IMHO: How green is your Budget?

In a typically New Zealand understated manner, the low-key 2 March launch of former Treasury and IMF staffer Murray Petrie’s Environmental Governance and Greening of Fiscal Policy puts New Zealand at the fore of global environmental thought leadership and good public management.

With big business climate-related disclosure on the way from 2023, Petrie sets out how governments worldwide can hold themselves accountable through improved environmental reporting, target setting, budgeting and fiscal reporting. Government is big business too, and at one-third of the economy in New Zealand’s case, has a critical role in setting the price of carbon across the whole economy. Following the money isn’t new, nor is using budget and tax policy to deliver on promises. What is new is getting the overarching environmental governance right.

As Petrie points out, there is a major two way interaction between fiscal policy and the environment both positive and negative. Fiscal policy is a powerful tool for making the government accountable for environmental stewardship, with Parliament and civil society holding the Executive accountable through transparent budget processes, stronger budget proposals, goal setting and open public reporting similar to the disclosures requirements on big business. It is walking the leadership talk as the private sector is limited in what it can achieve in terms of economic transformation on its own.

Taking well-being and environmental governance seriously will require capability building in the Executive and a Parliament that is better equipped to ask the right questions in holding the Executive to account.

The Parliamentary Commissioner for the Environment (PCE) highlighted before Christmas the quality of environmental considerations in new spending proposals with a largely under the radar report in which he exposed substandard budget bids from key agencies with a direct impact on environmental outcomes. Despite the well-being budget label nothing much changed in proposals. There are only a handful of special parliamentary officers, which makes the PCE extra special. As an Officer of Parliament, the PCE is there to support parliamentarians to do their job in select committees, in the House and in dealing with the public. That office warrants strengthening in the current climate (pun intended).

A triumph for the Treasury in the 1990s was the spread of economic literacy across public service departments. Some government policies support environmental well-being, and others can work against it. Departmental capability to understand and analyse total costs and total benefits has since waned at a time when we need it more than ever. Some of this can be put down to MMP and governments coming into office with negotiated agreements, but good budget analysis only strengthens the implementation of a government’s agenda.

The Treasury equally deserves support to lead a re-invigoration of public sector capability to analyse and prepare budget bids. Assuring the quality of public spending and good goal alignment is the domain of every department, not just the Treasury. Transport, energy, agriculture, health and education policy can have positive or negative environmental impacts that should be brought into sharp relief if decision-makers are to make fully informed choices. Putting the green impacts at the centre of budgeting forces consideration of what a green dollar is really worth.

As Petrie also discusses, there is an important role too for civil society to hold governments to account, with a watchful eye on greenwashing. This means assessing just how green a budget really is. Does the narrative match the ledger? A congruence test for measuring internal consistency is good governance – private or public sector. 

About the author

Todd Krieble is Deputy Chief Executive at NZIER, a former senior manager at the Ministry for the Environment, former co-chair of two Intergovernmental Panel on Climate Change Task Groups and a chartered member of the Institute of Directors.

The views expressed in this article do not reflect the position of the IoD unless explicitly stated.

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