Learning from the 2020 COVID Budget

Improving trust in the New Zealand Government – learning from the 2020 COVID Budget

Derek Gill - IPANZ, IGPS and NZIER

Unprecedented fiscal stimulus COVID

COVID was a difficult emergency for governments to manage that required swift action, but newly released survey data shows that in almost all countries including New Zealand emergency spending was not as transparent, accountable, or inclusive as they could be. When speed and accountability are pursued together, the public gets better services, which builds confidence that government can deliver. Public trust is critical to recover and renew our societies after COVID.

The COVID crisis has resulted in governments across the world  committing more than $US 14 trillion in emergency spending. In New Zealand Budget 2020 the COVID Response and Recovery Fund (CRRF) – a notional fund – was used as a planning envelope for budget management purposes. The CRFF set up $NZ 50 billion (18% of GDP) to manage the fiscal costs of COVID-19 response and recovery. This is the largest  fiscal package in our economic history which is forecast in the 2021 Budget to return NZ to peak levels of Net Debt of nearly 40% of GDP – a level not seen since 1995.

Urgent action does not have to come at the expense of accountability

Most countries used emergency powers to approve COVID measures by executive decree. New Zealand was outlier- we did not suspend Parliament or spend based in executive decree.  The state of national emergency between March and May 2020 mean that the New Zealand Minister of Finance – under Section 25 of the Public Finance Act – had the powers to approve emergency spending without the legislature approval. However New Zealand was one of a handful of countries to mainstream the fiscal responses to COVID through the standard Budget process in 2020. This was possible because  the serendipitous timing with COVID, relative to the Budget cycle and flexibility of our financial management system, and wider constitutional arrangement. In addition, legislative scrutiny continued even though Parliament was unable to sit. While normal Select Committee operations were suspended, the special Epidemic Response Committee was established and operated remotely.

New Zealand was included in global scorecard on COVID Budgeting

The International Budget partnership – an international NGO - conducted a rapid assessment of 120 countries' performance on transparency, oversight and public participation in funding their COVID relief packages. This expedited assessment was carried out through a set of 26 new indicators to supplement the standard Open Budget Survey (OBS) of the 2020 fiscal year. The findings “include following:

  • More than two thirds of governments fell short of managing their emergency packages in an accountable manner.
  • Almost two-thirds failed to follow transparent procurement procedures.
  • Almost half of the countries bypassed legislatures to introduce relief packages.
  • Only about a quarter of national auditors published expedited audit reports.”[1]

To find out more about how the survey assesses about open and accountable the New Zealand and other government have been in their COVID response click here.

Surprisingly New Zealand did not come out very well

New Zealand came out well down the batting order which was very surprising given we had been ranked as first equal in the world for open budgeting in 2019 and had mainstreamed the fiscal response to COVID through that same process that had been ranked so highly.

New Zealand ranked in the second to top group on  transparency (“Some Information”), the bottom group on participation  (“Minimal Participation”) the top group on Oversight (“ Adequate Oversight”) and the second to top group on accountability ( “Some Accountability”).  This put us on a par with Canada,  the United States and Sweden but below those assessed as being in the top group : Australia, Norway, Peru, and the Philippines. View the details of The New Zealand’s COVID assessment for IBP here

Which reflects some shortfalls  in New Zealand’s COVID response

Some good practices fell by the wayside during COVID. New Zealand’s low score on participation was because Citizens’ Budget information – like the Budget at a Glance  and BEFU Basics   – which had been a feature of previous  Budget’s – were not produced in 2020.

TINZ highlighted the serious lack of disclosure of Emergency Procurement

Another area where New Zealand feel short was in the transparency of information around emergency procurement. Transparency International New Zealand  raised concerns with the CE of MBIE in July 2020 about the lack of disclosure.  Subsequent analysis of the MBIE contract award data published by Lawrence Millar for TINZ since then reveals the depressing news is that only 26 award notices relating to COVID-19 emergency procurement were published in 2020, and only five contained information on the value of the contract. The work of TINZ on procurement highlights that in times of emergency when emergency procurement is required, the need  for transparency is heightened rather than reduced.

