New Zealand’s wellbeing budget: a good PR story or a contributor to improved wellbeing?

Author: Peter McKinlay, LGIU Associate

Photo by todd kent on Unsplash



New Zealand Government’s made a commitment to adopting a wellbeing budget in the Minister of Finance’s 2018 budget speech, stating:

“Next year we will be the first nation in the world to deliver a Wellbeing Budget reporting our annual progress against a range of measures that highlight the health and wellbeing of our people, our environment and our communities. We will use the Living Standards Framework developed by the New Zealand Treasury to help develop our Budget, and to measure our success.”

The glow still persists as can be seen from this extract from a recent blog for the Carnegie UK trust written by the Chief Executive of Centre for Thriving Places:

“As pioneering nations such as New Zealand, Iceland and Scotland have shown, putting wellbeing at the heart of policy can influence almost all aspects of decision making and this can happen at town level too. When economic activity is reconfigured to produce wellbeing, instead of wealth, and if local business, policy and civil society are aligned and working together towards this goal, radical change can happen quickly.”

This publication considers whether the Government’s adoption of a wellbeing budget has itself contributed to improved wellbeing in ways or to an extent that would not have resulted without that initiative. Commentators on the New Zealand experience note that virtually every government, at least in democratic societies, regards promoting the wellbeing of its communities as inherent in the process of governing.

In assessing the New Zealand experience, two questions arise. The first is whether the processes underpinning the adoption of a well-being budget and its implementation are ‘fit for purpose’? – in the sense, they should enable better well-being outcomes. The second is how to determine whether the well-being budget approach itself has improved well-being outcomes?



In September 2018 the Minister of State Services, and the State Services Commission, released a report on reform of the State Sector Act 1988 now replaced by the Public Service Act 2020. That report identified a number of matters of concern including “the narrowing of each department’s focus to its own particular outputs and a short-term horizon.”, an approach sometimes described as “the silo effect”. The report also noted, “a lack of systemic process for setting outcome goals and priorities and a tendency to a short-term focus. Fragmentation was also making it hard to agree and pursue cross-cutting objectives”.

Photo by Ruben Engel on Unsplash

Fit for purpose process?


The main tool for exercising control over departmental activity has been through the budget process – including both the approval of parliamentary appropriations and within approved appropriations levels of delegations. It is an approach which is inherently top-down and which provides relatively little in the way of incentives for collaboration either amongst departments or between departments and the communities they serve.

The wellbeing budget has adopted a different process. Minister of Finance draws on the Treasury’s Living Standards Framework – which has been under development since 2011 – and on international practice, including OECD research. An important point to note is the living standards framework does not itself include any means for determining which aspects of wellbeing should be given priority for government intervention, nor how intervention should be designed and delivered or with whom the government should collaborate when developing and delivering wellbeing policies.

The following figure taken from the Minister of Finance’s budget policy statement 2019 illustrates the difference between the traditional and well-being budget approaches:

The wellbeing budget approach is intended to encourage departments to coordinate budget bids and program delivery to ensure a collaborative approach that addresses the Government’s well-being budget priorities. For budget 2019 these priorities were the following:

  • transitioning to a sustainable and low-emissions economy
  • boosting innovation, and social and economic opportunities in a digital age
  • lifting Māori and Pacific incomes, skills and opportunities
  • reducing child poverty, improving child wellbeing and addressing family vio­ lence
  • supporting mental wellbeing, with a special focus on under 24-year-olds

As signalled, the selection of these priorities was a political decision by the Minister of Finance and colleagues.

Answering the question of whether the well-being budget process is ‘fit for purpose’ is primarily a matter of testing experience – do stakeholders, communities and others with an interest in specific wellbeing outcomes feel their views have been heard and that policies are effective in addressing their concerns? And is there evidence programs are being delivered as intended?

Any change invariably runs into unexpected problems and typically takes longer to embed than its decision-makers prefer. This has certainly been the case with the Government’s first wellbeing budget. The most recent reports on child poverty suggest very little change whilst highlighting inadequacies in data which make it difficult to get as clear an understanding. The lack of any substantive action on implementing additional support for mental wellbeing – for which NZ $1.9 billion was allocated in the 2019 budget – had in 2021, the Minister of Health expressing his extreme frustration that nothing seemed to have happened despite the sizable allocation. It also saw an individual, who had been a very high profile and effective advocate for the need for government action on mental health, return an honour he had been awarded for his advocacy activity out of disgust at the lack of any progress.

A short-term view might argue outcomes of this sort suggest the wellbeing budget is more window dressing than real change. A longer-term view would more likely make the case that change, especially changes so fundamental in terms of its demands on organisational culture and practice, takes time to embed especially when for much of the time the Government’s main priority has been coping with Covid-19.

There is a further difficulty seen when contrasting the New Zealand approach to wellbeing policy with the approach in Wales under the wellbeing of Future Generations Act; in Scotland and Northern Ireland with community planning. Common to all four jurisdictions is that the government takes the lead in determining wellbeing indicators.

