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Recalibrating the Budget for wellbeing

Budget 2018 the last of its kind with a world-first “wellbeing Budget” mooted for next year

Deloitte partner David Lovatt says the announcement of next year’s wellbeing Budget shows Government’s commitment to a more holistic approach – a recalibration of the Budget process to encompass a broader definition of success.

“In this vein, today’s Budget is the last of its kind. But it isn’t clear at this stage exactly how a wellbeing Budget will be different from all the ones that have come before,” says Mr Lovatt.

The work being done by Treasury and Statistics NZ progressing the Living Standards Framework and measures of wellbeing signals an increasing role for the “other” capitals – social, natural and human – to balance out the traditional dominance of the financial/physical capital.

“That’s easy to say but hard to do – how exactly does a Budget need to change to pay appropriate respect to all four capitals? How do policy, regulation and legislation need to adapt in a world where growth is not measured purely in terms of GDP, but rather by enhancing wellbeing? And how should government agencies make decisions on the programmes and services they offer, or investments they should make, if economic and commercial results don’t rule the roost, but need to be balanced with social, natural and human outcomes instead,” asks Mr Lovatt.

To give a purely hypothetical example, imagine that government decides to boost natural capital in our fisheries, and social capital through recreational fishing, by reducing financial capital in the form of commercial fishing quotas. This is the kind of trade-off that could result from applying a wellbeing, four-capital perspective. If the change were substantial, it might boost our overall measure of wellbeing, but it could also cause material disruption to the commercial fishing industry.

Most government agencies will not have experience evaluating and making these kinds of complex trade-offs between the four capitals.

“In general, Kiwis would support a more prosperous New Zealand with wellbeing in abundance. But the road there remains uncharted while government still lacks the vehicle to take us there. The Living Standards Framework and wellbeing measures provide a compass to guide us, but the real work lies in the future when government decisions reallocate between New Zealand’s four capitals of wellbeing,” concludes Mr Lovatt.

For Deloitte’s full Budget 2018 commentary and analysis go to www.deloitte.com/nz/2018budget.

You can also read Deloitte’s new series on wellbeing at www.deloitte.com/nz/stateofthestate.

ENDS

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