New Zealand: We can do better - the Productivity Commission on social services

Brief Counsel
Last Updated: 4 October 2015
Article by Matthew Yarnell

Most Read Contributor in New Zealand, September 2016

At the heart of the Productivity Commission's final report on More effective social services are the most neglected, most vulnerable people in our society.

The Commission's 61 recommendations advocate a fundamentally different approach to the way the system works for our most in need citizens, people whose lives are complicated and who face multiple challenges.

It's a sobering read but also an optimistic one which challenges our public service to collaborate, innovate and be more responsive to their clients.

The Government is clearly receptive to this message. It resonates with recent public sector reforms, emerging trends in technology and the explosion in the availability of data.

An important report

Finance Minister Bill English has publicly commended the quality of the Commission's analysis, describing it as sharp and thorough, so it is probably safe to assume that the government will adopt much of the Commission's advice. This would mean moving to a more integrated and responsive regime that better marshals resources to achieve more effective outcomes for those who are most vulnerable.

The principal area of agreement between English and the Commission is on the importance of focussing on the people with the deepest needs and the least capacity to access the services that are intended to be there for them.

The costs in social waste and desperation are obvious, and there is also the fiscal cost. The 10,000 highest cost "clients" are each expected to generate lifetime budgetary costs of $500,000 or more, amounting collectively to $6.5 billion.

As English observed in his contribution to Treasury's guest lecture series on social investment:

"The way we have designed our social service system is preventing us from making a meaningful difference in the lives of people with multiple, interdependent problems. This isn't because people are slack or lazy – it is just that these families have really different and complex lives, and so need a different and bespoke approach."

For a long-time there has been a level of tacit acceptance that some people's lives are simply too difficult to improve. But, with increasingly sophisticated tools available, the Commission – and the Government – are saying to our public service that we can and must do better. There is a tendency to focus on the Government's fiscal motives (and, no doubt, they are real) but there is also a real determination to mitigate the misery faced by a significant minority of New Zealanders.

Some tools

Data access

The era of "big data" and analytics has created new possibilities to better inform decisions and to make that information available to decision-makers at all points in the chain. This will require protocols and governance arrangements which secure confidence and trust in data sharing and making trade-offs with some of our (now entrenched) notions around privacy. At the core of this is the idea that promoting better feedback loops between the providers and consumers of social services will encourage the public service to make better decisions about where resources are prioritised, how resources can be better co-ordinated and how we evaluate the success – or failure - of social service provision.

The Government is in the process of setting up the Data Futures Partnership – an independent cross-sector group to drive this work.

More flexible public sector management options

Amendments in 2013 to the Public Finance Act (PFA) and the State Sector Act (SSA) have also set the stage for greater collaboration across departments and for a more results-focussed funding model.

The PFA, for example, now requires departments to report on what is intended to be achieved from the appropriation and on what is achieved. And the SSA enables the responsibilities of public service CEOs to extend beyond their agency's boundaries – leading to the creation of cross-agency boards, such as the recently established Social Sector Board, comprising the CEOs of the Ministry of Social Development, Health, Education, Justice, Police, Corrections, MBIE, Te Puni Kokiri, Pacific Island Affairs and Statistics.

A bespoke approach also means that agencies need to consider delegating more authority to those best-placed to respond to the needs of the client – whether employees of that agency, employees of other agencies or even non-governmental service providers. The 2013 reforms allow much greater flexibility in departmental delegations, a fundamental shift from a model that has traditionally demanded the concentration of authority at the top of the public service.

Social bonds

Social bonds (also referred to as social impact bonds) are a newly developing form of results-based contracting between the government, private social service providers and investors – which may be financial institutions, charities or individuals.

They are in use in the UK, the US and New South Wales. In New Zealand, pilot work in this area is underway led by the Ministry of Health with the government considering bonds focusing on employment for those with mental health issues, lowering recidivism rates and helping people manage long-term health problems.

The Commission considers that the social bond approach can stimulate innovation by sharing risk and linking payment to performance while leaving the providers (as opposed to the government) free to determine how to achieve the agreed outcomes. Accordingly, it sees a role for them in encouraging experimentation and testing the effectiveness of new approaches. But it says "they may not be suitable for wide application across social services".

The Investment Approach

This has been used by the Ministry of Social Development (MSD) for active labour market programmes. The idea is modelled on the system used by ACC and came out of the Paula Rebstock-led Welfare Working Group. It uses an actuarial model to evaluate Future Welfare Liability (albeit an imperfect proxy for evaluating the net social benefits of intervention) as a guide to where the Government should put its investment in welfare-to-work services.

The expectation was that it would shift the caseload focus from clients who are easy to move off benefit to the more intractable cases. It has produced promising results from a fiscal perspective but the Commission observes that "slavish application of an investment approach based purely on costs and benefits to government might lead to perverse outcomes". For example, a health service which sought only to reduce future costs would have no incentive to discourage obesity, given that obese people have a lower life expectancy.

The Commission recommends an extension of the programme but with more devolved decision-making, explicit criteria to ensure that all clients get access to at least a minimum level of service and independent actuarial and economic scrutiny to build public confidence.

From silos to integration

The Commission portrays the current system as one where well-intentioned people with fragmented budgets and decision rights are attempting to solve complex problems in a vacuum of information about what works, why it works, how well it works, who it works for and how much it costs.

It recommends an integrated approach for the most disadvantaged, at the hub of which would sit a skilled, client-centred "navigator" who is close enough culturally and geographically to the client to understand the client's circumstances and to build a relationship of trust. (This navigation concept has also underpinned the delivery of many Whanau Ora related services.)

The navigator would have a clear responsibility to achieve outcomes that are agreed by both the client and the commissioner/funder and a "realistic" allocation of funds. He or she would be supported by:

  • information systems and an allocation framework that funnels money to where it has the most effect, and
  • devolved decision-making that gives the navigator the freedom to provide or purchase services that will best meet the client's needs.

The Commission recommends the establishment of a "Better Lives" agency which would have dedicated funding and a mission to provide integrated services to the most disadvantaged New Zealanders. One comparison the Commission uses is with ACC which, once a claim has been accepted, accepts long-term responsibility for the claimant, including rehabilitation. Rather than provide the services directly, the agency would be responsible for the stewardship roles of high level design, goal setting, standard setting, data gathering, monitoring and investigation. It would contract with commissioning agencies that were close to the clients, with each enrolled person or family the responsibility of a single agency. Other clients would remain the responsibility of the mainstream social service agencies.

As an alternative, it suggests that the District Health Boards could have their role widened to include social services, but it is difficult to imagine either the DHBs or the Government being attracted by this proposal.

First steps

The Commission has outlined an action plan for the first two years, the next two years and the longer-term, with an immediate focus on getting the broad infrastructure into place. Key recommendations for years One and Two include:

  • assigning Ministerial responsibility for system reform
  • establishing a Transition Office to steer the reform and to report every six months on progress
  • initiating work on selecting a delivery model
  • improving commissioning, contracting and procurement processes
  • establishing governance arrangements for sharing data across agencies and providers
  • actively promoting innovation
  • investigating services where client direction could be expanded, and
  • enhancing evaluation.

The 400+ page report is available here.

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

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