Social Investment: What you need to know

News of the Police Commissioner moving to head up the Social Investment Agency has put a spotlight on Finance Minister Nicola Willis' passion project - but what is it and what does it do?

The government set out initial funding for the Agency in this year's Budget, but details of exactly how it will do its job and the size of the fund it's set to manage remain unclear.

Here's what we know so far.

The social investment approach

The broad approach for social investment is to use data, analytics and evidence to figure out the best way of intervening early in the lives of the most vulnerable in society, and working with the providers of social services to get the best result for those people, and reduce the burden on the taxpayer.

Willis told RNZ it was a common-sense approach.

"I think most Kiwis understand that prevention is better than cure, and we all have a desire to see more fences built at the top of the cliff, rather than the taxpayer being the ambulance at the bottom of the cliff," she said.

"Often the people best able to make a positive change in the lives of someone who is vulnerable or has complex needs is not the government itself, but often someone a bit closer to the community - be that an iwi provider, a social service provider, a charitable organisation - and so one of the roles Social Investment Agency is to ensure that the government works better with those organisations."

This includes a focus on new approaches and innovation, including co-investment and collation of contracts with non-government organisations (NGOs).

"We've talked to some NGOs who have upwards of 40 contracts with government simply to deliver it for people in need," Willis said. "If we can bundle those contracts together and have a much clearer focus on outcomes rather than outputs and process that's better for social service providers, it's better for the people they serve, and ultimately it's better for the government so we can have real clarity about impacts for people, rather than just paperwork."

She said her roles in Finance and Social Investment were complementary.

"To my mind, there's no point in being careful with the dollars if you don't also have a heart for the people that ultimately the government is here to serve," she said. "And equally, there's no point in having a great heart great intention, unless we're hard-headed about actually delivering better results.

"If we can intervene earlier in one child's life to get them onto a positive path of growth and development rather than a downhill path, then that's a difference worth making."

Reviving a legacy

Social investment as an idea was championed by Former National Party Prime Minister Bill English, who explained it in a 2015 guest lecture for Treasury, where he had previously started working as a graduate in 1987. He highlighted reoffending rates, prison numbers, NCEA achievement rates, and the 6 percent of children who were spending their entire childhood in benefit-dependent homes.

It was these children he wanted to target with early interventions, to reduce their dependence on the state and therefore the cost to taxpayers. This was not because they were lazy, he said, just that these families had different and complex lives - and needed a "more bespoke approach".

"Data shows that these children are at very high risk of not achieving at school, become dependent on a benefit themselves and spend time in prison. In fact, there is a group of 1 percent of five-year-olds - that's about 600 children each year - for whom we can expect that three quarters will not achieve NCEA level 2 or equivalent, four in 10 will have been on a benefit for more than two years before they are 21, and a quarter will have been in prison by the time they are 35.

"Each of these children will cost taxpayers an average of $320,000 by the time they are 35, and some will cost more than a million dollars. And we know this at age five."

Willis as a graduate famously worked for English after he lost the 2002 election. He was in the crowd when she gave her own speech on social investment at Victoria University in Wellington.

She too pointed to crime, social supports, and education - but with the hot-button framing of the time: ram raids, gang membership, emergency housing, and truancy.

"Very few people think a strong economy alone can solve these issues, and increasingly few think simply spending more will solve them either," she said.

She pointed to the Healthy Homes programme leading to fewer ED visits, higher attendance, and less spent on benefits. This exposed the shortcomings of the public sector's default approach, she said, where multiple agencies would engage with "different symptoms of a family's dysfunction".

Willis' approach has a few different parts to it, including:

• Powering up the agency originally established by English
• Creating a fund to be managed by it
• Establishing an independent Ministerial Advisory Committee to provide advice to the minister, the agency, and other agencies involved in the provision of social services
• Setting up a group of ministers to work on powering up the social investment approach across the entire system

No regulatory impact statement was produced, with the Cabinet paper stating it was not required "as the proposal concerns the internal arrangements of central government and has no or only minor impacts on businesses, individuals and not-for-profit entities".

