BUDGET 2012: Quakes, icebergs and tsunamis - lessons for public finances

They say that necessity is the mother of invention. Out of the Canterbury earthquakes emerged new ways of delivering public services. Borne out of necessity.

Difficulty or crisis is often the only way that innovative change and real leadership occurs.

But let’s not rely on a crisis in order to create innovation in the public sector in New Zealand.

This Budget has proudly been announced as a "zero" one, but increasingly it looks like we are robbing Peter to pay Paul. This only takes us so far.

The reality is that NZ Inc and the New Zealand public sector faces perennial issues that will not diminish longer term.

The Budget confirmed the desire for a better public service, focusing on 10 key delivery targets across the areas of reducing long-term welfare dependency, supporting vulnerable children, boosting skills and employment, reducing crime and improving interaction with government.

Further announcements will be be made by June 30.

Announcements today included an up-front investment in reforming welfare, reprioritising prisoner rehabilitation, new health funding and education.

However, the Budget does little to address the icebergs … the hidden part is the most dangerous.

We were reminded again of this hazard as part of the centenary of the Titanic sinking. What lies below is what is scary despite everything on the surface looking picturesque.

So New Zealand faces its own future iceberg.

What lies beneath the surface are the hard policy decisions on, for example, superannuation (with the impending “silver” tsunami) and immigration.

There is no need for musical chairs - rather a new boldness to address emerging policy issues and the need to have a step change in public service delivery and public service finances.

What is needed is leadership in innovation and the implementation of frameworks for development of innovative ideas.

We would expect the government should:

• Put aside a percentage of all Government funding for public sector innovation.
• Develop conduits for new ideas.
• Remove barriers to innovation – have the budget changes to the Public Finance Act gone far enough?
• Service delivery design to include consideration of decentralised collaboration. That is, decentralising specific services away from government control and instead delivery through collaborating with not for profits or the private sector.

Fundamentally, the Budget has reshuffled the deckchairs to ensure we focus on getting the books back into surplus by 2015-16.

However, the policy changes required are more fundamental than this.

Innovation and leadership is required by the government to ensure a positive reshuffling of the deck chairs are not those on the Titanic.

Alastair Boult is national director/government advisory with Grant Thornton. Email alastair.boult@nz.gt.com