Why the Government should track future liabilities

writes in the Herald:

The actuarial approach assesses the predictable fiscal risks of people with different profiles. By calculating how much individuals with different risk factors are likely to cost the welfare system, a government can target services to reduce that liability.

But measuring fiscal liability is not primarily about cutting costs. Nor is it about reducing our colourful and intricate lives to dollar figures. It is about highlighting and understanding the complexities that lead to those figures. …

Perhaps counter-intuitively, the most valuable outcomes from applying the actuarial measure are not the big fiscal numbers churned out at the end. The juiciest part of those chunky actuarial reports is how the numbers are reached.

The actuarial reports can reveal what has been out of sight, or affirm what has always been in plain sight but where government action has not been effective.

The actuarial reports remind us of the costs of getting public policy wrong. More needs to be done to help young people receiving benefits gain independence. In fact, 75 per cent of total liability for those in the benefit system is attributable to those who first entered the system under the age of 20.

While Labour and National agree that early intervention is important the actuarial reports can measure its effectiveness.

This last sentence is I think the key. The actuarial reports allow you to judge if these policies are effective and successful. I think a hallmark of this Government will be that they don’t want to be judged on outcomes – just outputs. That spending lots of money and trying hard is what counts, rather than measuring actual change.

High fiscal liabilities are not a failure of the individual, but a failure of government to help them into independence. And the actuarial measure need not lead to punitive welfare policy. Forcing people into jobs they are not suited for or that are unsustainable will not reduce long-term fiscal liability. Treating beneficiaries like liabilities does not reduce fiscal liability.

Of course, the actuarial measure does not reveal everything policymakers need to know. Critics argue it would be best to dump it for a range of well-being measures. That is like saying a builder should dump her screwdrivers because she already has a hammer.

The Government needs both well-being measures and actuarial measures to track its progress and highlight what it has neglected.

All too often people argue it is one or the other. They argue rail not roads when we need both. They argue grow Auckland up not out, when we need both. And with welfare we need both well-being measures and the actuarial approach.

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