An old agency made new

English had set up the Social Investment Agency in 2017, but this was later renamed the Social Wellbeing Agency by the Labour-led government in 2020.

Along with returning to its previous name, the coalition has powered it up - shifting it from being part of the Public Service Commission to a central agency. Central agencies are focused on the wider system of government agencies, and can advise ministers on the direction of the whole system. This change took effect on 1 July and included the transfer of all previous functions and staff.

In her Cabinet paper, Willis said social investment would help the government meet its nine public service targets. It aligns closely with the rhetoric from Prime Minister Christopher Luxon: "Social investment is not just about new spending. It is also about what we are already spending and getting better outcomes from that expenditure."

The Agency's website lists four new functions, which match those in the Cabinet paper:

• Setting standards for social investment practice to ensure consistency across government agencies and contracted providers
• Advising on and facilitating the creation of data and evidence infrastructure for social investment
• Working with other agencies to apply the social investment approach
• Leading an ongoing review of social sector spending to measure outcomes

These are in addition to its previous functions:

• Providing advice across the social system and supporting the sector with cross-system work
• Insights, tools, and practices that improve cross-social system decision making for improving wellbeing

After Willis announced her plan to reinstate the Social Investment Agency ahead of the Budget this year, Victoria University professor and economist Arthur Grimes said New Zealand was a world leader in data collection for this sort of analysis.

He suspected the agency would dig deeper into the data, and produce its own, but noted some of the analytical teams that had previously produced the data were among those being disestablished by the coalition.

He also said English's approach had "looked at it in terms of reducing government fiscal outlays in the future, as opposed to what's beneficial for society as a whole, so it had a much narrower focus, it was looking at how you save money for the government in the future".

The agency reports to the Social Invesment Minister - in this case, Willis.

However, it goes wider than just the agency. Willis told RNZ the agency was working closely with the Ministry of Housing and Urban Development on improving delivery for people who had previously been in emergency housing, and was working with Health NZ on supports for neurodiversity and mental health.

Willis also proposed setting up a group of ministers, including for: Regulation, Housing, Health, Education, Justice, Social Development and Employment, Corrections, Police, Whānau Ora, Mental Health, Children, Prevention of Family and Sexual Violence, and Statistics.

The Cabinet paper said these ministers would all be asked to report back to Cabinet by 1 September with a work programme for "how social agencies will implement social investment".

Show me the money

Part of the agency's job is to manage a fund, for commissioning services for vulnerable New Zealanders.

Willis has said the fund will start investing from next year, with an "initially modest" amount to be scaled up over time, but she confirmed to RNZ the Cabinet had not yet decided on that initial amount.

The Cabinet paper says it will operate differently from traditional government spending, and will "operate more closely to a traditional investment fund".

"I would expect it to have a portfolio of investments ranging from innovative, more experimental investments to more conservative investments - ensuring we are delivering results for New Zealanders. The Fund will be used to test new ways of working and its lessons can be adopted further through the social sector. It will play a key role in supporting the Social Investment Agency to test the standards it proposes."

Some $49m operating and $1.5m capital funding was set aside in this year's Budget for setting up the Agency and the fund, but Willis said this had not yet been drawn upon and was not what would be used for the Fund.

"The money in the budget was to set up and establish a fund, which of course, involves design work and some expertise to do that, and there will be future decisions made about the amount of funding in that fund available for social sector delivery."

In the meantime, the agency was using the baseline funding previously provided to it in its former guise as the Social Wellbeing Agency. Savings from the agency of about $2m over four years were also set out in the budget, through operating efficiencies.

In her speech to Victoria University, Willis said the fund would be targeted towards "social impact bonds, social outcome contracts and other innovative ways of investing".

