Social investment speech to the Victoria University School of Government

Thank you to the Victoria University School of Government for hosting this lecture today. I was a first-year student at this university 23 years ago. It’s an honour to return on the other side of the lectern, even if just for an hour. I appreciate the willingness of the University to set the stage for much-needed debate about new policy ideas. 

I acknowledge my parliamentary colleagues Chris Bishop and Harete Hipango and all those who’ve come to listen. You are some of the many New Zealanders who have shown an interest in the concept of social investment, probably having first heard these ideas articulated and brought to life by Rt Hon Sir Bill English in the past National Government. I am honoured to have Sir Bill joining us here today.

Seven years ago, I flew to Melbourne to watch Sir Bill give the Sir John Howard lecture, in which he shared his brilliant conception of social investment. It was exceptional. It’s still online and I recommend it to you all.

Some of you may share my frustration at watching National’s approach to social investment be eroded by the current administration. Others may be here because you are part of a small yet surely well-meaning group of critics. Welcome all.

I’m here because I’m determined that the next National Government will bring social investment back to life.

In today’s lecture I will:

• Argue that the profound challenges our communities face show the social investment approach is needed now more than ever;
• Set out longstanding problems with the way Governments ‘do’ social policy and share some exciting new tools and approaches that give me hope we can do so much better in future;
• Propose the principles a new Government could apply and the actions it could take to bring social investment back to life and in doing so transform many New Zealanders lives for the better.

Why social investment is needed now more than ever

Looking at New Zealand today can present a bleak picture.

Kids ram-raiding shopping malls, thousands of families living in motel rooms and cars, soaring truancy rates, rapidly rising gang membership, declining rates of literacy and numeracy achievement, more children growing up in benefit-dependant households. It goes on.

Some of New Zealand’s social problems seem at once intractable and avoidable.

The prisoner whose treatable mental health condition was left undiagnosed. The young family moved from one unsuitable temporary housing situation to another, acquiring debt and losing community each step of the way.  The child so badly let down by the care and protection system that we find their story too painful to read.

This is not the New Zealand any of us aspire to. 

My experience is that voters of all political persuasions care deeply about these issues. Frustration and concern at a lack of progress exists on both sides of the political divide.

Together we feel a sense of lost opportunity, of our fellow New Zealanders being let down, of lives made miserable despite so many good intentions and so much money spent. 

Very few people think a strong economy alone can solve these issues, and increasingly few think simply spending more will solve them either.

Despite the increasing billions spent on well-intended programmes, endless Government strategies – 221 at last count – and thousands more people employed to help, traditional public systems and services are still failing to reach New Zealanders in most need of community support.

Or if services are reaching them, they’re failing to have the impact needed. They are, to paraphrase Sir Bill, servicing misery when we want that misery reduced.

Recently, writer and Vic alum Danyl McLauchlin described it this way; “You can’t have effective public services without bureaucracies, but it’s not clear that the torrents of money flowing into them are delivering more value to the public or to the marginalised communities some of they are named after.”

There’s less tolerance for lofty political promises, with too little results to show for them. 

A creeping contempt for the absence of accountability for Government failure and regret that hard-earned money is being wasted while those in need miss out.

The growing gap between spend and impact has eroded trust in Government programmes, and made many cynical about funding another set of political good intentions.  

There’s an unwillingness to throw good money after bad, or to lock in yet more state dependency when self-determination, mana motuhake, is what we want for each other.

New Zealanders are thirsty for a better way. 

National’s Social Investment Approach is the better way New Zealand needs to deliver for people with the greatest needs.

Intuitively, there is great appeal in the basic idea underpinning social investment - that if only we intervene earlier and more effectively for our most at risk citizens then their lives could be so much better. 

It seems obvious that Government policies should seek to build fences at the top of cliffs rather than funding ever more ambulances to pick up the pieces at the bottom.

The social investment approach seeks to build those better fences, particularly for those whose path through life exposes them to greater risk. It stems from the basic idea that investment in a successful intervention today can have lasting dividends throughout their lifetime, providing a “return” on that initial investment.

