By spending on prevention and early intervention governments can achieve better outcomes and better value for public money, says the Centre for Policy Development.
Prevention is better than cure: this is such a well-acknowledged principle that it has become a cliché. Yet, our governments consistently find themselves responding to harms that could have been prevented – responses that are often inadequate to address the scale of the problem. The current approach to our economy and systems of governance fails to safeguard much of what we value, including our health, safety, social connections, prosperity, and the resilience and sustainability of our natural environment.
The nominal amounts of government spending on prevention and early intervention is often the first to be cut because their benefits are long-term, while political and budgetary cycles incentivise short-term wins. As a result, there is an ever-increasing demand for downstream responsive services such as acute healthcare, criminal justice, and disaster response, causing government spending to balloon. This cycle of repeatedly using public resources to address harms that could have been prevented – known as ‘failure demand’ – is not only unsustainable, it’s avoidable.
We propose that governments embed avoidable cost analysis in fiscal and policy processes to better target investment and improve long-term outcomes. As a central recommendation, we call for the establishment of an Avoidable Costs Unit within the Commonwealth Treasury, and within each state and territory treasury.
The purpose of this unit would be to support more informed, preventative policymaking by developing the capacity to model failure demand and identify avoidable public expenditure as part of the policy development process. This unit could also track the actual savings that result from policies aimed at reducing avoidable costs. This not only ensures programs are effective but will also improve future modelling.
The Australian Centre for Evaluation already has some of the capacity required to perform this work. Similar to the team who administer the Victorian Department of Treasury and Finance’s Early Intervention Investment Framework, this unit would collaborate with line agencies to quantify avoidable costs associated with proposed policies. It would also play a capacity building role, helping agencies to embed avoidable cost estimation into their own planning and evaluation processes over time.
The absence of avoidable costs calculations in current policy proposals and budgets partly explains the underfunding of prevention across portfolios. When savings from a policy proposal cannot be calculated and banked in the budget then the proposal is much less likely
to be supported.
The centralised model of an Avoidable Costs Unit would ensure rigour and consistency without requiring every department to develop its own specialist capacity in fiscal modelling. It would support agencies to take a long-term view of investment, strengthen the case for preventative approaches, and align budget decision making more closely with whole-of-government goals, including improved outcomes for communities and better value for public money.
Governments are capable of long-term planning and investment when the institutional supports exist.
These shifts towards long-term preventative thinking are not without challenges. But as demonstrated in sectors like infrastructure and defence, governments are capable of long-term planning and investment when the institutional supports exist. The same approach can and should be applied to the systems that shape people’s lives and wellbeing and the wellbeing of our natural environment.
Encouragingly, models already exist in Australia and globally that show how avoided costs can be identified and used to guide decision making. The opportunity now is to bring this approach to other jurisdictions and take it further than early intervention, to prevention and economic system change.
Australia’s governments can move beyond the cycle of failure demand and focus on building systems that enable societies and the environment to thrive. By looking upstream and embedding avoidable cost analysis into budgeting and policy design, governments can deliver better value for public money – and, more importantly, better outcomes for people and planet.
An extract from Avoidable Costs: Better outcomes and better value for public money
Leave a Reply