On The Nation: Lisa Owen interviews Bill English

Published: Sat 9 Jul 2016 07:05 PM
On The Nation: Lisa Owen interviews Bill English, Anne Tolley and Hekia Parata
Youtube clips from the show are available here.
Tolley concedes National unlikely to meet BPS target for moving people off benefits; “it’s a very aspirational target”.
Finance Minister Bill English takes a serve at the Reserve Bank, saying it doesn’t understand the policy making process and “does not have a detailed understanding of how the tax system or the migration system works”
Asked why the Government wouldn’t give the extra funding targeted at the very poorest children to all those counted as “deprived”, Social Development Minister Anne Tolley says, “They don’t all need it. And you don’t want the state interfering in families in a really intensive way if they don’t need it.”
English says purpose of social investment is to improve people’s quality of life - saving money is a bonus.
But Ministers concede they’re not tracking where people who come off the benefits go next.
Lisa Owen: Now, if you've been paying attention the past few years, you will have heard the government ministers talking more and more about what they call social investment. It really is a radical but under-reported revolution; changing our welfare system, our schools, hospitals and more. Just this week we've seen the collapse of Bill English's first social bond. Now, that's where private investors fund social services and they get a payout from the government if they meet their goals. Now, critics say it's privatisation by stealth and targets money too narrowly. But the government says it's all about using big data to stage early intervention; to save money in the long run and change lives. But we've heard such talk from the government before, so when I sat down with Bill English, Anne Tolley and Hekia Parata in Old Government House, I began by asking what's different this time.
Bill English: Well, there's lot of talk about it but it didn't really happen, and now the technology gives us much more opportunity to actually change the way we make decisions. So, what we're trying to do here is change lives. So we need to understand a lot more about the people who are dependent upon our services, particularly the most vulnerable and we need to get much clearer about what we're trying to change, and use the data and the technology to enable people on the front line to make good decisions that have an impact on lives.
Well, let's talk about that data. Can you paint me a picture of who these people are? What do you know about them? How specific is it?
English: Well, the important insights that we've gotten in the last few years have been about what happens to people over time. So on any given day, you can see which children are in care, who's got a chronic illness, who's on sickness benefit with a mental illness. But we can now see what happens to these people over 20 or 30 years, and what becomes clear from that is that we could make a lot better decisions about spending money now to change the trajectory to change their lives.
But you can tell me what town you're in, can't you? You can tell me what ethnicity they are, you can tell me which of these people who are at risk, right down to that?
English: You can pinpoint the characteristics of a broader population. For instance, there might be 500 very at-risk families in a provincial town, but then you actually have to go and find them through the government services and provide them with better services so you can change what's going on in these families.
Right. Mrs Tolley, let's talk about some of these changes. So with welfare, can you give me a brief example of how this social investment would work? What would you do that is new?
Anne Tolley: So, what happened in Welfare, we were able to identify the different groups who had the worst trajectory of lifetimes. And the highest group, of course, are young people. If you go on to a benefit before you're 20, the projection was that you could be on that benefit for up to 17 years. Now, for a young person, the life outcomes as a result of that are pretty abysmal. So that was the highest group. The second group is solo parents, and they have an expected time on benefit of 14 years. And then we know the outcomes for their children are just as bad. So you've got two generations. So what it has enabled us to do then was to target the interventions to those particular groups of people to address the issues that they were facing. The biggest success we've had, of course, has been with sole parents. We've reduced the numbers of parents reliant on a benefit by 25% over the last five years. That means those families are now living independently, and we know that's good for them and we know it's much better for their children.
Ms Parata, in education, you've identified four risk factors for a child — a parent who's been to prison, a sibling who's suffered some form of abuse, family relying on a benefit for a prolonged period of time, a mother without qualifications. You know that those kids are going to be at higher risk of failing. How many of those children are there?
Hekia Parata: Well, in education, it's actually a relatively small number. It's about 600 to 700, when you think that the school population is over 750,000. But that's each year. And if we don't intervene early with impact, which is the whole thrust of the social investment approach, then their trajectory gets worse as it proceeds.
