16 May 2012

Welfare Reform

Some questions arise from the government's announcement of a Board, chaired by Paula Rebstock, to advise on and oversee the implementation of the forthcoming welfare reforms.
First, the board's roles and position appear to create a recipe for conflict. The board consists of six very fine, experienced people from outside of the public service. But they have the dual roles of advising the chief executive of MSD on the implementation of the reforms, and reporting to the Ministers of Social Development, Finance and State Sector on the performance of WINZ (the largest unit of MSD). This arrangement is quite extraordinary and outside of the normal reporting and accountability systems in the public sector. The opportunities here for misunderstandings to arise between the board, the management of MSD and the State Sector Commission are obvious. What advice have the responsible Ministers received about clarity of roles and accountability under this unusual structure?
Secondly, the plan for the reforms includes the actuarial valuation of the system of welfare benefits. But Ms Bennett's press statement tells us that “The lifetime cost of today’s total number of beneficiaries is estimated at $45 billion." That is, a valuation appears already to have been performed. Can we have more information about who did this valuation and what methods and assumptions they used? Can we see their report?
Thirdly, what is actuarial valuation to be used for? My guess is that such a valuation will make it possible for government to negotiate with private-sector insurers and health-care providers to "invest in" specific cohorts of beneficiaries. That is, the government could contract out their case-management for a negotiated fee, and the actuarial valuation will assist the agencies in calculating the risk.
Fourth, if there is now an official valuation in print of the NZ government's contingent liability in its welfare scheme, what effect does it have on NZ Inc's credit-rating? Would an off-shore lender now be wanting to deduct that $45 billion liability from the government's balance sheet so as to fully appreciate the risk that it faces?


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