Academic journal article New Zealand Sociology

Using the Living Standards Framework: Update and Policy Examples

Academic journal article New Zealand Sociology

Using the Living Standards Framework: Update and Policy Examples

Article excerpt

1. Introduction

In May 2011 Treasury released a working paper outlining what it meant with its vision statement, that it sought to be "a world class Treasury working for higher living standards for New Zealanders"1. By "living standards" we mean much more than just income. We mean people have the great opportunities, capabilities and incentives to live a life they value, and that they face fewer obstacles in achieving their goals. When releasing the paper, the then Secretary to the Treasury, John Whitehead, indicated that this was not a new innovation but rather it reflected the thinking that had underpinned Treasury's advice for at least the previous decade. In June 2012 Treasury presented the next step in the Treasury's Living Standards work. We presented the case for, and details of, the Living Standards Framework (LSF) -a practical guide for thinking about good economic, environmental and social policy in an integrated way.2

The purpose of this article is to provide an update on where Treasury has got to since the introduction of the LSF and show examples of how we have used it to guide our thinking and policy advice. The article proceeds as follows: Section 2 reflects on the purpose of public policy; Section 3 discusses the purpose of the LSF; Section 4 provides a brief overview of the LSF; Section 5 illustrates the many different ways the LSF has been used in policy; Section 6 discusses some key lessons from using the LSF; Section 7 focuses on what we are currently doing to develop the LSF; and finally Section 8 explains where you can go for more information about the LSF.

2. Purpose of Public Policy

Treasury like many other government departments in New Zealand, and indeed the world, is a 'policy shop'. It is a 'policy shop' that provide advice to Ministers aimed at improving the lives of people, through means that are amendable to policy. So what is the purpose of public policy? The ultimate purpose of public policy is to improve people's lives, now and into the future. We do not know how each and every individual wishes to live his/her life, nor do we wish to pass judgement on how they should be living their lives. There are an infinite number of possible lives, shaped by personal circumstances, including capabilities, opportunities and preferences, as well as possible cultures, religions, political arrangements, geographical surroundings and so on.

Given this objective and this constraint, and based on previous works summarised in Sen (2009), Stiglitz, Sen and Fitoussi (2009), O.Donnell, et al (2014), Braunerhjelm and Henrekson (2015), Feldman et al (2014) and McCloskey (2014), the LSF specifies the purpose of public policy as enhancing the capabilities and opportunities of individuals to pursue the lives they have reason to value (i.e. to increase their wellbeing). At the same time, we need to help remove the obstacles they face in this pursuit and in doing so, making sure that we do not blunt the incentives of individuals to do the best they can for themselves [Gleisner et al (2012)].3

Good policy focuses on ensuring that the wellbeing-generating capacity of capital assets (human, social, natural and economic capital) is sustained or enhanced, and shared, which is to say: not eroded by current generations at the expense of future generations (sustainability); is shared in a manner consistent with sustaining or enhancing the capital base (equity); that no particular social group(s) impose their concepts of wellbeing on others, respecting others' rights to live the kinds of lives they have reason to value (social cohesion); that comprehensive wealth is protected against major systemic risks (resilience); and that the material wellbeing generating potential of capital assets is enhanced (to underpin the economy's capacity to sustain higher growth).

3. Purpose of the Living Standards Framework

From Treasury's perspective, the challenge is not how to embed the wider concept of living standards into our advice (since that has been happening for many years) but rather to do so more systematically, visibly and at a higher level - putting people at the centre of all our thinking and policy advice. …

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