So given that you’ve got these 600 children each year, I think — 5-year-olds, 600 5-year-olds — so what are they going to get that other kids won’t?
Parata: Well, first of all, in the education system, we’re interested in every child getting the best education possible. And so we’ve got this dual challenge of getting those who are already doing well to do even better, and those who are at risk of failing, identify them, wrap around the services that they need and help them to be successful. We know, for instance, using those four predictive factors that of a group of 10 kids, three will not fail. We’re really as interested in what’s the resilience around those three young people that we need to create more of in the environment.
But what are we talking about in practical terms for these kids that are going to help them achieve their education goals?
Parata: Well, what we’ve done in Budget 2016 is instead of providing a 1% universal operational grant across the system which would’ve resulted in about an average of $16 per child, we have targeted it to those kids who come from long-term benefit-dependent homes. We know from our data that’s about 155,000 kids. We also know, therefore, that on average, that’ll be about $80 per child instead of $16. What we then do is provide it to schools, as we have always done, and we rely on their professional judgement as to whether it’s a reading intervention or a maths intervention or it’s a behaviour plus a reading intervention. And the accountability we then expect from schools is we see growth in learning.
Tolley: But the important thing is that it’s not just education. So what happens in the schools is one part of it. We’ve had 40,000 children come out of benefit-dependent families. Now, that affects what’s happening in education, as education affects what’s happening with us. The referral to CYF — we know that that’s why we need to do that overhaul of Child, Youth and Family in order to remove some of those risk factors for that same group of children. So it’s not just one agency working on its own. We’ve all got to be working together. Whatever we do, whether it’s welfare and education, affects what happens in the justice system.
Which brings me to my next point. Mr English, this is what some people call ultra-targeting. And that’s great that 600 kids who are identified in the education system will get more attention. But what about the next 600 or the ones that have three out of four risk factors? Are they going to get as much attention?
English: Well, ideally, we can calibrate the support to what the needs of the children are. I think the shift here is that instead of using generalised categories of disadvantage and putting money in the top and hoping that it gets to the child one way or another, we can have a much more granular understanding of the needs. And where the needs are extreme, then we probably would be dealing with individual children. Where the needs are moderate, then you can calibrate the delivery of services to meet that need.
Well, because the thing is what Ms Parata was talking about there was going from $16 a week for every child to about $80 a week for the child that needs more attention. That does mean moving funds away from some kids, though, doesn’t it?
Parata: If I can just be clear, the formula for how we decide on the allocation is based on what I’ve just said, but then we provide it in an aggregated fund to the schools, and we expect that, as Bill’s just said, if there’s a particular child that needs reading recovery or a family that needs reading together, then that’s what’s targeted. But otherwise, it might be a provision for all of the class or all of the school. In fact, we expect that that would be happening. We’re not about stigmatising individual kids. We’re saying, ‘How do we respond to what we know are the challenges you have in your school?’
Because the things is, Ms Tolley, stats show us that about 190,000 kids are materially deprived, so they miss out on five of 13 key measures. You’d know them – having two pairs of shoes, a hot meal every second day, a warm home. So why do they miss out on the ultra-targeting?
Tolley: Well, they haven’t, and, of course, this government, in last year’s Budget, addressed exactly that and raised the benefit levels for the first time in 42 years and also raised the Working for Families to very low-income families but to directly address those hardship factors that we knew some children were experiencing. This is extra money that is going into the system. This isn’t necessarily taking money from one group and giving it to another. We’re coming to the Minister of Finance and saying, ‘Actually, we still need that wider provision. If you look at welfare, we still need case workers to work with the wider benefits. But there are this particular group of people that need much more targeted, much more intensive support, and that’s going to cost us more.’
But the alternative is that you could actually put that level of intensity, care, money into all of these children, all of those 190,000.
Tolley: They don’t all need it. And you don’t want the state interfering in families in a really intensive way if they don’t need it. There are people that come into the benefit system that have just got a blip in their lives, something’s gone wrong. They just need a little bit of support. They don’t need the state climbing all over them, providing a whole lot of intensive support that’s not necessarily needed by them or, in fact, wanted by them.