Social investment seeks to identify, fund and scale up the actions that will have the most positive impact on people in the long run. In a practical sense, it applies the standards, data collection, analysis, funding, commissioning and feedback loops needed to expand the delivery of effective early intervention. 

It cuts across the normal ways of doing Government, breaks down silos, exposes failure and subjects itself to evaluation and feedback. 

Critics sometimes perceive social investment as an elaborate cover for a secret agenda to dismantle Government services.  They see shadows in the very word ‘investment’, as if anything that measures or accounts for costs imperils our humanity. I reject that view.

In a world of finite resources, the Government must take all steps it can to invest wisely. For when Government invests well, it can liberate families from challenging circumstances, afford genuine opportunity to children no matter their beginnings and empower people to lead better lives.

Yet when Government invests badly it lets down not only the families it seeks to serve but their fellow citizens too.  We owe it to those in need to invest public dollars better than we currently do.  It’s not enough to spend more, it’s the results that count.

National’s belief in social investment is ambitious and it is long term:  it seeks to make better investments today so that we can transform the lives of New Zealanders for generations to come.

Social investment will be the organising principle for the next National Government’s approach to the funding and delivery of social services. 

How can Government social policy do better?

To fix long-standing social issues, to break cycles of disadvantage and build family resilience we need a much better understanding of what works, for whom and at what cost. 

Empowered with that knowledge, better direction of resources is possible.

Let me share a story of what can be achieved when we get it right.

At a recent press conference the Prime Minister highlighted research showing positive social impact from the Healthy Homes programme.  The programme was started in 2013 by the former National Government to help deliver on its goal to reduce rates of rheumatic fever in children.

Families in the programme were referred by health authorities and assisted by community-based co-ordinators to insulate, warm and dry their homes, or where that wasn’t possible to find more suitable housing.  Healthy Homes was so successful in reducing disease and hospitalisations that the Government expanded it in 2016 to a larger group of families.

A full data-led evaluation of the programme showed children of families in the programme had far fewer visits to hospital emergency rooms, their attendance at school increased, and overall their parents were receiving fewer Government benefits. The return on investment was clear and measurable: For every dollar the Government invested in the programme it reaped more than $3 in savings, with more savings expected to accrue over time.

What a success story. 

National’s goal is to ensure more social programmes deliver the positive social impact the Healthy Homes programme has achieved.

Unfortunately, a lot of the stuff that made this programme work is pretty rare in the normal way of Government. 

For one, Healthy Homes arose in response to a clear, measurable target (reducing incidence of rheumatic fever) that the Government was prepared to hold itself publicly accountable for delivering. That’s increasingly rare.

For another thing, the Government started the programme with a built-in outcome and evaluation approach, determined to get feedback about its success before scaling it up or down.

Healthy Homes was also unusual in the way it cut across the normally rigid walls of Government to deploy people and resources, replacing the usual tools used to achieve health results – like medicines and doctors – with curtains and heaters, and employing community leaders to work with the specific and bespoke needs of each family referred to in the programme.

Right from the outset the programme was designed to respond to the reality that every family’s needs would be different, so instead of measuring success through outputs like how many windows were taped up or carpets laid it instead focused on outcomes – warmer, drier homes, healthier families and healthier kids.

The successful features of the Healthy Homes approach expose the deficiencies of the default public sector operating system.

In general, the public sector remains risk-averse, and wary of the data, evaluation and measurement that could make a well-intended and much-loved idea look like a failure. The result is that underperforming programmes can persist indefinitely, sucking up previous resources and stalling the f adaption and innovation that might otherwise have taken place.

In some cases there is measurement, but it is of the wrong stuff – of the contracted outputs delivered, the boxes ticked, the number of times the social worker visited, or the information sheet was handed out, when what we really care about is whether the programme succeeded in delivering change for an individual and their family.

For individuals, this output-driven model can lead to what Hon Dame Tariana Turia once referred to as the “five cars up the driveway” phenomenon  where multiple well-meaning Government agencies engage with different symptoms of a family’s dysfunction but never substantively address the underlying challenges driving those symptoms.

I think for example of someone living in an emergency motel, dealing with a truancy officer one day, a CYFS officer and an MSD broker the next and a youth aid officer the day after that, yet getting no closer to obtaining the sustainable tenancy they so clearly need. 

