Monday 1 February 2016

Costing policy

My Friday column at The NBR noted some of the potential difficulties in the Greens' proposed policy costing regime.

  • Housing it in Treasury is a bad idea as compared to in an independent office of Parliament, so it would not have to conduct a substantial body of work that it would need to keep secret from the Minister overseeing the agency;
  • A rule or norm that every policy be costed means that it will be more difficult to cost policies than you might expect for currently costed policies. Why? Right now, parties can refrain from costing silly policies. In the alternative, they'll have reason to delay and obfuscate, making it harder for agencies to undertake a costing;
  • New spending at each election can be big, but even bigger is the body of existing policy that is rarely revisited.
And so I concluded:
But the bulk of the government’s spending – the big line items that do not change much from budget to budget – receive rather less attention.
Take the government’s student loan programme. Labour’s zero-percent student loan policy drew attention during the 2005 election campaign and again in 2008. But we do not often hear discussion of the $5 billion gap between the nominal value of the loan and their carrying value.
The vast majority of government spending simply carries on, from year to year, without much notice.
Perhaps an agency established to cost new political party proposals could, between elections, spend its time running rolling reviews of existing spending programmes, ensuring they continue to deliver value for money.
After I filed the column on Wednesday, I found that Mike Reddell had some similar things to say. He also helpfully points to international examples. He also suggests it could be at least as good to simply provide funding to political parties that they then be able to commission independent evaluations. Here's Reddell:
On balance, I still think there is a role for something like a (macro oriented) fiscal council in New Zealand, perhaps subsumed within the sort of macroeconomic or monetary and economic council I suggested here (but perhaps that just reflects my macro background). And there is probably a role for better-resourcing select committees. But when it comes to political party proposals, if (and I don’t think the case is open and shut by any means) we are going to spend more public money on the process, I would probably prefer to provide a higher level of funding to parliamentary parties, to enable them to commission any independent evaluations or expertise they found useful, and then have the parties fight it out in the court of public opinion. The big choices societies face mostly aren’t technocratic in nature, and I’m not sure that the differences between whether individual proposals are properly costed or not is that important in the scheme of things (and perhaps less so than previously under MMP, where all promises are provisional, given that absolute parliamentary majorities are very rare). If there are serious doubts about the costings, let the politicians (and the experts each can marshall) contest the matter.

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