"Social bonds are an investment tool where private organisations, including investors, partner to fund and deliver services to improve social outcomes," she said.

"The positive or negative return for investors depends on the extent the agreed results are achieved...

"I know some will question this mixing of the public and private domains. I'm not interested in that rigidity. I want results. If private capital can be better deployed to help change the lives of more New Zealanders then I will not be afraid to use it. We must not allow ideology to get in the way of what works."

Getting on Board

Willis' Cabinet paper also proposed shutting down the previous Social Wellbeing Board which had been made up of chief executives across several social sector departments and agencies.

This would be replaced with a new Social Investment Board, a Ministerial Advisory Committee reporting to Willis which would need only Cabinet's approval to be set up.

Terms of reference for the Board have been published by the Ministry of Business, Innovation and Employment, and show it will include six to eight members, who collectively must have skills including:

• An understanding of social investment, public finance, and/or commissioning models
• An understanding of how to contract for social outcomes
• Connection and experience with vulnerable communities
• Strong understanding of social sciences (economics, sociology, psychology, behavioural science)
• Commitment to use of data and evidence
• Understanding of Te Tiriti o Waitangi and knowledge of mātauranga Māori

Members are to be paid in line with the Cabinet Fees Framework: between $319 and $616 a day, with the Chair paid between $429 and $974 a day.

The board is not responsible for developing policy or implementing initiatives, and has no power to direct agencies. Instead it can offer feedback to the agency and other agencies on draft proposals or anything else the agency is seeking feedback on. It would also offer advice to ministers - particularly the Social Investment Minister - and would be able to meet with the ministers group or engage with other agencies.

The board's operations will be reviewed by July 2026, after which it will either be reappointed or disestablished.

Where it counts

In its previous iterations, the Social Investment Agency has built up a range of data and analytics tools, making use of Stats NZ's Integrated Data Infrastructure (IDI), a large anonymised database with "microdata about people and households", sourced from a range of surveys, government agencies and NGOs.

For example, Willis' Cabinet paper pointed to analysis by the Social Wellbeing Agency. It showed young people with the most risk factors linked to youth crime were highly likely to be supported by a main benefit (92%) and living with an adult sentenced for a "relatively serious criminal offence" (83%). They were also fairly likely (51%) to have lived with an adult who had received support for mental health or addiction, and to have lived with a family where the income amounted to less than $20,000 a year per family member (38%).

However, the government is aware of the risks of data use. The Cabinet paper sets out Willis' concern the social investment approach retain a social licence - the support of the public - and this would mean emphasising the "rules, ethics and transparency around the use of administrative data".

"At the same time we need to balance that with ensuring that the vast amounts of data the government holds is able to used."

The new boss, same as the police boss

Andrew Coster's slightly early resignation as Police Commissioner was announced last week because he had accepted a role heading the Social Investment Agency as its Secretary. Note that this is a different position from the Chair of the Social Investment Board.

He had been due to step down in April at the end of his five-year term but now he's finishing at police in early November and taking up his new role on the 11th.

Coster told RNZ's Midday Report the move was a "marvellous opportunity to make a difference in our community right at the front end of the value chain, and so a great opportunity for me to carry on serving the public".

He had not always got on so well with National MPs and Ministers, or with other parties in the coalition - having been criticised for the approach he was taking under Labour towards gangs and the policing of the nation during the Covid-19 lockdowns.

Former National leader Simon Bridges had called Coster a "wokester", ACT leader David Seymour called him "Commissioner Gaslight".

When in opposition, the current Police Minister Mark Mitchell had called Coster's policing-by-consent approach as akin to having cups of tea with gang members. He initially delayed expressing confidence in Coster and released a letter of expectations for him.

The government has since changed largely changed its tune, with Luxon saying Coster had "delivered bigtime" and done an "exceptionally good job".

Perhaps in this case - leading an agency focused on supporting those identified as possible future criminals - a wokester is just what's needed.