For frontline workers and delivery agencies this approach can lead to “contract spaghetti”: 

Multiple output-oriented contracts slicing up social challenges and losing sight of the wood for the trees. Losing sight of the individual families and people we are meant to be helping.

I think of the community agency I visited in Ashburton who told me of their multiple Government contracts, the compliance burden and constraints they created, and the frustration of the experiences frontline workers that they couldn’t just do the things they knew would make the biggest practical difference for the families and young people of their town.

In many cases, the Government-led approach to social policy intentionally places that power in the centre – read Wellington – rather than in the wise hands of those closest to the communities and families we seek to reach.

In my experience, nine times out of ten an experienced grassroots member of a community has a better idea of how to affect change for their neighbours than the most well-intended far-flung public servant ever will.  If you want examples of the power of a fired-up passionate private citizen then look no further than David Letele, Mike King, Julie Chapman or the tens of thousands of Kiwis who volunteer their time and hearts to doing good in their communities.

There can be no doubt that Government service provision has a huge amount of room for improvement.

The thing that makes me hopeful for change is that in 2022 we have better tools than ever available to improve the way the public service works.

We live in a time of fast technological change, with old ways of doing things being dismantled in favour of new and a trend towards putting the individual at the heart of things.

It’s hard to remember a world without Uber or Air BnB and all the choices, convenience and savings those disruptive technologies have brought customers. I think it’s time the public sector experienced a dose of this constructive disruption.

Today’s computing technology means we have much greater knowledge of the people Government interacts with, and we can track the patterns and results of those interactions over time. 

The public sector has long collected data about people’s life events, like education, income, benefits, migration, housing, justice and health.  What’s perhaps less well known is that that data can now be linked together and analysed using the “Integrated Data Infrastructure” or IDI. 

The IDI is basically a large New Zealand based research database.  It provides us with an enormous opportunity to predict which Government activities are most likely to be associated with better outcomes for children, what factors might indicate the highest need, and to scientifically evaluate the effectiveness of Government programmes.

The Healthy Homes evaluation for example drew extensively on data held in the IDI.

It was analysis of IDI data that gifted us the Mason Curve, named after Emily Mason, the official who developed it – which is an analysis on where the need in our population is greatest.

Emily’s work shows that 50 per cent of public services are used by 85 per cent of the population, and the other 50 per cent of public services are consumed by only 15 per cent of our population. That is an extraordinary insight.

We can use the IDI to dive even deeper, to understand for example which children will likely need the most public resource applied to supporting them through their lifetimes.

Imagine how much human potential we could unleash by investing earlier to steer a young person off a risky path of crime and dysfunction and into a safer more fulfilling life? Surely that’s a prize worth pursuing.

Used intelligently the IDI could help us prioritise previous taxpayer resources towards getting more social impact out of existing Government spending and activity. New Zealand simply must make more of this enormous potential.

I acknowledge that we must take upmost care to manage this data ethically and maintain social license for its use. We must ensure privacy is protected and that anyone accessing the data is appropriately vetted.  A National Government seeking to make more of the IDI would be vigilant about enforcing ethical standards for its use.

In addition to the IDI, New Zealand has extensive longitudinal science and research to help us identify what effective early intervention might look like.

The Dunedin Study and the Growing Up in New Zealand  studies provide exquisitely in-depth research and evidence on what affects child development in New Zealand.  We should mine them for more applicable insights that might improving life-long outcomes for children in a range of circumstances.

I think, for example, of the coalition of researchers including Director of the Dunedin Study, Professor Richie Poulton, who have worked to apply their findings about the importance of self-regulation and language knowledge in children. They have worked with Best Start early childhood services to trial programmes to help children strengthen these skills through play. 

I’m fascinated to see what we can learn from these ENRICH and ENGAGE programmes.

In general, I’d like to see more science brought to bear on policy making. Some of you might be surprised to learn that in addition to the Chief Science Advisor role created in 2009, more than a dozen Government agencies currently have a chief science advisor. These advisors should be used far more extensively to test the evidence and assumptions informing public policy design.