Parata: To give an example in education, the 1% we’re talking about amounts to 42 million. That’s in the context of over 5.5 billion, which is what we fund the schools to do. This is just that 1%.
So, Mr English, this is not a question of what we can afford? We can afford to help these kids but maybe not give so much to these kids? Because that kind of sounds like rationing. So is that what this is?
English: It’s not really an issue about the money, because when we take a 20- or 30-year view, it makes it pretty obvious in some cases that it’s worth spending maybe quite a lot more than we do now. So on any given day, or this year, a 23-year-old woman with depression and mild schizophrenia doesn’t cost us much. But if we don’t do anything, she’ll be there for 30 or 40 years. Or the child with the very high risk factors that we know is going to cost a million dollars by the time they’re 35. So what I’m saying often to the officials is, ‘Show us something that will work. Give us some assurance this isn’t just another programme that didn’t have an impact. If you show us something that will work, using some of these tools, then we’re willing to fund it.’ And a good example would be rheumatic fever, where there was a widespread belief you couldn’t do much about it, but actually, we put in 60 million over three years, and they came up with quite complex range of solutions, which is what you need to address rheumatic fever, and now they’re getting the rate down. Still a long way to go, but we said, ‘Don’t worry about the money. If it works, it’s going to be worth it.’
But the thing is you are using this data to make a choice – an arbitrary line of who are the kids that need higher investment. That is a choice. You have these very stark statistics now, so doesn’t that make that choice or where you draw that line even harder? Because you can see exactly who you’re giving money to and exactly who falls beneath that line.
English: Well, look, there has to be a balance here, as the ministers have pointed out. We provide services to every child in New Zealand, and they deserve the best service we can give them. But I think what we’re seeing now is there’s around 20% of the population where they’re locked into long-term cycles of violence, offending, dependency, addiction, and we have to break that up. We really do have to work at a more individual and family level to change the way their lives work.
All right, we need to take a break, but we’ll be back shortly. Do stay with us.
This morning joining me are three ministers; Bill English, Anne Tolley and Hekia Parata. Now, Mr English, before the break we were talking about the money and where the cut-off line is. Some budgets are frozen and, the thing is, you’ve got a certain amount of money to spend. You’re ultra-targeting some high-risk children and people, but if I can bring this back to that 190,000 kids who I said are not getting, they’re missing out, they’re material deprived, they’re not going to get as much as those other kids – don’t they all need it?
English: Well, they all get it in the form of health. They all go to school, they all get access to the GP and Plunket nurse.
But not at the same level, with this targeting.
English: Well, we are moving here on a balance of increasing incomes, so those families had their income go up $25 a week on the 1st of April, and trying to break the long-term cycles. We have to deal with both, and too often the argument is all just about the income levels, but actually there’s a whole set of complexities there with some of those families, not all of them, and also some families who aren’t on a benefit, who are actually in work, who have complicated lives, and what the work we’re doing shows is that people move between the two quite rapidly and sometimes quite often. So, it’s a pretty complicated picture, and we just try and do two things; raise incomes, so that’s lifting the minimum wage, raising the benefit level, which we’ve done, both of those of the 1st of April; and try and deal with the behaviours that lock people into that. Most people can handle a low income for a time but the most deprived are those who are there for 10, 20, 30 years.
Mrs Tolley, I just want to talk about benefits – you raised that earlier. One of the things you would identify as a positive from your data is that in about two years you’ve got about 33,000 people off various benefits. Do you know what’s happened to them?
Tolley: Well, about 41% of them tell us they’re going into employment. People move off benefit for a range of reasons. We don’t track them, we don’t follow them in their lives, but we do know if they cycle back on to benefit.
But if you don’t track them, how do you know they’ve gone on to something better, that their life is better, that they’re earning more money or their situation has improved?
Tolley: Most of them, if they were in crisis, would be back on a benefit. And there are some that cycle back on to a benefit. I’ve just commissioned some research—
But what if they ended up in prison? Do you know that?
