How is one national ministry of finance engaging directly with the public?

There is considerable interest amongst officials in national ministries of finance in how they can directly engage the public in the design and implementation of fiscal policies. GIFT’s Guide on Public Participation contains numerous individual case studies of public engagement mechanisms across a number of countries.

We decided to drill down further into one MOF – the NZ Treasury – to get a better understanding of the range of public engagements recently completed or under way, and to explore with the responsible managers/senior analysts how the Treasury managed them. Table 1 lists them, and the GIFT public participation principles they best illustrate.

Table 1 Public Engagements by the NZ Treasury 2018-19

Individual engagement Stage of policy cycle Mechanism type Participation principle illustrated
1. Tax reform Policy design Time-limited Working Group Openness, inclusiveness, respect for self-expression, timeliness, depth, proportionality,
2. Independent Fiscal Institution Institutional design One-off consultation Openness, depth
3. New Infrastructure Agency Institutional design One-off consultation Openness, depth
4. Open budget Budget preparation One-off consultation Accessibility, openness, timeliness
5. Social Investment Panel Budget preparation Regular in-year consultation* Openness, depth
6. Earthquake Commission review Design and implementation Multi-year consultation Openness, timeliness, depth
7. Long term fiscal statement Policy design Every 4 years Openness, inclusiveness
8. School and university outreach Design and implementation Annual exercise Openness

* Not operating since early 2018

Two general points stand out from Table 1:

  • With only one exception, these engagements took place outside the annual budget cycle and are therefore not measured by the Open Budget Survey.
  • The topics on which public engagement took place are much broader than how government spending is allocated. Consultations spanned macro-fiscal policy, tax policy, the design of fiscal institutions, current expenditures, public investment, and government-provided insurance.

The relatively large number of public engagement exercises reflects a combination of long-standing government practice to consult on significant new policies (engagements 1 and 6), a new government’s agenda (1,2,3), an initiative by the previous government (5), and Treasury’s own operational practices (4, 7, and 8). In one or two cases the government directed the Treasury to consult, in one or two cases the Treasury recommended to Ministers that consultation should take place.

With respect to the GIFT Principles of Public Participation in Fiscal Policy, the Tax Reform Working Group best illustrates the range of principles, reflecting that it was a major consultation exercise. Over all the engagements the principle of proportionality is broadly reflected in the relative effort and time devoted to each. The principle of complementarity is illustrated by those exercise where the executive engaged during the development of policy, to be followed by public consultation by the legislature on draft legislation e.g. engagements 2 and 3. An area of relative weakness is the provision of feedback on how public inputs are used, which is often subject to quite long delays and is generally lacking in detail.

What are some of the practical elements in each of these public engagements?

  1. Tax policy reform: in the mid-1990s NZ introduced a Generic Tax Policy Process which includes public consultation, publication of an annual tax policy work program, scheduling of two tax Bills per year outside the annual budget to avoid budget secrecy and time constraints, frequent consultations on small policy and changes to tax administration, and occasional major external reviews of tax policy. A Tax Working Group (TWG) was set up in November 2017 chaired by a former deputy P.M/Minister of Finance. The other ten members spanned tax law practitioners, academics, business, community, Maori community, and sustainable development. The TWG was supported by a secretariat of officials from Treasury and the Inland Revenue Department acting independently from their in-line responsibilities. A two-month public consultation (March – April 2018) was followed by other public engagements following release of an interim report in September 2018. The final report was published in February 2019. Box 1 describes the special efforts the TWG made to consult Maori (NZ’s indigenous people).
Box 1: Inclusive engagement in tax reform

 Maori comprise about 15% of NZ’s population, their rights are established in the Treaty of Waitangi 1840 and have been recognized in law in recent decades. Consultation and partnership with Maori is now an essential part of public policy in NZ. Recently government has introduced central Guidelines on engaging with Maori.

