Wellbeing Budgets: New Zealand and Beyond

A government’s budget is one of its most important documents. It shows what the government plans to spend and tax, and so what it truly prioritises. A wellbeing budget is an attempt to decide spending based on how policies affect people’s wellbeing, not only on how they affect economic growth. New Zealand’s 2019 budget is the best-known example.

New Zealand’s 2019 Wellbeing Budget

In 2019, New Zealand’s government, with Grant Robertson as finance minister, presented what it called a Wellbeing Budget. It required government departments to show how new spending proposals would improve wellbeing, and it selected five priorities based on evidence about where wellbeing was lowest. These were: improving mental health, reducing child poverty, supporting Māori and Pacific peoples, building a productive and sustainable economy, and helping the country thrive in a digital age.

The approach built on the New Zealand Treasury’s Living Standards Framework, a tool that assesses policies across many aspects of wellbeing, such as health, housing, income, safety, the environment and social connections, and considers four kinds of capital that support wellbeing over time: natural, human, social, and financial and physical capital. In 2020 New Zealand changed its public finance law to require governments to report on wellbeing objectives alongside their budgets.

Other countries

New Zealand is not alone. Wales passed the Well-being of Future Generations Act in 2015, which requires public bodies to consider the long-term effects of their decisions on future generations and appointed a commissioner to hold them to account. In 2018, Scotland, Iceland and New Zealand formed a group called the Wellbeing Economy Governments partnership, later joined by Wales and Finland, to share ideas.

The United Kingdom’s Treasury has added guidance for valuing wellbeing in policy appraisal using a unit called the WELLBY, short for wellbeing-adjusted life year. One WELLBY represents a one-point change in life satisfaction on a 0 to 10 scale for one person for one year. This lets analysts compare policies in terms of the total wellbeing they are expected to produce.

The debate

Supporters argue that wellbeing budgets encourage governments to think beyond short-term growth, to work across departments, and to focus on problems like mental illness and child poverty that growth alone does not solve.

Critics raise reasonable concerns. It is hard to show that a wellbeing label changes actual outcomes rather than just how budgets are described. Wellbeing measures can be vague, which may make it harder to hold governments accountable. In New Zealand, measures such as child poverty showed some improvement while other problems, including housing costs, remained serious, and later governments have placed less emphasis on the wellbeing framing. Supporters and critics alike agree the approach is still young.