Tolley: Well, some of them might end up in prison — very few. But again, once we start sharing our data, and we’ve got money in this year’s budget, there’s 40-odd million to work alongside Corrections, to actually target people who are in prison as they come out and make sure that they’re supported and maintained in work.
I suppose my point with that — isn’t it a fundamental issue that you do not track those people? Because, if this is to improve the lives of individuals, you have to know if their life has improved. So, if they come off the benefit, don’t you need to track them to know that their life has improved?
Tolley: Well, there’s always a balance between how much state intervention you have in someone’s life. So, we do ask them why they’re leaving benefit, and, as I say, 40% of them tell us they’re going into work. Some of them go into different relationships. Some of them travel. Some go into education, and some, as you say, might go into prison. I’ve just commissioned a small piece of research, and the early results of that are just coming in. About three out of four of the people that they tracked had gone into employment.
But also, even if they move into work, how do you know that the work that they’re getting is better than the benefit? Insomuch as, is it meaningful work, is it long-term, is it stable, is it above the minimum wage, can you tell us any of that?
Tolley: Some of the work that we’re doing, like the 3K to Christchurch, for instance, we checked on them for 90 days to make sure that they were still in work, and we had really good success. Something like 86% for 90 days.
90 days? But they could have lost their job after the probation period.
Tolley: Well, they could well have, but they stayed in work for 90 days, and that’s a good indicator that that work is sustainable. We want to get them into the right sort of jobs. But there’s plenty of research that says work isn’t just about finance, it isn’t just about income. Work actually keeps people healthier. It allows them to participate in their community. So it has a whole range of other benefits, which is why this government’s very focused on lifting people out of poverty, both of income and of spirit, and getting them into work.
Just very quickly, I’m curious, they’re your own figures, I think – you’ve got to move about 65,000 more people off benefits within the next two years. Are you going to meet that target, do you think?
Tolley: We’re working hard to meet that target.
What are you thinking? What’s your feeling on that? Will you make it?
Tolley: Actually, I’m not so much worried about the numbers. As part of that BPS target there is a liability, that’s that long-term accounting that the Minister of Finance is-
Financials, yeah.
Tolley: I’m more interested in that because that means we’re actually making a greater difference in people’s lives.
So, Minister, does that mean you’re going to miss that target on the benefit numbers?
Tolley: It’s a very aspirational target.
Okay. Mr English, this government says that its decisions are evidence based. But if you talk to people from other institutions — Morgan foundation, CTU — even if you look at international research, even The Economist will tell you that what they’re seeing now is that the best thing you can do is an unconditional cash boost to families – a universal payment. So why not follow that evidence?
English: Well, we just have. On the 1st of April, all of New Zealand’s lowest income families got $25 a week, an unspecified cash boost to their income.
$25 a week, though, and when you’re looking at ultra-targeting, you could do more in terms of universal unconditional payments.
English: Well, of course you could. You could put it up further if you wanted to. We’re working on a balance of—
So why not do that? Why not follow that evidence?
English: Well, we’re following that evidence, and a lot of people don’t seem to understand that’s what’s actually happened. I think partly because it was a National government that did it, for the first time in 42 years.
Okay. Well, Ms Parata, I want to look at an example. So let’s say your targeted group gets to NCEA Level 2, which is one of the goals. So what some in the sector say is that you’re fixing the individual, not the community. Like, for example, we say we’ve got a Maori boy in Kaikohe and he gets to NCEA Level 2, it doesn’t mean that there are more jobs in that community. It doesn’t mean that there are more warm houses or that they have more teachers. Arguably, that’s half the job, isn’t it?
Parata: Yeah, and that’s why the social investment approach that our government’s introduced is about more integrated government services, about making sure that we are addressing, through both our individual and integrated approach, a range of factors. The second things is—
But targeting that kid doesn’t fix the problem in the community.
Parata: No, no, but these kids are part of what make up a community, and first of all, we’re targeting every kid in New Zealand to get NCEA 2, because we want all New Zealand children to have at least the minimum qualification. And by that, they just get more choices.
