicators from Statistics New Zealand yesterday. So we see the Dashboard and other agency well-being frameworks as drawing from that comprehensive data source. And the data that we draw from it will depend on the purpose of the different well-being frameworks or the policy area that they’re focused on.

We’re also doing work within Treasury around how we embed a well-being approach across all our work with other Government agencies and in our advice to our Minister. And some of this work is around the implications for agency reporting, which I’ll talk a bit more about soon. Before I do that, I would just like to stress that it’s important to remember that the Living Standards Framework is not the same thing as the Government’s well-being approach. So the Government’s well-being approach is much broader than the Living Standards Framework. So that includes things like legislative changes to incorporate well-being reporting and having a more joined-up public sector. So things like reporting on child poverty or amending the Public Finance Act to require well-being reporting. It includes well-being budget decision-making, and I’ll talk a little bit more about that in a moment.

And it’s also about bringing a well-being approach to policy decision-making. So the Porirua Regeneration Project gives you a good example of this. The Government also expects public sector agencies to be strongly focused on improving well-being, and for this to be reflected in agencies’ statutory reporting documents like your statement of intent, your estimates, your annual reports. Now, what the LSF is, the Living Standards Framework, that’s the Treasury tool for how we measure and report on New Zealanders’ well-being. And a number of other agencies in Wellington also have their own well-being frameworks or approaches, but, of course, you’re welcome to use and borrow from the LSF if you find it useful.

And the tool is actually still relatively new to Treasury staff. We’ve been working on it for a number of years, but actually embedding it across all our work, it’s probably going to take some time, if we’re honest. And our message to Treasury staff is actually, there’s no right or wrong way to use it, and no two pieces of policy advice will necessarily look the same. We’re also really keen to hear about and learn from other agencies’ experiences in applying the LSF or other well-being frameworks in their work. So, if any of you have been doing interesting work, we would love to hear about it. So I promised to talk a little about the Well-being Budget. That is a key example of the application of the Living Standards Framework. And, as part of that, analysis from the indicators of the Dashboard informed the development of the Government’s Budget Priorities, which were outlined in the Government’s Budget Policy Statement, and I won’t read them all out but they’re summarised there on the slide.

So the high-level analysis from the Dashboard was complemented by a range of evidence and analysis from other sources such as the departmental science advisors and actually agencies from across Government. And well-being and the living standard concepts also underpin the templates that agencies were required to fill out to request new funding as part of the budget process. So agencies were asked to provide analysis and evidence of how that initiative would impact across the relevant well-being domains, as well as the alignment with the Budget Priorities. And there’s also been a lot of focus in the budget process around coordination to achieve well-being objectives.

In a recent IPANZ speech by the Minister of Finance around applying a well-being approach to the public finance system, the MoF outlined the Government’s well-being approach and the critical next steps that he sees to embedding it in the public sector system. The speech is actually available on the IPANZ website and I’d really recommend it as a good read if you have time, if you’re interested. In that speech, our Minister spoke about three things that he sees as fundamental to the Government’s well-being approach. So the first is about a whole of Government approach. So that’s about looking for opportunities and grasping opportunities to collaborate, to work together with other agencies to achieve well-being objectives.

The second area is about intergenerational impacts. So it’s about thinking not just about problems or issues or impacts of policies for this generation, but thinking longer-term about how things will pan out over a number of generations. And also, third – last but not least – it’s about thinking more broadly about success measures. So things like IANZ and the Living Standards Framework and dashboard are tools that help you to do that, to think more broadly about how we measure impacts and success. The Minister of Finance also described about how a broad range of changes are needed to support the Government’s well-being vision, including his expectations that agencies bring a well-being focus to their reporting and planning.

So the Treasury has been working with agencies to help them meet expectations about bringing a well-being approach into external performance reporting and planning. The overall aim is to describe your agency’s contribution to improving intergenerational well-being and supporting the Government’s well-being approach. Now, there isn’t any obligation or compulsion to use the Treasury’s Living Standards Framework to do that. A number of agencies have used it and found it useful, but if you have other frameworks or your own agency framework that works better for you to tell your story, you should go with that. The Treasury’s 2017/18 Annual Report was part of a transitional approach to this kind of reporting, and you can check that out on our website if you’re interested.

We’ve also been using input from interested agencies to develop a series of prompts on how you could use a well-being approach in your external performance reporting, and some of those are shown on the slide. So a number of agencies have been doing some really great work, some exciting stuff, in taking that well-being approach into their planning and reporting. Last month, we released an information sheet that has some prompts to consider as you develop your statutory reporting documents, and I actually understand you have a copy of that on your tables. It’s also available on the finance shared workspace and on the Planners Network PSI page. We do see this as initial start and we’ll aim to keep adding further examples of the approaches that agencies have taken.

We’re also starting to think about how we can support the Government’s well-being approach even more in the planning space. For example, looking at how you could take an integrated reporting approach in the core public sector, and also looking for where are there opportunities for more collective reporting against joint well-being objectives. And much of this, of course, aligns with broader state, sector and public finance reform changes. So, some key messages from me, to sum up. The Living Standards Framework supports the Government’s well-being approach and agenda, but it’s not the same thing. As part of its broader well-being programme, the Government does expect agencies to tell a meaningful story of how they’re contributing to intergenerational well-being. But there isn’t one way to do this – tell your story in a way that’s meaningful and relevant to you and your agency.

The Treasury vote analysts and vote teams are available if you want to talk that through, get some additional ideas. But we have to admit that we don’t have the answers, and, ultimately, you know your own business best and know best how to tell your story and your impacts. So that’s it from me. I think there’s an opportunity now for any questions if people have them. Also, if people have experiences of using the well-being approach in their planning and reporting, or in other contexts, I’d be really interested to hear them, and I’m sure your colleagues would be really interested as well, so please feel free to share your experiences too. Thank you.

For more information and to download presentations, visit auditnz.govt.nz.

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