Green MP Ken Graham’s Public Finance (Sustainable Development Indicators) Amendment Bill, newly introduced to the members’ ballot, would revolutionise the annual government budget
Businesses report on their ‘triple bottom line’ — profit, people, planet. But New Zealand governments don’t, in their annual budget.
Dr Kennedy Graham’s Public Finance (Sustainable Development Indicators) Amendment Bill would change that. Newly introduced to the members’ ballot, the Bill requires the Finance Minister to have annual regard to, and provide information about, sustainable development measures and principles. It brings ecological economics to the heart of the budget process — and where the money goes, policy follows.
GDP is our shorthand for economic growth, ergo, wellbeing. The assumptions are wrong: GDP was never meant to be used as that proxy. The alternative concept, of ecological economics, is no longer all that alternative, accepted all over the world at the highest levels. Some work has been done in New Zealand, some of it very comprehensive, but ad hoc.
Earlier, I quoted Kennedy Graham, who responded to the PCE’s call for regular ‘state of the environment’ reports as follows:
“the Green Party strongly supports that recommendation from the Parliamentary Commissioner of the Environment. I personally shall be exploring, I hope, in dialogue with the Government, ways in which the idea of sustainability indicators can be produced and integrated into Government legislation”.
I hinted that, rather than an Environment Reporting Act, we might see something more ambitious, giving true effect to ecological economics in New Zealand:
“The Budget is coming up — which in terms of the OECD recommendation above for better economic and environmental integration, is the annual highlight of economic decision-making, from which all else follows. Instead of considering solely fiscal measures, as the Public Finance Act requires at Budget time, maybe we might one day see another Act, requiring equal Budget priority to be given to environmental measures as well.”
What I could not say, in May, was that Graham was stalking bigger game: he had his own quite revolutionary idea, now given effect in this Bill.
The Public Finance Act has certain reporting requirements. Under section 26P of the Act, economic and fiscal update forecasts, delivered with the budget, must include New Zealand’s GDP, consumer prices, unemployment and employment, and the current account balance of payments. There are other requrements, for a fiscal strategy report (section 26I), and a budget policy statement (section 26M).
Governments’ focus on fiscal and economic concepts is, therefore, entirely regular, in terms of the Act. But we see only half of the picture. This Bill would introduce and integrate a new kind of reporting obligation, to sit alongside the existing ones.
The Bill amends the Public Finance Act, which, in itself, is a kind of heresy. It brings to this dry fiscal tool some audacious hemp and sandal-type concepts, like “ecological footprint”, and “human development index”.
Under the new part 2A, there will be a set of sustainable development indicators, annually prepared jointly by the Ministry for the Environment and Statistics New Zealand. There will also be a set of principles of sustainable development. Both the indicators and the principles are set out in the Bill, to be inserted in schedules to the Act.
When the Minister of Finance presents all of the other budget material, he or she shall also present information about sustainable development. To satisfy that requirement, for each of the fiscal documents required under the Public Finance Act, the Minister must explain how, in developing each document, the government has taken into account the sustainable development indicators (our annual performance, on population measures, biodiversity, air and atmosphere, water, land use, energy use, waste) and the more aspirational principles.
He or she must also present New Zealand’s ecological footprint, and human development index (both defined, and expertly calculated).
The Public Finance Act is, very largely, about fiscal policy, and fiscal strategy. These new provisions are about something quite different. The argument, though, is this: sustainable development information is no less important and relevant to budget planning and decisions (or, in terms of the Act, the “use of public financial resources”) than fiscal and economic information. Not to take them into account is (again, in terms of the Act) irresponsible fiscal management.
I called this “revolutionary”, and indeed it is, but it is also politically modest, in this sense: this is better democracy, not a Green coup. This is about the power of information.
In explaining how the government has “taken into account” sustainable development, it remains open to the Minister of Finance to say: well, we had a good look at the indicators, and a bit of a think about those nice principles of yours, but we didn’t agree.
The difference is that we will all be able to scrutinise it.
Nor is it inconsistent with Environment Minister Nick Smith’s plans. National’s 2008 election policy, since backed by the Parliamentary Commissioner for the Environment (PCE), was for an Environment Reporting Act, requiring five-yearly reporting by the PCE on the state of the environment.
This Bill goes further. It embeds key elements of a state of the environment report at the heart of the budget process.
Mr Smith might say: this government completely agrees in principle, but an Environment Reporting Act is the different method we propose, to implement it in practice. Or he might say: a parallel five-yearly process is more robust, because it can be more comprehensive, and more independent. Or: as the PCE said, state of the environment reporting is presently so flawed, elevating it in the way proposed is both inappropriate and meaningless.
He and his colleagues probably will say any and all of these things.
In fact, this Bill of Kennedy Graham’s would be the ultimate expression of ‘bluegreen’ policymaking: a true ‘bluegreen’ marriage, of fiscal prudence and sustainability.
Graham had done a great deal of work on the Bill when I first spoke to him, in February. He’s done a lot more since.
He sought all manner of expert advice, at high levels, inside and outside government. He took economic advice from Massey’s Centre for Ecological Economics and ANEW NZ. He was briefed by the PCE and Statistics New Zealand. He has the support of leading figures in this field: Bryan Gould, Marilyn Waring, Jeanette Fitzsimons. Backed by a big body of literature, the Bill also builds on our own domestic framework, Statistics New Zealand’s report Measuring New Zealand’s Progress using a Sustainable Development Approach 2008, published under this government.
Contrast that diligence and thought and care with the level of thought and care on display in the House on any member’s day, as one government patsy speaker after another kicks opposition Bills for touch.