Mrs Tolley, all through this conversation there’s been discussion about evidence, but some people would say basically isn’t it about ideology? Critics would say privatisation by stealth. Ideology.
Tolley: I think that’s coming from an ideological perspective, because in nothing that we’ve said today have we talked about privatisation. This is about the state using taxpayers’ money in an effective way that actually changes people’s lives. And for too long, the answer has been just throw more money at it and hope that it’s going to work. And we’re saying that hasn’t worked. That’s why we’ve got so many children with life courses in front of them that end them up in the Corrections system.
If I can bring Mr English in here, you do want the private sector to be involved at the heart of this. You’re looking for someone to take on state house contracts, social bonds, Serco, and all of those areas that they have struggled. Isn’t it because social services don’t fit a commercial model?
English: We just want people who can deliver results. And generally we’ve had a bit much spending, as indicated by the ministers, that hasn’t been focused on the results, because we think the results are more important than the delivery.
If results are the main concern. I mean, you’ve had social bond contract fall over this week. If you look at Serco, if you look at the state house contracts, if it’s results, you haven’t got them yet in those areas. People’s lives are messy sometimes. They’re risky. They aren’t commodities, some people would argue, to be invested in. Businesses like certainties, and isn’t that why these things are traditionally better delivered by the state?
English: Well, a lot of them traditionally aren’t delivered by the state, and as I said, we don’t spend a whole lot of time on it. We spend time getting very clear about what we want to achieve, what needs to be achieved for these families and individuals and then working to develop with whoever wants to participate the kind of funding arrangements that will focus on getting those results.
We’re running out of time, but I just want to cover off a couple of points before we go. So, when you talk about measuring success, it’s the outcomes that matter, what is going to be ultimately the measure of success? Is it going to be saving the money in the long term, or does quality of life count too?
English: Oh, better lives. What’s become quite clear through this process—
Ahead of the money? Ahead of the savings?
English: Yes. What’s become quite clear through this is that what works for the community works for the government’s books. If kids get their education at school, we don’t have to do it again. If we work with prisoners while they’re in prison, they don’t reoffend. That’s quite a lot cheaper. If we deal with the 3-year-old in a very difficult family situation, we don’t spend 30 years spending a million dollars.
So quality of life is the number one measure? If you get savings as a result, that’s great, but it’s not the main measure?
English: That’s right.
Okay. Just before we go, I want to ask you about the Reserve Bank’s comments this week. It’s pushed back at you, saying you could do more in terms of the housing market, changing tax benefits on rentals, reducing immigration. Are you still refusing to move on those things?
English: Well, we make the policy. The Reserve Bank’s job is to focus on monetary policy and macro-prudential tools. We’re always looking at the tax system and immigration, and there’s been a number of changes in those areas. The Reserve Bank may not be familiar with those.
Okay. Because arguably, that wasn’t just a push; that was a shove back. So no movement on those two things?
English: No, we’re changing them all the time, and there’s been adjustments in the tax system quite recently with respect to housing.
But not getting rid of negative gearing?
English: We haven’t decided to do that. There’s ongoing discussion about the migration settings. I mean, those are all legitimate issues.
But is it on the table, then? Is it on the table , negative gearing? Is looking at immigration levels — are you open to turning the tap off?
English: We’re always looking at the settings, but as the government and as we’ve always said, the core issue here is supply — that you can’t actually control the demand in anything other than the very short term, as the Reserve Bank’s finding out. The core issue is getting more houses, because the biggest driver of—
I understand that, but the Reserve Bank has said to you, ‘Things that you could deal with — negative gearing, immigration.’ So negative gearing, going to get rid of it?
English: No, we’re not committing to doing that, and the Reserve Bank does not have a detailed understanding of how the tax system or the migration system works.
So the Reserve Bank’s wrong?
English: They’re putting a view of theirs out, but they’re not in the policy-making process, and so there’s adjustment going on in those areas continuously.
All right. Thank you very much to all of the ministers for joining us this morning. Thank you.
English: Thank you.
Parata: Thanks.
Transcript provided by Able.

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