Policy conflict: The influence of fiscal targets on reform of New Zealand's natural disaster fund

• Date: 01 May 2020
• Author: Susan Newberry
• Published date: 01 May 2020
• DOI: http://doi.org/10.1111/faam.12232

Received: 31 January 2019 Revised: 29 September 2019 Accepted: 8 November2019

DOI: 10.1111/faam.12232

RESEARCH ARTICLE

Policy conflict: The influence of fiscal targets on

reform of New Zealand’s natural disaster fund

Susan Newberry

Discipline of Accounting, The University of

SydneyBusiness School, Sydney, Australia

Correspondence

SusanNewberry, Discipline of Accounting, The

Universityof Sydney Business School, H69

CodringtonBuilding, The University of Sydney,

NSW2006, Australia.

Email:susan.newberry@sydney.edu.au

Abstract

The new public management combination of macro-level fiscal tar-

gets and micro-level restructuring can prompt enduring policy con-

flict. Via analysis of archival materials using the economies of worth

framework, this case study of reform to New Zealand’s Natural Dis-

aster Fund identifies several reform design features that sustain

policy conflict. Key among these is a governmental entity design

structure that contains within the accounting boundary for whole of

government, a further accounting boundary for determination of fis-

cal measures, and the imposition of antagonistic truces. Placement

of some entities outside the boundary for fiscal measures but inside

the whole of government boundary means fiscal measures may be

improved by withholding or withdrawing funds from those entities.

Antagonistic truces provide a means to continue these practices, at

least temporarily. The findings extend understanding of the known

tensions between individual entity accountability and whole of gov-

ernment accountability.

KEYWORDS

accounting boundaries, antagonistic truce, economies of worth, fis-

cal measures, policy conflict, whole of government

1INTRODUCTION

The new public management (NPM) reforms that swept through many countries from the early 1980s brought a com-

bination of macro- and micro-level changes that precipitated enduring tensions. At the macro-level, the adoption of

fiscal targets to limit government deficits and debt in relation to GDP has a centralising effect and limits other policy

initiatives (Heald & Hodges, 2018). Although controversial, achievementof these fiscal measures carries political rep-

utation effects for a government (McConnell,2018), that are heightened by publicity from international oversight, and

public and media scrutiny (Heald & Hodges, 2018).

At the micro-level, government restructuring decentralised responsibility, corporatised some government activ-

ities and utilised extensive financial reporting practices to monitor each entity’s accountability (Christensen,

Financial Acc & Man. 2020;36:189–206. wileyonlinelibrary.com/journal/faam c

2020 John Wiley & Sons Ltd 189

190 NEWBERRY

Newberry, & Potter, 2019; Mattei, Christensen, & Pilar, 2015; Pallot, 1996). An implicit assumption underpinning

these reforms is that each restructured entity has “settled goals, a supportive political environment, and con-

trol over the resources and capabilities necessary to deliver on the goals”, although the potential for “subter-

ranean connections” between delegated activities to prompt conflict is recognised (Head & Alford, 2015, pp. 719–

120). NPM research has shown that, because each restructured entity is defined and shaped by its organisational

form and boundary, the “interests, pre-occupations and goals” of each entity differs from those of the govern-

ment and other government entities, creating tensions (Carey & Crammond, 2015; Christensen & Lægreid, 2001,

2011, p. 415, 2013, 2015; Pollitt, 2003; Mattei et al., 2015; Pollitt, 2003; Rennison, 2007). A whole of govern-

ment phase of reform prioritised the interests and strategy of the whole government over the separate interests

of the restructured sub-entities, thus strengthening centralising forces. But this also prompted tensions between

individual entity accountability and whole of government accountability (Christensen & Lægreid, 2007, p. 1063,

2011, 2015; Mattei et al., 2015, p. 470; Pollitt, 2003). This research extends understanding of these accountability

tensions.

Financial management reform is central to NPM, and many countries, including New Zealand, have moved from

cash-based to accruals-based accounting, modelled closely on pre-existing business-style accounting practices. The

resulting financial reports are used to demonstrate accountability at multiple levels: for each individual sub-entity of

government, for achievement of fiscal measures, and for the whole of government. The coherence of these multiple

accountability and performance measures at all levels seems to be assumed. However,examples of paradoxical effects

arising from NPM reforms suggest such measures require closer scrutiny: reform outcomes contrary to the stated

aims, yet the same reforms are pursued further (Humphrey & Miller,2012); the promotion of ideas that accounting is

objective and truthful, alongside accounting manipulations that support pre-determined decisions, for example,public

private partnerships (Heald, 2003); and the apparent negative effect of particular combinations of accounting, finan-

cial management practices, and incentives on staff morale (Newberry & Pallot, 2004); see also, Hopwood’s (1984)

advice to interrogate technical developments to learn what is achieved rather than accepting the rationalisations

provided.

This case study of reform to New Zealand’s Natural Disaster Fund(NDF) investigates more closely the paradoxical

reform outcome that followed media attention to a dispute. In 1988, at the height of New Zealand’s NPM reforms, the

Minister of Finance had announced reform of the NDF,criticising its operation as “grossly imprudent and inadequate”

(Douglas,1988, p. 19). However, the subsequent reform entrenched the very practices criticised, prompting 10 years of

friction until 1998 when the Minister’s power to continue them was legislated and the practicesendured. This research

investigates the reform and the dispute, identifying policy conflict between achievementof ambitious macro-level fis-

cal targets, and the announced but ambiguous policy intentions that “cultivat[ed] the perception”reform of the NDF

would address the publicised policy problem (McConnell, 2018, p. 167). In doing so, it identifies key “processes, design,

operational features and presentation formats” (Annisette, Vesty,& Anslem, 2017) that show how reform precipitated

and sustained policy conflict.

Central among these design features is the government entity structure that followed the transition to accruals-

based accounting as illustrated in Figure 1 .

Within the whole of government, accounting boundary sits another accounting boundary for determination of key

fiscal measures. This relates to an entity called the Crown for which separatefinancial reports are not published. Place-

ment of the corporatised sub-entity established to hold the NDF of the Earthquake Commission (EQC) outside the

Crown accounting boundary and inside the whole of government accounting boundary means fiscal measures may be

improved to the detriment of the NDF by withholding or withdrawing resources from it and vice versa.This research

adds to prior research findings about tensions between whole of government and individual entity accountability by

emphasising the importance of the accounting boundary for fiscal measures and identifying other reform features that

sustain policy conflict when efforts to improve fiscal measures prompt dispute overthe effect on the public policy pur-

poses of the individual entity.