Volume 9 – Issue 4 – November 2013 SPECIAL ISSUE Affording Our Future Statement of New Zealand’s Long-term Fiscal Position The Role and Importance of Fiscal Challenges and Changing Patterns of Need Long-Term Fiscal Planning for Health and Long-Term Care in New Zealand Jonathan Boston and Rebecca Prebble 3 Nicholas Mays, John Marney and Erin King 35 Fiscal and Other Risks over Window of Opportunity to Deliver Better the Long Term Justice Sector Outcomes over the Long Term Simon Upton 9 Paul Sherrell 47 The Political Economy of Long-Term Fiscal Engaging Youth on New Zealand’s Planning from a Social Democratic Long-Term Fiscal Position Perspective Susie Krieble and Finn O’Dwyer-Cunliffe 53 Michael Cullen 15 Long-Term Challenges and Opportunities Making Big Decisions for the Future in the Natural Resource Sector Colin James 21 Miriam Chaum 57 The Future Costs of Retirement The New Zealand Transport Agency’s Income Policy and Ways of Transport Appraisal Framework Addressing Them Ernest Albuquerque 66 Nicola Kirkup 29 A Brief Reply to Ernest Albuquerque Michael Pickford 71 Editorial Note This issue of Policy Quarterly explores the Treasury’s transparently representative citizen’s assembly might recently released report, Affording Our Future: be the most promising option. Statement on New Zealand’s Long-Term Fiscal Nicola Kirkup, in her contribution, addresses the Volume 9 – Issue 4 – November 2013 Position, and some of the major policy issues raised long-term fiscal challenge posed by the design of New by this significant document. To set the scene, the Zealand superannuation (which provides a universal, Policy Quarterly (PQ) is targeted at readers first article (which we have co-authored) examines the taxable pension to all those aged 65 years and over). in the public sector, including politicians and nature of long-term fiscal planning, why it is important With the proportion of the population over 65 steadily their staff, public servants and a wide variety of and why making it a legal requirement is desirable. increasing, the fiscal cost of the current scheme will professions, together with others interested in We also explore some of the common objections to, or inevitably increase, rising from around 4% to almost public issues. Its length and style are intended concerns about, long-term fiscal planning. While noting 8% of GDP by mid-century. Accordingly, her paper to make the journal accessible to busy readers. the need for caution when trying to assess the likely explores the various options for reducing these costs The journal welcomes contributions of policy preferences and values of future voters, we and assesses their respective merits. While views about 4,000 words, written on any topic argue that long-term fiscal planning can be very helpful on which approach is ‘best’ are bound to differ, it is relating to governance, public policy and in highlighting the kinds of spending pressures on the critical that the debate is informed by the best available management. Articles submitted will be horizon and how policy makers might best respond. For evidence and clarity over the implications of the reviewed by members of the journal’s Editorial New Zealand, critical issues over the longer-term will different options. Board and/or by selected reviewers, depending include the funding of pensions, health services and Funding public health care has always been a on the topic. Although issues will not usually long-term care. The article concludes by considering challenge, and the future will be no different. In their have single themes, special issues may be the case for extending the requirement for long-term contribution, Nick Mays and his colleagues discuss the published from time to time on specific or fiscal planning to other important policy domains, most nature and scale of the fiscal challenges posed by rising general themes, perhaps to mark significant notably the social and environmental spheres. health expenditures and how these might be addressed. events. In such cases, and on other occasions, Simon Upton, in the next contribution, argues that They advocate a shift in priorities away from acute care contributions may be invited from particular the Treasury’s review of the long-term fiscal outlook towards a greater focus on primary care. people. should be viewed as an exercise in managing a wide Paul Sherrell’s contribution scrutinises the Subscriptions: The journal is available in PDF range of risks under conditions of significant uncertainty. conclusions in Affording Our Future with particular format on the Institute for Government and He focuses specifically on the risks associated with reference to the justice sector (especially prisons). He Policy Studies (IGPS) website: http://igps. demographic change (especially