Welfare providers must take a leaf out of Amazon’s book

We can no longer deny that government systems have reached their limits. New Zealand’s former PM says and the answer to fixing our broken welfare state is right under our nose.

A man sits at the front of the Leichhardt Centrelink queue in Sydney. Picture: Rohan Kelly

Bill English has been banging on about the deficiencies of the welfare state and its role in the “pathology of deprivation” for years but his moment might just have come.

The former New Zealand prime minister does not necessarily want cuts in welfare spending – in fact he says sometimes more money will have to be spent – but he wants governments to start using data and technology to pinpoint where funds can be directed to achieve results.

After 40 years of “persistent failure” in welfare in the West, he says, we need a fresh angle and “the freshest is the mixture of actuarial models, data tools, customer segmentation – really boring down, really getting to understand the risk factors down to quite small components of your community”.

The former National Party MP is not holding his breath about the bureaucracy changing tack. But he believes charities and impact investors can show the public sector a way forward by adopting the kind of measurement tools regularly used by digital businesses such as Amazon.

“It’s not complicated, really, it’s a matter of will,” says English, who has just joined the board of Australia’s richest philanthropic foundation, the $4bn Paul Ramsay Foundation.

“The effort involved in landing the right coloured T-shirt for a 16-year old boy in a Kmart in (a New Zealand town) is way more sophisticated and focused than servicing broken families with housing needs.

“If Amazon can customise for hundreds of millions of people, then surely we can do it for a few hundred,” he says.

And that’s the point. If you drill down into the data, you will often identify a relatively small number – hundreds or thousands – who need intense, targeted effort, according to English.

He says the public sector has “done what it does well, which is the monopoly supply of commodity services (which are effective) for 80 to 85 per cent of the population”.

Bill English, former NZ Prime Minister.

The problem is that the other 15 per cent use about half of all public services – and that 15 per cent have complex lives that are very different from each other.

“They don’t fit easily into categories,” English says. “The welfare state was never designed to accommodate that kind of complexity and we should stop pouring money in the top of it, hoping that it will get, in an effective way, down to the people who most need it.

“What’s exciting is that the tools for measuring are improving quickly and becoming affordable for a lot of charitable organisations … you can now access evidence around the world relatively cheaply. And that can be quite powerful in shaping decisions.”

English has had extensive hands on experience as a New Zealand health minister and finance minister as well as prime minister. Since he left politics in 2018, he has invested in social businesses and is involved directly in the data sector. He chairs ImpactLab, which is run by his daughter Maria English and which offers measurement tools to funders, who can see how their money is helping, and providers, to help them decide where to spend.

The Ramsay foundation is chaired by Michael Traill who has spent more than 20 years involved in social enterprises and “profit-with-purpose” business. Traill says the foundation believes that to achieve the scale of social change needed, it must work in partnership with government, using evidence-based approaches. The foundation’s chief executive, Glyn Davis, has said the foundation’s aim is to “break the cycles of disadvantage” and develop a permanent institution to bring significant change to the sector.

Measurement is a fit, although English warns “it’s a mistake to think you can measure everything, or that measuring is the only thing that matters”.

But technology does allow you to identify need very clearly – for example, to know the probability that a 14-year-old ­migrant girl will graduate from high school and thus make decisions about investment.

English says a universal welfare system is not designed to drill down to this level. “You can’t expect it to, because it can’t deliver tailored solutions. (And) you have to remember bureaucracies … grow by making the problem look bigger. They’re feeding off the ­misery and they’re not strongly incentivised to actually solve a problem,” he says.

That’s not the case for foundations and funds promoting impact investment and social enterprises; they must show results if they want to continue to attract money, he says.

And the world is changing rapidly: historically you had to be an expert to deal with statistics but the “tools of knowledge are now democratised – anyone can know almost anything anywhere now for nothing”.

Antigone Yammoulidis waits in the queue outside Centrelink in Prahran, Melbourne. Picture: David Geraghty / The Australian.

The pressure for more accountability is also growing because the assumed support given by churches has significantly declined and other charities are more visible. Donors and funders are more interested than they used to be in outcomes.

“Part of it is coming from the investment community where the whole push for ESG frameworks and … impact investing … is creating an environment where everyone wants to know,” English says.

“I think another reason it matters is because the government systems have reached their limits. And to deny that is to deny overwhelming evidence.”

Since the 1980s, many governments in the West have tried to tackle problems with the welfare state by slashing national budgets, but English says: “In my experience, the best way to achieve fiscal control is to actually solve the problems of the people who are driving the spend. Bureaucracies are very reluctant to admit that what they’re doing is not working … but we shouldn’t pretend when we know we’re failing.”

Sometimes much more money is needed, he says, but it has to be applied in ways that work, dealing with one problem at a time.

“If you quantify these problems, you often find they’re not as large as people think,” he says. “The mindset … is that there’s these overwhelming demands, but if you meet the customers, you’ll find people who know what the ­solution is, and it’s simple.

“They might just need to have their depression diagnosed and get on antidepressants.

“There might be a family that is suffering long-term from an uncontained violence, and someone will already know that family, and they will already know what needs to be done.”

He cites a New Zealand example involving young single mothers.

When analysed, it turned out the issue was centred on two or three high schools and support could be delivered in a very targeted way.

“The first thing for governments to do is admit what they’re not good at,” says English. “And what they’re not good at is complexity – that is, people who need multiple services, and don’t fit the boxes. So those people are all getting little doses of commodity services that usually wear them out rather than have any impact.”

He points to a “trained hopelessness” in the welfare sector and argues that identity politics is making it worse, “because it’s saying that who you are determines what you will be; and, of course, that’s the kind of thing a lazy universal system would say”.

For the people on the receiving end of that bureaucracy, it’s tough: “People on middle-class incomes … have no idea what it’s like to be enmeshed in 10 different systems (of payments) … these people are worn out … and we give them bad service.”

What about the bigger philosophical argument that promoting private investment and philanthropy is just a way to cut government spending and avoid responsibility.

English doesn’t pull his punches: “I think we should have that discussion on the lawn outside the house where the child is getting beaten up, and while the kid’s screaming, we will have that philosophical contest. And when someone wins it, then they’re allowed to go in and deal with the child.”