Looking still further across our communities and the world, I see a range of exciting new approaches to social policy that I’d like us to learn from. Social enterprise, impact investment, and collective impact approaches are examples.

In the UK “outcome funds” and “social financing” have been used to get better bang and social impact for the Government buck. The Government sets a clear, measurable goal, with funding to back it up, but leaves the choice of tool and programme design up to the fund.

Here in New Zealand, early evidence suggests the possibilities of the ‘social investment bond’.  Social bonds are an investment tool where private organisations, including investors, partner to fund and deliver services to improve social outcomes.  The positive or negative return for investors depends on the extent the agreed results are achieved. 

In 2017, Oranga Tamariki entered into a six year agreement with Genesis Youth Trust to deliver an intensive programme to reduce the frequency and severity of youth offending for a maximum of 1,000 participants. Investors provided a $6 million initial investment to finance the Social Bond and the initial evaluation suggests its delivering some positive results. This is a model worth building on.

We’ve also seen potential with the Whanau Ora programme which puts community-run organisations in charge of delivering lasting change for the people they serve. It aims to empower families to set their own goals and to select a set of services and support to help achieve them. The family-centred design, rather than the typical Government service-centred approach shows the potential for a more responsive tailored social service system.

I’m conscious that Māori are disproportionately represented in the client base of services targeting help at those at risk of poor outcomes.

It’s also abundantly clear that strengths exist within iwi and Māori communities to create change for themselves. 

By actively devolving how we deliver social services we can bring to life the development aspirations of Māori and the desire so many communities have to improve outcomes for the families they support.

National looks forward to finding opportunities to take power away from the centre and to give it back to the grass roots.

Bringing social investment to life

So how will a future National Government bring social investment to life, in philosophy and in deed?

Our task will be to rebuild the outdated aeroplane that is the Government’s current mode of public services delivery, while still relying on that aeroplane to stay up and flying.

The trick is not to let the old machine limit our horizon for what might be possible, nor tinker so much we lose propulsion.

We will begin by doing the basics well, ensuring the machinery of Government is more focused, with clearer priorities and greater accountability for spending and results. 

That will require much greater clarity in the way Government approaches social problems we wish to solve. It will demand from Ministers clearer definitions  of what social outcomes they hope to achieve, better using and responding to evidence, being more prepared to change how they do things, from community to community and year to year, and being more willing to empower Government outsiders to make things happen. 

National will set a small number of Better Public Service Targets to focus Government activity and effort towards measurable goals. They will be transparently and publicly reported against with Ministers held accountable for progress towards them.  

We will stop the expansion of centralised and Wellington-based bureaucracy, reducing the number of public servants in backroom roles, so we can move more resources to the frontline.

We will hold public service entities to a much higher standard of accountability for what they spend and what that spend delivers. 

National will also sow the seeds for the more dramatic change and innovation a social investment approach requires. 

I think of ‘social investment’ as a sophisticated kind of new operating system that we will deploy to address challenges and opportunities across different Government agencies.

The Social Investment system will develop with time but its key features will be to make use of data and evidence, embed feedback mechanisms, take a people and outcomes focus and to align standards.

The data and evidence features of the approach will be used to better target, design and ultimately measure the outcomes of social investments, seeking to understand the return an investment will make not just over the course of the budget cycle but more importantly over the course of a human life.

The feedback app will install evaluation mechanisms into the design of social investment programmes.  This will require us to be much more willing to identify failures and stop initiatives that aren’t working.  It will allow us to scale-up things that work and it will encourage constant innovation. 

The people-focused approach will prioritise the needs of individuals and promote community- based, joined-up and responsive services rather than the incoherent and overwhelming policy soup multiple government agencies can create for the people they’re meant to be helping. 

Our system will be relentlessly focused on outcomes, rejecting the noise of output-contracting and compliance in favour of a higher-trust model that allows delivery agencies to focus on what works for the communities and people whose lives they are working to improve.  

Finally, we will develop and apply consistent standards so that social investments can be compared and scaled-up no matter which part of Government they start in. Standards would cover things like data security, return on investment (ROI) methodology and effective commissioning.

The Social Investment Agency

Finally, let me spend a minute on institutional architecture.

