The Social Investment Unit in New Zealand - Centre for Public Impact (CPI)

The Social Investment Unit in New Zealand

The increasing cost of social welfare, partly as a result of an ageing population, is a growing problem in New Zealand as in many countries around the globe. In February 2016, the nation's government created the Social Investment Unit (SIU), a government agency that aims to encourage and oversee social investment by drawing on the talents of NGOs, non-profits, the private sector and government itself to fund solutions to the most pressing social issues of the day. So far, the jury is out on the unit's achievements and impact in its first year of operation.

The challenge

New Zealand has a rapidly ageing population: “by 2068 the 65+ population will have increased from 16% in 2014 to 32%”.[1] This has a major potential effect on pensions and healthcare: "left unchecked, government spending could reach 47% of GDP by 2060”.[2] This was becoming clear by the turn of the century and by this decade definitive action was required, but this was only one of many burdens on the government's social welfare budget which needed to be urgently addressed.

The response of the New Zealand government was to consider three different approaches to future welfare: higher taxation, higher borrowing, and spending less of its budget on services. It decided that the last of these offered the best option, but not simply by cutting spending. “Increasing taxes may make working less attractive, and encourage tax avoidance. By increasing debt, the total amount of debt could reach 200% of GDP by 2060. Thus, to improve the quality of spending to address fiscal and social problems, the government introduced the idea of social investment.”[3]

The initiative

In order to spearhead its drive towards social investment, the government set up the Social Investment Unit (SIU) in February 2016. “The [SIU] aims to support the social system in New Zealand to understand what investments would lead to better outcomes for communities. It employs rigorous and evidence-based investment practices towards that end. The SIU also develops tools and products to enable agencies to develop their social investment approaches, [and] analyse and measure the impact and effectiveness of the services they are delivering.”[4]

The SIU's overarching aim was to enable and influence social investment throughout New Zealand. “The objective of the SIU is to advance and embed a systemic approach to social investment across the social sector, including:

  • "Championing a social investment approach
  • "Acting as stewards of the social investment system
  • "Partnering with agencies
  • "Building and operating the centralised platform required
  • "Prototyping solutions
  • "Building a reusable infrastructure.”[5]

The public impact

The SIU has now been in operation for a year. It works with social agencies, NGOs and government to drive their investment decisions in order to improve the way funds reach the public, rather than interacting with the public directly. The impact of its social investment strategy is therefore achieved through other agencies. The unit's achievements by December 2016 included the following:

  • The creation of “Data Exchange: ‘Prod-1’, under which the transfer of data between the Ministry of Social Development (MSD) and the Methodist Mission Southern will take place.
  • “The Social Investment Analytical Layer in Statistics, New Zealand’s Integrated Data Infrastructure (IDI), launched in September 2016.
  • The launch of “the Social Investment Measurement Map (SIMM), which provides information on what type of measures are available before authorised users access Statistics NZ’s Integrated Data Infrastructure (IDI).
  • “SIU is working with agencies wanting to implement a social investment approach for Budget 2017.
  • “SIU along with Statistics NZ and the Data Futures Partnership co-hosted the fourth Data Hui, in association with the Minister of Finance, on 22 November 2016.”[6]

What did and didn't work

All cases in our Public Impact Observatory have been evaluated for performance against the elements of our Public Impact Fundamentals.

Legitimacy

Public Confidence Good

As stated above, the SIU has no direct connection with the public. Therefore, there is little or no information regarding public opinion on the SIU. Bill English, the country's finance minister, made a number of pronouncements in February 2016 that called into question the government's progress up to that point. He was particularly frustrated over the lack of progress on domestic violence and other social problems, such as the growth in prison numbers. "We have really had no impact, despite spending hundreds of millions of dollars on programmes, on the incidence of domestic violence in New Zealand," he said. "Really no impact at all."[12]