Tax reform engagement with Maori started with informal ‘soft testing’ of the planned consultation process with 8-10 Maori leaders (identified on the advice of Treasury’s Principal Advisor Maori, and from established networks). Based on this, formal meetings were held around NZ on selected tribal marae (meeting grounds).

Efforts made to recognize the specific cultural context were important for successful engagements: terminology (‘partners’, not ‘stakeholders’); personal connection; consultations held on Maori ‘home ground’; appropriate catering; attention to giving personal feedback.

The importance of positive engagement was recognized: ‘we want to hear your views’, not ‘ we are required to consult you’.

  1. Establishing an Independent Fiscal Institution (IFI): an election commitment of the new government. The Treasury produced a draft public consultation document drawing on existing Treasury, OECD and IMF networks and publications. The document required staff time of 2 FTEs over 2 months plus the time of a contractor to edit. The consultation document was published on 12 September 2018, and submissions closed on 24 October. Two consultation workshops were held in Wellington, and officials visited the IFI in Australia for 2 days of discussions. 25 submissions were received, 24 of which were published in March 2019 together with a summary. The government has yet to announce its decisions. The Treasury would have liked more time to consult e.g. consult outside the capital city, and more cross-agency consultation.
  2. Consultation on new infrastructure body: an initiative of the new Minister for Infrastructure, concerned about a major infrastructure deficit and the need for better information and coordination. The Treasury published a consultation document on 8 October 2018, disseminated via the web and social media, which included a questionnaire (using Likert scales for some questions). Submissions were required by 26 October via an online survey or submission template or other written form. Meetings were held during October with stakeholders in the three main cities, plus Sydney, Australia (hosted at individual business premises), and at the Treasury. Invitees were identified from mailing lists and were also asked to pass the invitation on to other interested parties. An Expert Review Panel supported the Treasury throughout. 130 submissions were received, which were assessed individually by one analyst, the themes extracted, and a summary compiled and reported to Ministers. Some Treasury advice was based on what was in the submissions. The submissions and brief summary and the Cabinet paper were published in February 2019. The Treasury indicated that if it had more time it would have gone back to more individual submitters to explore interesting ideas. In February 2019 the Government announced the form, functions and name of the new body, legislation was introduced into Parliament in April with an opportunity for public submissions, and the new Infrastructure Commission is expected to be operational later in 2019.
  3. Consultation on open budgets: a commitment in NZ’s 2016-2018 Open Government Partnership Action Plan to ‘make the budget more accessible and open.’ Due to a tight timeline, and the need for specialist research skills, Treasury commissioned a survey research company to seek stakeholder views (tendered at a cost of NZ$42,000, funded within Treasury’s existing budget baseline). Treasury compiled a list of stakeholders (seeking both the ‘usual voices’ and ‘new voices’), which was finalised in discussion with the contractor. 35 qualitative in-depth interviews were conducted: Media (5), industry reps (4), analysts (3), financial orgs (3), academics (3), international organisations (2), indigenous groups (4), social and community service groups (6), and professional network groups (4). The contractor prepared the interview questions which were finalised in discussion with Treasury. Interviews were up to one hour, took place over two months, half were conducted face-to-ace and  half by phone. The contractor’s report contained recommendations, was discussed by Treasury’s senior management group, and reported to the Minister.  Changes were introduced in the 2018 Budget documents partly as a result of the consultation: new “Economic and Fiscal Update Basics” and ‘Budget at a Glance’, more data in open data formats, and more historical data.
  4. Social Investment Panel: convened by Treasury in recent years to assess selected line ministry budget proposals. It met in two stages: to determine which proposals should be further developed for the next budget; and 4 months later, to prioritize proposals for inclusion in the budget. The Panel included NGOs, academics, a Maori representative, other external organisations, and senior officials from Treasury and selected agencies. Panel members were selected by an informal process based on what perspectives were needed, not what organizations should be represented. There were rules to manage conflicts of interest. A report was submitted to Treasury senior management and relevant ministers (posted on Treasury website) with the Panel’s assessments of proposed policy initiatives. It is considered that the Panel helped the Minister of Finance deal with spending ministers. However, the Panel has not met since early 2018 following a change of government (2017 Open Budget Survey of NZ, Q. 125).
  5. Earthquake Commission review: EQC is a government entity that provides homeowners with disaster insurance. Following a major 2011 earthquake the government announced a review in 2012 of EQC’s insurance claims management and insurance coverage issues. The consultation process was led by the Treasury: initial informal ‘soft consultation’, listening, to identify and understand the issues; used the general Community Advisory Group set up for all post-earthquake issues; needed careful stakeholder management with multiple points of engagement with different interests. Officials talked in detail to insurance companies and the Insurance Coucil, enabling them to develop initial ideas in confidence. There were potential Competition Policy (anti-trust) constraints on individuals’ comments at group discussions amongst competing insurance companies. Treasury maintained a high degree of openness, giving formal feedback to all participants at group meetings to avoid mixed messages. The consultation document was not published until 2015, containing 22 specific proposals, 62 submissions were received. Due to a long delay in government decisions, submissions were withheld under the Official Information Act (issue still under active consideration), and not released until 2017. Initial legislation was prepared in 2018, public submissions were heard by Parliamentary Select Committee, and the Bill passed into law in February 2019. Other elements of the review are on-going.
  6. Long term Fiscal Statement 2016: the Public Finance Act requires the Treasury to report to Parliament every 4 years on the long term fiscal position. Treasury’s public engagement process for the 2016 Statement included a national representative survey of over 1,00 people e.g. on trade-offs between a range of things that people value, such as OECD Better Life Index dimensions. The Treasury also facilitated a series of small workshops and discussions with people from various cultures, occupations, ages, and regions.
  7. Treasury outreach to schools and universities: The Treasury regularly sets challenges and competitions aimed at secondary schools and at universities.