Firstly, we need to fix the sadly depowered Social Wellbeing Agency by replacing it with a fit-for-purpose Social Investment Agency.

First, it will become the IDI centre of excellence. Safeguarding the use of the treasure-trove of data the IDI contains, deploying it safely across Government for both ‘pre’ and ‘post’ evaluation of proposed initiatives, and ensuring non-Government organisations can access it with appropriate controls in place.

Second, the Social Investment Agency will provide leadership on impact and value measurement, providing insightful analysis of the whole of life return (ROI) on proposed social investments. 

It will also have a yearly work programme that evaluates the social impact of existing government programmes with a view to expand, stop or improve them depending on what the evaluation analysis tells us.

Finally, today I’m announcing that the Social Investment Agency will support a new Social Investment Fund.

The purpose of the Social Investment Fund will be to invest in programmes that will change the lives of New Zealanders with the greatest needs. 

My expectation is that the fund will start small and scale-up over time. 

It will have a range of investment options available to it including social impact bonds, social outcome contracts and other innovative ways of investing in longer-term outcomes for people, including partnering with external experts and agencies.

Initial funding would be provided by Government through the Budget process, and would be topped-up over time, including by redeploying funding from any Government initiatives that may have received disappointing social impact evaluations.

I can imagine, for example, a National Government might deploy the Social Investment Fund to tackle the task of delivering secure, sustainable housing for people currently living for extended periods in emergency housing. 

It’s unconscionable to me that the Government now spends more than $1 million every day paying the nightly bills of emergency motel rooms for thousands of New Zealanders, paying so much for such a terrible result for those people and their often young families. 

The Social Investment Fund could commission NGOs to deliver housing solutions that improve social outcomes for these families, more carefully deploying massive state funding for a better result.

My hope is that the Social Investment Agency would become so effective over time that those seeking positive social change for the disadvantaged would choose to invest their funds with it. 

There could be huge power in combining the forces of Government social investment expertise with the capital and expertise of the non-Government sector, with the fund ultimately becoming a trusted repository for philanthropic and charitable social investment.

I’ve lost count of the number of times people have told me they’d be willing to donate more to charity if only they could have confidence the donation would really make a difference. 

Success for the Impact Fund would be New Zealanders having sufficient faith in it that they would voluntarily invest to expand its impact potential.

I know some will question this mixing of the public and private domains. I’m not interested in that rigidity. I want results. If private capital can be better deployed to help change the lives of more New Zealanders then I will not be afraid to use it.  We must not allow ideology to get in the way of what works.

In conclusion

While basic public services generally work well for those with basic needs, the old approaches are failing our most vulnerable.

The current Government has tried more spending as a solution to New Zealand’s problems and has demonstrably failed to deliver improved results, dropping Better Public Services Targets, rejecting accountability and effectively failing many of our most disadvantaged New Zealanders.

I started this lecture by declaring that a better way is possible.

It’s not only possible, it’s urgent. The problems with the current approach to social spending are clear and persistent, and the possibility of new tools and approaches for delivering greater social impact is immense. 

The failure to capture the potential of social investment has been to the detriment of this Government, but it provides enormous opportunity for the next one.

I say that not because I want the social investment project to be a partisan endeavour. In fact, the opposite is true. I see social investment not as a creature of the ‘left’ or the ‘right’, it’s just about delivering public services that actually work.

It’s easy to get pessimistic and to tolerate the failure we have come to expect from the state.

Let’s instead be bolder, braver and more hopeful.

I’ve shared with you today some of my vision for how I think we can action social investment. 

The approach I’ve proposed will undoubtedly challenge traditional structures and ways of doing things in Government agencies. That disruption is exactly what I seek.  Because the old ways just aren’t working.

I welcome your input on how my conception of social investment can be refined and improved. Please do get in touch with me to share your ideas, your criticisms, your tangible actions for change.

I want to express my appreciation to the small group of extremely wise and intelligent people who have helped me develop this thinking over the past few months. I won’t name names, you know who you are. Thank you.

Ultimately, social investment is simply Government done well. It is doing good better and most specifically doing better by those who need us most.

Social Investment will be a driving project for the next National Government.

I hope you will join me in bringing it to life.