He saw potential, however, in the role of the newly-created SIU, even though it was yet to deliver. "English said that the public service was having 'no impact' on some costly social problems. The government's social investment unit, which has a budget of about NZD6 million over two years, is spearheading a government drive to make better use of data and software tools. The government had made agencies focus on whether they were achieving results, rather than just on 'churning money', English said. 'But now we are at a stage where some of those results are starting to flatten out. They are going to need new tools based around data and measurement'."[13]

Stakeholder Engagement Good

The major stakeholders involved with the SIU include social agencies, NGOs, and ministries such as the MSD, to which the SIU reports, the Office of the Privacy Commissioner, the Government Chief Privacy Officer and the Ministry of Justice. This is to ensure that stakeholders have complete oversight of the overall approach.

In order to implement a social investment approach for New Zealand's Budget 2017, the SIU works closely with a number of government agencies. It also cooperates with a number of agencies on its IT strategy: “the SIU is working in partnership with social sector agencies, NGOs and contracted service providers to develop a cloud-based Data Exchange to enable safe and secure information sharing of non-anonymised data”.[7] Any privacy issues are addressed with the relevant government organisations: “the SIU works closely with the Office of the Privacy Commissioner, the Government Chief Privacy Officer and the Ministry of Justice to ensure they have complete oversight of the privacy approach being taken”.[8]

However, there are weaknesses in the government's approach to commissioning social welfare investment. “An improvement is also needed in the way that social service providers are commissioned.”[9]

Political Commitment Fair

The government has displayed a willingness to move away from a "spend-versus-cut" approach to solving the problem of debt, and has instead focused on the quality of its spending, to ensure that it is being allocated appropriately through the medium of the SIU. Here, the focus is on social need and on innovation and on making use of the experience of non-governmental actors. “To get better long-term results for people with needs that aren’t being met, we need to look at where existing services could be improved, and where we need to innovate to get bigger breakthroughs. To help with this, the government is looking at greater involvement from not-for-profit and private sector providers alongside its agencies.”[10]

Social expenditure is rising, and the government has remained committed to continue to spend on social issues, while reducing its budget in many other areas. “The social spending is forecast to increase; however, the current government has remained committed to maintaining an environment of constrained overall expenditure, and has chosen to make reductions in other spending areas such as back office expenses and limiting crown entities.”[11]

Policy

Clear Objectives Fair

The SIU's objectives are clearly defined and are addressing the relevant issues (see The initiative above). These objectives have remained consistent since their inception. There is less focus, though, on outcomes. "There is a lack of clarity on the outcomes that social sector agencies and service providers should be collectively achieving, and there is some resistance to having outcomes measured. Additionally, developing a single set of priority outcomes to aim for is difficult, and there are few examples where this has been done well.”[14]

Evidence Fair

Private sector SIUs had been in operation globally before the creation of the New Zealand government's own SIU, for example in promoting microenterprises in sub-Saharan Africa. However, there was no definitive information about the government's referring to similar units while setting up the SIU. It was clear, though, that discussions on welfare dependency being a future liability were conducted by the government long before the SIU was set up, and it was also clear that there would be many challenges to the social welfare budget, which the SIU was designed to help address.

Individual components of the SIU's approach have drawn on evidence from international sources. "International experience shows that return-on-investment tools which evaluate the costs and benefits of different proposals in a consistent way can be a powerful driver in getting better results for people. A new cost-benefit assessment tool has been developed to enable the SIU to make these comparisons.”[15]

Feasibility Weak

There is no evidence that the government conducted strict feasibility studies of the fiscal, human resource and legal constraints affecting the SIU. A major problem was identified, in that “there aren’t enough people with the right data skills working in the social policy and service design, and there are concerns about how sensitive data might be misused”.[16] The data sensitivity issue was one that would be addressed with the government's privacy agencies (see Stakeholder engagement above).

