Will Bill English’s vision of highly targeted and data-driven welfare spending survive under Jacinda Ardern? Thomas Coughlan reports it is likely to morph rather than disappear.

From its first tentative steps as an outgrowth of 2011’s Welfare Working Group to an approach that, depending on who you ask, has engulfed nearly all social spending, social investment has embedded itself in the heart of National’s vision for the welfare state.

So you might expect it to be an early casualty an incoming Labour government.

The Prime Minister, Jacinda Ardern, hasn’t given more than a hint at an answer. Last week, when asked whether social investment might form part of her plan to reduce child poverty, she said only that she had “long supported the idea of early intervention” although not when it conflicted with the value of ‘proportionate universalism,’ a distinctly more Labour, approach to welfare that is less targeted.

Talking to Newsroom on the release of his new book on social investment, Victoria University Professor Jonathan Boston is optimistic for its future under Labour.

“The government is reviewing its overall approach to social investment and there’ll be almost certainly some qualification and refinement, but the Social Investment Agency is going to stay, so social investment probably will too,” Boston says.

“It was an evolving policy area, so Labour making changes isn’t unexpected,” he says.

The changing nature of social investment may help it morph into something that could be a part of the Labour Government’s welfare program. It doesn’t make it any easier to define what social investment actually is and where it’s going, but Boston thinks this has been inherited from the previous government.

“Although Bill English was one of the key drivers from the outset, I’m not sure to what extent his particular vision was entirely shared by some of his colleagues, nor am I sure whether or not he really ever came to a final resting place in terms of what it all adds up to,” he says.

One of social investment’s enduring controversies is that Bill English isn’t the only one who isn’t sure what all adds up to: large numbers of voters and even academics struggle to define social investment. Even Boston confesses that he isn’t quite sure there’s an adequate answer yet.

“On the one hand the idea of social investment is very simple, just like infrastructure investment or investing in housing. You’re basically saying there is a cost and there is a string of benefits and if the string of benefits outweigh the cost then you’ve got a positive return and if that return is relatively good than you do it”, he said

“It’s a matter of expending some resources to get some sort of net benefit. The problem with social is that the social domain is so huge: what aspects of social policy are we actually talking about?”

English and then Social Investment Minister cutting a cake to celebrate the opening of the Social Investment Agency in July last year. The cake included icing with computer code on it to highlight the use of a data-driven approach to welfare spending. Photo by Lynn Grieveson.

A little idea masquerading as a big one

The ambiguity about what social spending is actually social investment may help aspects of the plan be preserved under Labour. The party’s former Finance Minister, Michael Cullen in his contribution to the book argues that considered spending on social services with long-term outcomes is hardly an innovation of the Fifth National Government.

“[Social investment] is not a big idea at all, but a little one masquerading as a big one”, he wrote.

Cullen argues National’s use of the term ‘investment’ is simply a rebranding of the more traditional government term ‘spending’.

But there is slightly more at work in social investment, most importantly the framework for how social investment decisions are made: ‘the actuarial approach’.

This borrows a term from the world of insurance to describe the approach some public service entities take when deciding to make a social investment: first the risk is identified, then steps are taken to see how that risk might be mitigated and how much that might cost and what the return might be over the course of that person’s life.

This could be something like addressing child illiteracy and encouraging them to go to university: university graduates earn (and consequently pay tax on) far more than non-university graduates.

More expensive interventions are also weighed up. Spending heavily on young offenders, recently released from prison is also part of the approach. The revolving door of welfare dependence and prison is extremely costly. Investing in young offenders doesn’t just turn someone’s life around, it will save the state a small fortune.

Where the issue becomes more complex is the issue of how the returns on that investment are measured.

“Part of the problem is the social side of things. Normally when you are talking about investment you are talking explicitly and often exclusively about financial returns so you have a single currency that you can equate, but with social investment you’ve got multiple currencies going on: psychological, social, cultural, economic and then how do you weigh them all up?”

How do you make a social investment?

Thinking on how to resolve this seemingly intractable problem is already far advanced. Treasury has been using a new cost benefit analysis tool, CBAx for the last two budgets, which has encouraged ministries to submit social, not just financial benefits, in bids for public spending.  This helps to convert some of the more difficult-to-define social dividends yielded on social investments so that they can be compared with other, more traditional government spending on an ‘apples-and-apples’ basis.

Ideally, it will help the public service decide how to make difficult public spending decisions between something like infrastructure with tangible benefits and other social programs, whose benefits might not show up in traditional cost benefit analysis.

Treasury has also developed an advanced Living Standards Framework (LSF), which will allow the Treasury to consider social qualities when assessing our economy. Largely ignored by national, LSF will be used to draw up budgets from 2019 onwards.

To the extent that LSF is also a component of social investment, we could actually see more social investment under the new Government, but of a different flavour.

‘The new Government is probably going to focus on broad spectrum interventions: income transfer systems, tax credits, the benefit system and so on. It is a little bit more willing to spend more money than national ways and broad spectrum stuff costs more money”, Boston said.

However Boston doesn’t see an eventuality where Labour could move away from the narrow spectrum interventions, especially if it wants to achieve its goals of poverty reduction and assisting the vulnerable. Often, as is the case with children abused in state care, for example, this requires focusing on a proportionally small number of New Zealanders.

“There is no way the new government is going to move right away from narrow spectrum interventions which are much more targeted and tailored”, he said.

So far, Ardern’s only signal has been that she favours “proportionate universalism”, borrowing a term used by British Public Health Professor Michael Marmot to describe the provision of public health. It is universal, in the sense that it is available for everyone, but proportional in the sense that we draw upon it to the extent of our needs — and some peoples’ needs are far greater than others.

Applied to social investment, this could mean that the universality of some provisions of the welfare state remain, but so would social investment’s ability to target spending at particularly vulnerable people.

One issue Labour will run up against — and one which caused National a lot of trouble — is the clash between the usefulness of big-data in making investment decisions and its tendency to dismiss privacy.

“Narrow spectrum interventions do deal with hard cases and so you are going to run up against some difficult issues whether they’re genuine trade offs between one value and another,” Boston said.

“You might have to say something trespasses so much in relation to privacy, that we can’t do it”.

A wall chart at the Social Investment Agency opened in July last year. It remains open. Photo by Lynn Grieveson.

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