For context, that first social-investment column was a week after the Pike River disaster. The first Christchurch earthquake had struck some months earlier, but the second fatal one was still to come. The five-year-olds then in their first year of primary school are now in their second year of university, an apprenticeship or work. More importantly, some of them who might have been, had social investment been implemented, aren’t. They’re on their way to boot camp or jail.
In 2011, Finance Minister Bill English advocated for social investment by famously and accurately describing prisons as a “moral and fiscal failure”. Yet those words apply equally to his own inability over the next six years – and that of the Ardern-Hipkins Government – to implement social investment rather than it remaining a useful talking point for politicians to excuse gaps in the existing system.
Deep in the Wellington bureaucracy and aided by some of the country’s smartest data analysts and other experts, work on Rebstock’s idea never stopped. English called it social investment. Jacinda Ardern called it social wellbeing. It’s now called social investment again, but the various re-brandings haven’t changed the algorithms, data or ideas underpinning it.
Finance Minister Nicola Willis, also Social Investment Minister, has a moral and fiscal obligation to get on with it. To the extent social investment would help those who wouldn’t otherwise receive it – and stop money going to providers who don’t improve lives – procrastinating for another generation would be unconscionable.
Delays in implementing social investment stem from politicians selling it as utopia and demanding the boffins deliver. To use Christopher Luxon’s type of language, they’ve made the perfect the enemy of the good.
Social investment is certainly about much more than recognising that early interventions are better than trying to fix broken lives later on. Even most politicians have worked that out, sometimes helped by the Dunedin and Christchurch longitudinal studies that began in the 1970s.
Social investment is about applying that obvious point more rigorously. Roughly, it starts with gathering all the group and individual data that governments collect and then applying analytical tools, including those used in corporate finance, to work out who is most at risk of failing at school, getting sick, getting into trouble, committing crimes and otherwise making their own and their communities’ lives miserable. There are fewer such people than sometimes thought, but they are also those who cost taxpayers the most through their lives.
Government agencies will then target their services to those the algorithms suggest need more help, rather than spread their efforts more randomly and thinly.
But the idea goes further. Social investment bonds will be issued to non-government organisations (NGOs) such as private trusts, church organisations, iwi and urban Māori authorities, which pay out in full only if the organisation delivers the predefined social gains they promised.
The biggest advocates for social investment then hope investment banks, pension funds and other allocators of capital will come to the party, applying their skills in analysing whether Apple, Amazon or Tesla is most likely to create greater value to evaluate which NGO is likely to do the most social good. If they think drug programme X will do better than programme Y in getting people off meth, they can profit by investing in the former.
Over time, it’s claimed, the NGOs that do the most good will get the most money.
From taxpayers’ point of view, it makes sense for governments to spend almost anything reducing the percentage of a defined group who will end up committing serious crimes, traumatising or killing others and attracting life sentences for themselves. If investors can also profit handsomely from backing a programme that will do that – but lose their shirt if it fails – then so much the better for everyone.
Willis is currently looking for people with skills in everything from social work to finance to appoint to her new Social Investment Board. She has promised to finally get social investment properly underway in her 2025 Budget. She ought to be held to that.
Unlike some of her predecessors, Willis accepts she can’t let the perfect be the enemy of the good and that she must wear teething troubles if the alternative is another decade of procrastination.
After more than a decade in the seminar room, those designing the algorithms say they are as good as they could ever be prior to going live. That includes accepting that all data is inevitably imperfect, no assumption is unable to be improved and that every algorithm always needs further development.
Politicians must also accept that social investment will be disruptive. Some NGOs will find their programmes cut or closed with the money going to others that the algorithms suggest are more likely to improve lives. Some of these assessments will turn out to be wrong and the boffins will need to keep collecting data and amending their assumptions and maths accordingly.
But this can’t possibly be worse than the status quo, where taxpayers’ money keeps going to organisations and programmes that have failed but are politically powerful among the Wellington bureaucracy or are popular with party donors.
Ahead of Willis implementing social investment, the Minister for Children, Act’s Karen Chhour, has put her toe in the water, boldly cancelling more than 330 service contracts she says weren’t delivering what they promised and directing the money elsewhere.
Some of the providers are already bleating, along with the public-service union. For social investment to succeed as the disruptor intended, the Government must show it can hold firm, even when its own friends get work lobbying for underperforming NGOs who miss out.
Messiness will not be evidence of social investment failing but of it succeeding. No amount of further analysis will allow the Government to avoid the political consequences of that messiness. Moreover, social investment cannot deliver the utopia sometimes promised. It is neither more nor less than a powerful new tool to improve the allocation of resources to make lives better. Imperfections can’t be used as an excuse to delay getting those benefits and protect a status quo that is unquestionably worse.
Some political courage is necessary. Hopefully, I won’t need to write this column yet again in 14 years, or even in 14 months.