There is a major divergence when it comes to the next steps. In Wales, Scotland and Northern Ireland legislation provides for the assessment of wellbeing and determines what services should be delivered and how to be undertaken within the territory of each local authority – by a body, convened by the local authority, and including government agencies and others in each case working closely with communities (public service boards in Wales, community planning partnerships in Scotland and Northern Ireland).

In contrast, in New Zealand, it is the Government which determines through its own political process what aspects of wellbeing should be addressed and, through the budgetary process illustrated on the previous page, which government agencies should be responsible and how.

To put this in context, the different approaches can be seen as reflecting the substantial role local government plays in the UK in the delivery of major social services and the complete absence in New Zealand of any involvement by local government in social service delivery. Arguably each jurisdiction has simply built on established practice when determining how best to implement wellbeing policy.

The wellbeing profiles of communities (even contiguous communities) can, and often do, differ markedly. Effectiveness in setting priorities for wellbeing policy requires a good understanding of the circumstances, priorities and preferences of individual communities together with the networks and trust needed to be able to work in partnership (Locality’s ‘voice, choice and control’ for communities over decisions affecting their place: The Carnegie UK Trust’s ‘democratic outcomes’ as one of four wellbeing domains).

The wellbeing budget can be seen as a significant step forward by reframing the budgetary process so that bids must specifically address wellbeing priorities and bring together all of the agencies which need to be involved. It falls short of being fit for purpose because of its disconnect from communities and hence the inability to directly address community wellbeing in ways which recognise that each community has its own unique set of conditions, priorities and needs.


Has the wellbeing budget approach improved wellbeing outcomes?


In July 2020, New Zealand’s Public Finance Act was amended to include the following section:

26NB Wellbeing report

(1) The Minister must, before the end of 2022 and then at intervals not exceeding 4 years, present to the House of Representatives a report on wellbeing prepared by the Treasury.

(2) Using indicators, the report must describe—

(a) the state of wellbeing in New Zealand; and

(b) how the state of wellbeing in New Zealand has changed over time; and

(c) the sustainability of, and any risk to, the state of wellbeing in New Zealand.

(3) The report must be accompanied by a statement of responsibility signed by the Secretary.

(4) The statement of responsibility must state that the indicators have been selected, and the report prepared, by the Treasury using its best professional judgements.

As Treasury is the lead department in the development and implementation of the Government’s wellbeing policy this provision, it can be seen as a requirement for the Treasury to monitor its own performance. A more substantive comment is that the focus is on national outcomes, the ultimate tyranny of the average, rather than on wellbeing at a level at which distinctive differences are most likely to emerge. It may be this level of reporting is the one most acceptable to politicians but any meaningful assessment of progress with improving wellbeing must address those aspects of wellbeing and areas/communities where the relative need is greatest.

Another factor which will inevitably make identifying the impact of the wellbeing budget approach, as currently practised, extremely difficult is the problem of multi-causality – which is best addressed by being able to undertake assessments across time and over a representative sample of micro-level groupings (individual communities).

The best assessment which can be made now on whether the wellbeing budget approach itself has improved wellbeing outcomes is that the process of evaluation is a work in progress – something which in practice is virtually inevitable given the long time frames involved in embedding many well-being improvements, especially when individual, family or community wellbeing is impacted by a multiplicity of causes.


The role of local government in delivering wellbeing


The Local Government Act 2002, included promoting community wellbeing as one of the purposes of local government – with a strong emphasis on councils facilitating a process through which communities would identify their preferred outcomes. On paper, this was a potentially very significant initiative, in practice, it resulted in very little change for reasons which (as discussed above) included a reluctance by central government departments to collaborate, coupled with quite a widespread lack of understanding within councils on how best to implement the new provisions.

The change also lacked cross-party support at the level of central government. The Labour-led government, responsible for the Local Government Act 2002, lost office in 2008. The Government then amended the act in 2010 to replace the Long Term Council Community Plan – and the associated emphasis on communities identifying their preferred outcomes – with a much more narrowly focused Long Term Plan.

In 2012, the national Government, in what it described as its Better Local Government initiative, argued the purpose of promoting community wellbeing had resulted in rates increases to fund ‘nice to haves’ (the evidence at the time was rates increases were funding additional investment in infrastructure, especially water infrastructure) and they proceeded to replace that purpose with a new purpose:

“to meet the current and future needs of communities for good-quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost-effective for households and businesses.”

Thus entrenching a quite widespread view councils should primarily act as local infrastructure companies. In 2019, the new Labour-led national government which had come into office in 2017 repealed the new infrastructure purpose and replaced it with the former community well-being purpose:

“to promote the social, economic, environmental, and cultural well-being of communities in the present and for the future.”

Despite that change taking place at basically the same time as delivering its first wellbeing budget, the national Government made it clear it did not see a significant role for local government in working with it on the implementation of government’s wellbeing policies.