General observations

  • The topics on which public engagement took place are much broader than how government spending is allocated. Consultations spanned macro-fiscal policy, tax policy, the design of fiscal institutions, current expenditures, public investment, and government-provided insurance.
  • With one exception, these engagements took place outside the annual budget cycle and are therefore not measured by the Open Budget Survey.
  • Where the Treasury itself initiated public consultation, it did so to increase its understanding of policy problems and to improve the quality of its policy advice to government.
  • The public engagements utilised a wide variety of engagement mechanisms:
    • one-off exercises, time-limited working groups, and regular annual mechanisms (e.g. the Social Investment Panel)
    • single stage consultation (at times preceded by informal ‘soft consultation’/listening) and multiple rounds of consultation
    • expert-based consultations and consultations with the general public
    • calls for submissions, public surveys, and in-depth focus group discussions
    • formal government consultation as well as operational decisions by the Treasury to consult.
  • Some public consultation was done with very short time frames reflecting political imperatives, but in one case consultation in a policy area has run for seven years and is not yet completed due again to political circumstances.
  • The Treasury engages the public in the context of well-established non-government actors and patterns of interaction with civil society.
  • Most of the work in researching and drafting public consultation documents, engaging with stakeholders, and assessing public submissions and advising ministers was performed by Treasury staff, within Treasury’s existing budget baseline, with limited contracting out of specific functions.
  • The Treasury conducted these exercises on the basis of limited centralised guidelines for its staff (although there are protocols to manage confidentiality and privacy issues and potential conflicts of interest). There is a reliance on experienced staff that understand how government operates together with a strong culture of informal cross-Treasury discussion and sharing of experience.
  • There are systematic delays (sometimes long) in publishing submissions and summaries of submissions; the general practice is not to publish submissions until government has made its decisions, which reduces the impact of submissions and the openness of the process.
  • Specific efforts have been used to engage Maori (indigenous people) illustrating the GIFT principle of inclusive engagement (Box 1), and Treasury has institutionalised capacity to provide policy advice on and to engage with Maori through creation of the position of Principle Advisor Maori.