population ageing), notes that while the justice sector has experienced victoria.ac.nz/publications/publications/list/10. global environmental pressures (especially natural a rapid escalation of costs over the past decade or Readers who wish to receive it by email should disasters and climate change), and financial crises. so, some of these cost pressures are now easing. In register as PQ subscribers [email protected]. While maintaining that long-term fiscal reviews should particular, the fall in the crime rate and the number of This service is free. enable ‘a more measured trimming of the fiscal sails people entering the criminal justice pipeline provides For all subscription and membership in advance of acute challenges arising’, he observes the sector with a chance to modernise service delivery enquiries please e-mail [email protected] or that New Zealand’s relative security has contributed models and free up underutilised resources for post to Institute for Government and Policy to long periods of policy stagnation. Accordingly, he redistribution to priority areas. Hopefully, the sector Studies, P.O. Box 600, Wellington. encourages policy makers to act pre-emptively rather can seize this opportunity and thereby reduce New Electronic Access: The IGPS directs than waiting until they have no choice but to respond Zealand’s disturbingly high imprisonment rate. interested individuals to its website: www.igps. due to fiscal pressures – when their options may well The next article provides a youth perspective on victoria.ac.nz where details of the Institute’s be much more limited. New Zealand’s long-term fiscal position by exploring publications and upcoming events can be Sir Michael Cullen’s contribution is significant, not the responses of 27 young people (participants in found. least because he served as finance minister for nine the 2012 LongTermNZ workshop) to the Treasury’s Permission: In the interest of promoting debate years and oversaw the passage of the Public Finance statement. Written by two of these students, it explores and wider dissemination, the IGPS encourages Amendment Act which ushered in the requirement for how the Treasury can better engage young people in use of all or part of the papers appearing in long-term fiscal planning. He analyses some of the main a conversation surrounding the long-term health and PQ, where there is no element of commercial conclusions in Affording Our Future, giving particular viability of the New Zealand economy and outlines some gain. Appropriate acknowledgement of both attention to the greatest opportunities for long-term of the policy conclusions reached by the participants in author and source should be made in all cases. fiscal adjustment, not least the options for raising the LongTermNZ workshop. The IGPS retains copyright. Please direct additional revenue and the possible ways of reforming The penultimate article, by Miriam Chaum, explores requests for permission to reprint articles from New Zealand’s current retirement income provisions. the long-term fiscal challenges and opportunities this publication to [email protected]. His various suggestions with respect to pensions generated by New Zealand’s diverse natural resource Editors: Jonathan Boston and Bill Ryan policy deserve careful scrutiny and debate. Above sector. The paper focuses on three important and Guest Editor: Rebecca Prebble all, he urges policy makers not to leave our children controversial policy issues: the mining of fossil fuels; Editorial Board: Guy Beatson, David Bromell, and grandchildren with harder choices than we are freshwater management; and mitigating climate Valentina Dinica, Don Gray, Gerald Minnee, prepared to make ourselves. This means engaging now change. In each case, there are major challenges for Mike Reid and Andrea Schollmann. in intelligent debate on how to meet future challenges – policy makers. Failure to address these challenges ISSN: 1176 - 8797 (Print) not wait another decade or more. successfully will have profound implications – and not ISSN: 1176 - 4325 (Online) Colin James’ contribution considers how merely of a fiscal nature; at stake is the well-being of Volume 9, Issue 4 – November 2013 adjustments for the future might be made in a countless generations. Copy Editor: Rachel Barrowman representative democracy where politicians are subject Finally, in the interests of stimulating debate on Design & Layout: Aleck Yee to frequent elections and intense short-term pressures. important contemporary policy matters, this issue Cover Photography and Design: In so doing, he examines the likelihood of generating a of Policy Quarterly includes a response by Ernest Aleck Yee/Alltex Design parliamentary consensus on the handling of long-term Albuquerque to an earlier article