Opinion & Commentary
We need better results from social spending
Unlike Paris Hilton though, Finance Minister Michael Cullen doesn’t have to pay for it himself. He now spends $55 billion a year of our money on our behalf, which is $20 billion higher than it was seven years ago. In real terms this is a 32% increase.
Most people agree that some level of social spending is necessary to help those who need support. By the same token, everyone should agree that this spending must be effective. If it doesn’t deliver results then there is no point taxing us in the first place.
This is the issue I considered in my recent paper: has the government’s spending binge actually made us better off as a country? What are the exact social benefits we’ve received? As reported in The Independent Financial Review last week, I used a range of broad social indicators to argue that we are getting a poor return for our investment.
In particular, I found that since 2000 there has been negligible change in life expectancy, hospital outputs, literacy, violent crime, suicide, poverty and inequality.
You might think the government would take this issue seriously, but the response from Finance Minister Dr Cullen (via his spokesman) was half-hearted and disappointing. The list of “real achievements” provided had some serious gaps which need explaining.
Working for Families may well lift some children out of poverty, but this is a prediction for the future, rather than an achievement. Billions of extra dollars have already been spent on social policy and yet poverty and hardship has actually increased, according to the government’s own measurements.
There are now fewer children living in benefit-dependent households, and this is great, but clearly this is a function of a healthy economy rather than any spending programme.
The government boasts of an extra $1 billion of spending on hospitals, along with higher pay for nurses and cheaper doctors visits. But these figures are all inputs, rather than outcomes. This is the whole point of my paper: there is no point spending billions of extra dollars unless you can prove it makes us healthier and better off as a society. Public hospitals are now less efficient than they were in 2000, and performing less elective surgery operations.
There are, however, a few positive achievements we can agree on. There is universal acknowledgement that roads need more investment, and at least this is an area where vigorous cost-benefit analysis is carried out in advance. And it is positive that more people are receiving a tertiary education, but one has to wonder at the cost, given the number of questionable courses uncovered in recent years.
The improvement in infant mortality is also good news, but similar improvements were made during the 1990s with much less funding.
Many of the successes claimed by the government are examples of ‘churning’, whereby spending is recycled straight back to the person who paid the tax in the first place. Cheaper doctors visits, interest free student loans and Working for Families (for wealthy families) are all classic examples of this. This kind of spending is wasteful, inefficient and does nothing to help the poor – hence the lack of progress in social indicators.
Given these disappointing examples, it is unfair for Dr Cullen to claim I was “highly selective” in the indicators I used. He does not offer any evidence for this, so let me explain how and why I chose my measurements.
The starting point for my paper was the United Nations’ Human Development Index, which uses life expectancy and infant mortality as the most important health measurements (as does the OECD). I also used the annual reports of the Ministry of Health and Treasury documents to look at hospital efficiency and the number of elective surgery operations.
For education, the government itself offers literacy as the most important indicator via the Ministry of Education’s annual reports. If it’s good enough for them, it’s good enough for me. I also used the government’s Social Report 2006 which featured suicide rates, inequality and poverty.
Importantly, I chose these measurements before I knew what the results would be, and I was as surprised as anyone at the lack of progress. I had expected to see a declining rate of return, but many of these indicators have actually gone backwards.
Finally, I am amazed that critics continue to claim I was “part of the National government in the 1990s”. As far as I remember I spent most of the 1990s at high school, before working part-time at Parliament as a student. I admit to having done a few silly things as a teenager, but you can hardly say I was running the country.
Phil Rennie is a Policy Analyst with the Centre for Independent Studies. His paper “New Zealand’s Spending Binge” is available at www.cis.org.nz