A crisis is not an excuse for lack of accountability

The Office of Auditor General, as part of its controller function conducted a special review focused on Government spending in response to Covid-19.  The  six monthly report, published on 10 February 2021 they raised concerns that “public accountability would be better served through additional reporting on Covid-19 expenditure.” It suggested the "formal, statutory basis of accountability reporting is necessary but not enough to provide Parliament and the public with meaningful information about Covid-19 spending."[2]

But cross country survey results need interpreting with care

On the face of it the survey results for NZ are quite surprising. With the exception of the low score on participation and procurement discussed above, a significant part of reported poor NZ performance is due to survey instrument design rather than the underlying reality. For example, as the Covid fiscal measures were mainstreamed through the budget, the Office of Auditor General (OAG) had the flexibility, resources and mandate to undertake their statutory functions. However, the survey assessed audit oversight as  ‘’limited “ apparently because the business as usual approach did not tick survey boxes for adopting special measures.

Trust in the New Zealand Public Service increased dramatically with COVID lockdown

The PSC’s Kiwis Count survey shows that trust in the Public Service  brand has increased markedly from 50% in December 2019 to a record high 69% in December 2020. This was 20% higher than confidence in the private sector at the same time.[3] Strong and effective leadership – both from the Prime Minister and senior public servants like the Director General of Health – meant that trust in government was spread across the political spectrum.  This is in marked contrast to the bipartisan divisions in perceptions about the US Government’s response to COVID for example.

We should celebrate our successes and learn from the missed opportunities

Even before COVID, across a range of international comparisons, trust in Government in New Zealand was relatively high. Moreover, according to the PSC Kiwis count surveyed trust has been gradually increasing in NZ since 2007[4] while it was declining in most other OECD countries[5]. The government’s response to Covid has further increased Kiwis trust and the response was assessed as  first in the world in the Bloomberg Covid Resilience Ranking as at 26 April 2021.[6]

The PSC report that “New Zealanders hold the most negative perceptions in relation to:

  • the public service admitting responsibility when it makes mistakes (52% disagree)
  • the public service learns from the mistakes it makes (42% disagree).”[7]

Reviews such as the COVID module of the recent Open Budget Review are an opportunity to learn and improve. In that regard, it was pleasing to see the 2021 Budget reinstated citizens budget information, like the Budget at a Glance and BEFU Basics – that has been removed. No doubt in part this was because the COVID module had highlighted of the low score on citizens participation.

 New Zealand’s 4th Open Government Partnership National Action Plan (NAP4) is currently under development[8] and this provides a further opportunity to cement in the gains that have been made and commitments to improvements where they are required. Rather than resting on our laurels, we need to celebrate our successes but also learn from the missed opportunities and mistakes.

References - 

[1] https://drive.google.com/file/d/1sKIxLVp0u-Sbic2FV8hSd6rUGuG2Ye6s/view

[2] OAG 2021 "Update on the Government’s Covid-19 expenditure" https://oag.parliament.nz/media/2021/controller-february

[3] https://www.publicservice.govt.nz/our-work/kiwis-count-survey/

[4] https://www.publicservice.govt.nz/our-work/kiwis-count-survey/

[5] The IGPS survey shows a significant increases in trust in a range of government institutions between the first survey in 2016 and subsequent surveys in 2018, 2019 and 2020 (before COVID).  Across a range of measures trust was generally stable since 2018 until a one off increase in trust in government in the aftermath of COVID.   https://www.wgtn.ac.nz/__data/assets/pdf_file/0007/1905370/WP-20-04-results-from-the-IGPS-March-2020-trust-survey.pdf

[6] https://www.bloomberg.com/graphics/covid-resilience-ranking/

[7] https://www.publicservice.govt.nz/resources/drivers-report/

[8] https://www.publicservice.govt.nz/our-work/open-government-partnership-ogp/