That may now be changing. National Government is engaged in a number of major policy initiatives which will significantly change the role and function of local government. This includes removing the responsibility for the ownership and management of three waters infrastructure from local government, and changing resource management legislation so that territorial local authorities will have virtually no involvement in land use planning.

The central Government recognised the major impact its proposed changes will have on the local government sector and has put in place, what is intended to be, a comprehensive review of the role of local government post current reforms. The terms of reference for the review signal the possibility of a greater role in wellbeing as can be seen from this extract:

“The Government acknowledges local government’s critical role in placemaking and achieving positive wellbeing outcomes for our communities. Stronger local democratic participation, active citizenship and inclusion will support local government in this role. There is an opportunity to strengthen the role of local participation in governance and continue to foster the strength of our open, transparent, and connected democracy.”

The timetable for the review requires the final report to be delivered on 30 April 2023 – just a few months before the next general election. The inference many have drawn from this is the review itself will not be considered by Cabinet until after the next election, raising the question of which government and what policy settings will be in place.

Councils generally have welcomed the review and recognised that part of the context is an increasing emphasis by central government on the importance of community. A prime example is the reform of New Zealand’s health and disability system with the objective of putting in place a community-led system. The reform process is currently underway with significant work already taking place on scoping what a community-led system should be.

It is a classic opportunity for councils to demonstrate what should be their unique capability to work with their communities and enable the expression of community preferences in ways which reflect the diverse nature of New Zealand’s communities, including the unique place occupied by Maori – the country’s indigenous population.

A number of councils are taking the view that scoping the future role of local government and demonstrating in practice what that could be, is too significant and too urgent to await the findings of the future of local government review – especially given the uncertainty over which government will consider the findings and what decisions if any could result.

The Local Government Act gives New Zealand local government a mandate for enabling local democracy which is almost unique internationally. Under the act, the purpose of local government is a combination of promoting community wellbeing and enabling “democratic local decision-making and action by, and on behalf of, communities”. The purpose is complemented by the act’s statement of the role of local government as to “give effect, in relation to its district or region, to the purpose of local government”.

The reform of the health and disability sector is seen as the perfect opportunity for councils to demonstrate their capability in supporting and enabling communities to determine their preferences about what community-led could mean and acting as advocates on their communities’ behalf to the reform process. One advantage of health and disability, as a ‘first cab off the rank’ in enabling community input into government policy, is the importance of the social determinants of health – as the various reviews led by Sir Michael Marmot highlight, something like 80% of health status is place determined and not under the influence of health service providers. Local government has, and increasingly knows it has, unique strengths in contributing to improved community wellbeing in the areas of health and disability.

Another factor which will influence local government’s role in promoting wellbeing is that the Government has asked the Productivity Commission to prepare the terms of reference for a new inquiry into the drivers of persistent disadvantage within people’s lifetimes and across generations. The Commission is currently seeking submissions to assist it in preparing the terms of reference for government sign off. As part of this process, the Productivity Commission will be receiving submissions arguing that, as part of the inquiry, it should revisit the New Zealand approach to wellbeing policy so as to align it more with practice in jurisdictions such as Wales, Scotland and Northern Ireland – with local government using its unique skills and local relationships to facilitate the community input and partnerships necessary if wellbeing policy is to be better targeted and delivered.

There will be important implications not just for the future of wellbeing policy in New Zealand, as this approach proceeds, but also for other jurisdictions. As discussed, the difference between the approach in New Zealand and that in other jurisdictions can be seen as very much a function of the extent to which councils themselves are involved in the delivery of major social services.

In jurisdictions such as the UK, working with ‘the community’ seems to be understood primarily as working with the voluntary, community and social enterprise sector. Reflecting in the fact that UK councils are generally already closely involved with the VCSE sector. Primarily because of their lack of involvement in the delivery of major social services, New Zealand councils have no such engagement so that working with ‘the community’ is much more naturally seen as working with entire communities of place, interest, ethnicity or other significant ‘communities’ within a council’s region.



New Zealand’s wellbeing budget should be seen as a work in progress. Current shortcomings in the delivery of improved outcomes reflect, in part, the inevitable difficulties of implementing an approach which is organisationally and culturally different from its predecessor, and in part the fact New Zealand’s public sector (unlike the public sector in most other jurisdictions) has had no natural and established practice for public sector engagement with communities through major social service delivery.

Major changes in government policy, including those affecting the role and function of local government, are providing both the context and the incentive for local government to become much more directly involved in promoting community wellbeing through enabling communities to help shape the way government policy initiatives impact on them and are best designed to meet their needs and preferences.

The changes this publication anticipates, in the way in which matters of wellbeing are addressed in New Zealand, will offer important opportunities for local government in other jurisdictions to compare and contrast – for example, approaches to working with communities embedded in a tradition of partnering in the delivery of social services, and an approach based on working with entire communities and without a long history of previous collaboration. It could perhaps be seen as a chance to compare service or wellbeing specific approaches, with a more holistic approach weighing community preferences and priorities across the entire spectrum of wellbeing.