Wellbeing ever elusive as Labour’s budget pressures mount

OPINION: In just over a month, Finance Minister Grant Robertson will deliver his first Budget.

Most of its contents are broadly known. The big bang announcements were last December, with the rejigging of National’s tax cuts to produce the July 1 Families Package.

If there are signs of strain in this year’s Budget process, they’re in the stories about just how tight the Government’s finances are, despite Wednesday’s confirmation of a bigger than forecast surplus and lower government debt.

The fact is that although retiring former National finance minister Steven Joyce over-egged his claim of an $11.7 billion ‘‘hole’’ in Labour’s pre-election fiscal plan, there is a hole of some magnitude, and the outlines of it are becoming clear.

On operational spending, there are large groups of public sector workers – nurses, teachers, police for example – who have reasonable expectations of a catch-up pay round. The size they have in mind wasn’t in Labour’s plan.

Nor was any pay equity settlement in the public sector, beyond that already agreed for aged-care workers.

Juggling those demands is one of Robertson’s biggest headaches, partly because any increase gets baked into future years as well.

Also creating fiscal pressure is the string of reports, exemplified by the state of Auckland’s Middlemore Hospital, revealing

Few countries have more than a decade's experience of applying wellbeing economics to policymaking.

urgent need for more investment in public infrastructure.

This is one-off capital spending, so the impacts don’t directly affect the annual budget deficit or surplus, except to the extent that any new borrowing attracts interest, and that the Government is bound by strict Crown debt reduction targets.

Critics may argue, rightly, that New Zealand’s net Crown debt is amongt the lowest in the developed world. But Labour is hoist with its own petard, having milked a crude analysis of the previous government’s record to spuriously claim a debt blowout.

The result is some stark choices. One minister talks of rebuilding Dunedin Hospital or the Waikeria women’s prison, but not both. In reality, the choices are not that binary, but the point is made. Fiscal pressure is also driving the political gamble to make motorists and the Provincial Growth Fund pay for chunks of the new land transport strategy.

Yet if that all sounds challenging, Budget 2018 is just the warm-up act. Robertson is determined to make his mark as a pioneering Labour finance minister by making Budget 2019 the first to make policy based on the living standards framework that the Treasury has been working on since 2011.

Few countries have more than a decade’s experience of practically applying wellbeing economics to policymaking. One of the earliest adopters of a living standards framework was Australia, which began work on the concept in 2004 but dropped it altogether in 2016 for lack of a political champion.

Part of the reason may be down to the theoretical realities of what sounds like a simple idea: to ensure government policies make people thrive. For example, in a report published last week on wellbeing metrics, the backroom boys and girls at the OECD write earnestly about ‘‘eudaimonia’’.

Defined by Psychology Today as ‘‘a state of having a good indwelling spirit or being in a contented state of being healthy, happy and prosperous’’, eudaimonia is a term unlikely to be overheard on the sideline of weekend sporting fixtures. But this tongue-curling concept is as important a guiding principle for this Government as balancing the books. –BusinessDesk