ANZSOG Rattigan Lecture 2019: Former NZ PM Sir Bill English says investment approach, customer focus can fix welfare state’s failures

Audience attending the lecture
  • Published Date: 06 December 2019

Former New Zealand Prime Minister Sir Bill English has used ANZSOG’s third annual Alf Rattigan Lecture in Canberra to outline a vision for a more customer-focused welfare system, which takes a social investment approach and uses data to address complex social problems.

Mr English questioned why inequality and disadvantage remained, and suggested the welfare state itself had become part of the problem and had lost the trust of the most vulnerable people it was set up to help.

He said that “for those people in our society who face the most intractable challenges, the monopoly welfare state has become part of the pathology of their deprivation” and that it needed to be changed into an institution that focused on customers not processes.

“I have great admiration for the thousands of people who care and work hard in the social services however too often the system fails to be effective for the people who really need it to work.”

Mr English called for technology and data investment and a shift to using the word “customer” because it recognises that “people have an existence independent of the public services they use”.

How a pay day lender beat the welfare state

Mr English said that universal provision of services was failing the most vulnerable people, who had complex and unique circumstances that needed agencies to work together. He used the example of a woman who visited 14 agencies in a fortnight looking for help. The only place that made her feel welcome and offered at least a temporary solution was a pay-day lender.

“The people with the toughest problems have to negotiate the worst system. In the universal service system, well known problems with well-known solutions stay unresolved, with lifelong impacts for the customer,” he said.

“This 15% of the population at the hard end of the spectrum of need are characterised by their diversity not their similarity – they are thousands of different complex households, needing thousands of unique relationships of sustained trust, and thousands of different pathways to change,” he said.

“The suppliers of universal services cannot respond adequately to complexity because their vertical service structures are defined by legislation, professional boundaries, and funding flows. They are set up to deal with only one part of a person, not the intersection of factors that shape real lives in real communities.”

Shifting to investment thinking

Mr English said the tools of investment thinking, especially better use of data, could overcome some of the limits of universal provision.

“The way forward is real-time, customer-focused use of linked data in an investment framework. These are tools that can empower customers and help reduce misery rather than feed off it. They enable differentiation leading to effectiveness gains, changing lives and generating significant long run fiscal payoffs,” he said.

He said the key features of an investment approach to social services were:

  • Focus on the customer, not the institution
  • Integrate data to understand the customer
  • Use actuarial life course projection to understand future impact
  • Create an investment framework
  • Supervise the investment process independent of service providers
  • Focus on outcomes and accountability.

“Unlike the traditional universal approach which seeks to shift aggregate indicators, these tools seek to identify where change is needed most. It seeks out the most amenable opportunities for change and ranks them by return on investment,” he said.

“By digging into chronic need and continually seeking smaller better solutions this approach can change demographic trends.”

An investment framework was a useful tool to show where and how to spend new investment for maximum long-term impact, but it should be based on insights generated by data, particularly longitudinal integrated data. In some cases this showed that high levels of investment in services to small groups – such as youth at risk of going onto welfare - were justified because of their high long-term returns.

He used the reduction of rheumatic fever cases in in New Zealand as an example of investment thinking.

“An investment framework tells us the benefit for a child of avoiding rheumatic fever is so large it was worth spending a lot more to prevent the disease even if it worked only for some,” he said.

The argument was persuasive enough that officials were set the task of determining a way to reduce rheumatic fever incidence with no budget limit.

“Their thinking had been constrained by randomly limited current year operational funding. Instead of managing the issue by endlessly restating the problem and handwringing about social determinants, they had to think deeply about what mechanisms they could use to prevent one more child from contracting the disease.

“They came back with an expensive thoughtful solution we fully funded. Rheumatic fever rates dropped by 40% over five years, when they had previously been considered unshiftable.”

Value of aggregated data being ignored

Mr English said that public agencies were missing the chance to use data to better understand their customers and improve services.

“Mountains of data exist about people using public services, but public agencies are where useful information goes to die and turn into statistics,” he said.

“Agency culture is to control all flows of information in the name of reputational risk management, but that control comes at a cost to the customer and to the community.”

Mr English said public agencies tend to resist data sharing and focus on collection not customers.

“In the end, New Zealand agencies had no choice,” he said.

“By law, the data belong to the person they describe, not to the agency. The agency has a statutory role as a steward who should use the data in the best interests of the customer, not their own best interest.”

He said significant gains would come from linking data across two agencies who share the same customers – such as linking data from the health and welfare systems about sickness and disability recipients.

Targets and Accountability

Mr English said that successful initiatives needed to be driven by a focus on results, which were “incontestably good”, like reducing the number of cases of child abuse, increasing qualifications for disadvantaged students, or shorter wait times in hospital emergency departments.

“Specifying results in numbers gives politicians and public servants clear direction. With data driven feedback loops, public servants have a consistent system of measurement and accountability around which to organise,” he said.

The successful recipe is to pick a dozen targets, not 50. Put clear, functional systems of measurement in place which focus on results, not outputs. Make an individual Minister and senior official responsible, and publish updates.

He concluded by saying that the current system “is not a fact of the universe. It’s a choice with costs and benefits and the evidence is clear that it’s the most vulnerable who get the worst deal. They are looking to the pay day lender for care and support”.

The Rattigan Lecture is the third in an annual series in honour of G.A. Rattigan, the renowned Chairman of the Tariff Board and Industries Assistance Commission (predecessors of today’s Productivity Commission).

The purpose of the Lecture is to elevate the importance of good process, sound governmental institutions and effective leadership to achieving nationally beneficial public policy and reform. It is delivered each year by an Australian or New Zealander who has played a significant role in promoting or implementing these ideals.

ABOUT THE ALF RATTIGAN LECTURE

The 2019 Alf Rattigan Lecture is the fourth in an annual series in honour of G.A. Rattigan, the renowned Chairman of the Tariff Board and Industries Assistance Commission (predecessors of today’s Productivity Commission).

The purpose of the Lecture is to elevate the importance of good process, sound governmental institutions and effective leadership to achieving nationally beneficial public policy and reform.

It is delivered each year by an Australian or New Zealander who has played a significant role in promoting or implementing these ideals.

The Lecture is held by ANZSOG, with the benefit of an initial endowment by the Trans-Tasman Transparency Group and contributions from The Treasury, Productivity Commission, Infrastructure Partnerships Australia and the Minerals Council of Australia.

Read Bill English's speech on data customers and the limits of universal public services

Previous Alf Rattigan lectures:

2018: Whatever Happened to Evidence Based Policy Making? with Professor Gary Banks AO, former ANZSOG Dean and CEO, and former Chair, Productivity Commission

2017: Restarting micro economic reform with Fred Hilmer

2016: Economic reform: a lost cause or merely in eclipse? with Dr Paul Kelly, Distinguished Fellow of ANZSOG and Editor-at-Large of The Australian