Action

Management Good

The SIU has to maintain a delicate balance between the centralisation and devolution of managing social investment. “The SIU will identify those elements of social investment that need to be centralised and which operational matters will stay within agencies. Services will be centralised to some extent.”[17]

The SIU has been set up to operate at five levels:

  • “Enablers or foundational tools and infrastructure
  • "Direction setting
  • "Delivery
  • "Accountability and incentives
  • "Feedback loops.”[18]

The SIU has a wide range of skilled programme managers who understand the delivery context and are continuously aligned on suitable goals and approaches. “A diverse, yet like-minded, group of passionate individuals have teamed up to form the SIU... this dynamic team is writing the book on how to implement the social investment approach. They're also creating the tools and supporting guidance to help make it a reality.”[19] For example, one of these is the cost benefit analysis tool described in Strength of evidence above.

Measurement Fair

The SIU has set up a feedback mechanism to use data and measurement to make better decisions at all levels of the social investment system. However, there is a lack of clarity on the specific outcomes that the various stakeholders should be achieving, and there are relatively weak incentives for individuals in the public sector to test interventions.

Measurement is a central function of the SIU, and this includes:

  • "Systematically measuring the effectiveness of services in meeting peoples’ needs
  • "Measuring long-term outcomes for people over their lifetimes and feeding back into decision-making
  • "Understanding the fiscal implications of better outcomes and help to manage the long-term costs to government”.[20]

The SIU has a system of feedback loops to enable staff to use data and measurement to make better decisions at all levels and to support the culture shift required that sees data being used in all decision-making. "The Unit will set data and evaluation standards and how to estimate return on investment for selected spending.”[21]

The SIU has to confront an unwillingness across the social sector to measure inputs and outcomes. “There is a lack of clarity on the outcomes that social sector agencies and service providers should be collectively achieving, and there is some resistance to having outcomes measured... There are weak incentives on individuals in the public sector to test and trial interventions rigorously, and report openly on performance in a way that permits learning from success and failure.”[22]

Alignment Good

There is evidence of the involvement of many social sector agencies in working with the SIU to achieve its objectives (see Stakeholder engagement above). The government is motivated and equipped to take action to support the initiatives taken by the SIU. The initiative is managed by a team of highly skilled professionals, who are guiding the implementation of the social investment approach (see Management above).

However, government ministers do not necessarily approach the problem positively. “Ministers have a fear of failure, which dampens the chase for the best outcomes.”[23] And although social spending is set to increase, "the current government has remained committed to maintaining an environment of constrained overall expenditure, and has chosen to make reductions in other spending areas such as back office expenses and limiting crown entities, expenditure”.[24]

Bibliography

Costly government programmes having 'no impact' on domestic violence - Bill English, Pullar-Strecker, T., 23 February 2016, stuff
(http://www.stuff.co.nz/business/industries/77170987/Costly-government-programmes-having-no-impact-on-domestic-violence-Bill-English)

How Social Investment Works, September 2015, The Treasury, New Zealand Government
(http://www.treasury.govt.nz/statesector/socialinvestment/howitworks)

SIU Social Investment Unit Newsletter, December 2016, Social Investment Unit, New Zealand Government
(https://siu.govt.nz/assets/Uploads/SIU-Newsletter-December-2016.pdf)

Social Investment Unit Fact sheet: Data Exchange, October 2016, Social Investment Unit, New Zealand Government
(https://siu.govt.nz/assets/Uploads/Data-Exchange-no-scenario-Oct-2016.pdf)

Social Investment Unit Fact sheet: What is the Social Investment Unit?, December 2016, Social Investment Unit, New Zealand Government
(https://siu.govt.nz/assets/Uploads/What-is-the-SIU.pdf)

State of the State, New Zealand 2016: Social Investment For Our Future, Fraser-Jones, J. and Tabarias, J., 2016, Deloitte and The New Zealand Institute of Economic Research
(https://nzier.org.nz/static/media/filer_public/2b/1d/2b1dd37e-ada7-44a1-8b8c-e9370986b1f9/state_of_the_state_nz_2016.pdf)