A policy costing unit

The Government’s plans for an independent policy costings unit were back in the news this week, with the announcement that Cabinet had agreed that the proposed new body should enjoy the exalted status of an Officer of Parliament  (a status it would share with the Auditor-General and the Ombudsman –  where the case is clear-cut –  and the Parliamentary Commissioner for the Environment –  where any case seems more grounded in feel-goodism).

Back when I was still a bureaucrat, I favoured the establishment of a small Fiscal Council (along Irish or Swedish lines) and thought (and think) that the mandate of such a body could usefully be widened to monitoring and reviewing macro policy more generally.   But what the government appears now to have in mind is primarily a policy costings unit, as championed for several years by the Green Party.   I’ve written about the idea on several occasions and have become increasingly sceptical.

This post in early 2016 dates from when the Greens first openly called for such a body.  And there have been various others since, including here, here, and here.    There was a Treasury-led consultation process last year (the document is here) which I made a short submission to (submissions are here).

Rereading my submission now, I find my views largely unchanged, with the exception that I am now much more sceptical than I was then of the case for making any new entity an Officer of Parliament –  the more so if, as now seems envisaged, the entity serves primarily as a costings unit for political parties (thus, essentially playing the sort of role economic consulting firms do).  If such a body is to be established, an independent Crown entity model might have been more appropriate, better protecting the relative status of the two absolutely vital Officers of Parliament (Auditor-General and Ombudsman), which act as crucial checks on the Executive.     It would be odd to have a policy costings unit as an Officer of Parliament while the –  much more vital –  Electoral Commission is only an independent Crown entity.

My summary observation was as follows:

I am much more sceptical (opposed) to the case for an institution to cost political party proposals (and in this respect associate myself with many of the comments in the New Zealand Initiative submission).  Parties have adequate incentives already to make the case for their policies, in whatever level of detail the political (voter) market demands, and (as the NZI note) already have access to the Parliamentary Library resources, parliamentary questions, and Official Information Act requests.  A policy costing office –  not found in any small OECD country –  would be, in effect, just a backdoor route to more state funding of parties (and not necessarily an efficient route – bulk funding would be preferable if state funded was to be more extensively adopted).  It also reflects a “inside the Beltway” conceit that specific costings are highly important, and that use of a single “model” or set of analysts somehow puts everyone on equal footing  (it doesn’t –  public service analysts having their own embedded assumptions about what is important, what behaviours are sensitive to what levers etc.)   With the possible exception of the Netherlands, I’m not aware of any country where a political costings office products plays any material or sustained role in election campaigns and outcomes.

There is an important distinction here.  Private entities (parties and their supporters) have every incentive to invest in convincing voters of their case/ideology/competence/costings. By contrast, no one has a strong private incentive to do the sort of analysis and commentary –  often longer-term in nature –  that a traditional (narrow) Fiscal Council does.  That is why a reasonable case can be made for a public institution of this sort (preferably macro policy focused –  since the same absence of incentives applies to monetary and financial regulatory policy).

There has been plenty of talk this week of how 29 of 36 OECD countries have some sort of independent fiscal institution.  This was the chart from the consultation document.

fisc council chart

But only a small number of those do policy costings, and none of the countries where the independent fiscal body does policy costings are themselves small.   I’ve not seen Treasury or the government engage with that point –  resources are more scarce in small countries, especially perhaps in relative poorer ones.   And although the US Congressional Budget Office is widely cited in such debates (and is pretty well-regarded) it doesn’t do policy costings for political parties or candidates as part of the election process, but rather produces independent expert analysis on proposals actually before Congress (the sort of role our less-politicised public service is supposed to play).   A policy costings unit for political parties, for use heading into an election, and paid for by taxpayers, remains quite unusual in OECD countries.

I’ve listed most of my objections previously, but just quickly:

  • there isn’t an obvious gap in the market.   At present, political parties produce costings (sometimes reviewed by independent experts) to the extent they judge it to be in their own interests to do so.  Voters, in turn, can judge whether the presence or absence of any costings, or any debate around them, matters much.  Existing parliamentary parties have access to considerable taxpayer resources which they can draw on to develop and test policy proposals,
  • it isn’t obvious when, if ever, a New Zealand election in at least the last fifty years has turned on the presence, absence, quality (or otherwise) of election costings.  It is a technocratic conceit to suppose otherwise: people vote for parties for all sorts of reasons (values, mood affiliation, fear/hope, being sick of the incumbent, trust (or otherwise)) which have little or nothing to do with specific policy costings,
  • the relevance of specific policy costings (and indeed overall fiscal plans) is even less under MMP than it was in years gone by.  Party promises are now little more than opening bids, as coalitions of support are put together after the election to govern (and on almost every specific piece of legislation).  We simply aren’t in a world where a few dominant ministers dominate a Cabinet which in turn has a majority (or near so) in the government caucus, which in turn has an unchallenged majority in Parliament,
  • the “fiscal hole” argument (from the 2017 campaign) remains an utter straw man in this context.   First, when Steven Joyce made his claims in 2017 lots of people, including experienced ex-Treasury officials, weighed in voluntarily, and debate ensued about whether, and in what sense, Joyce was saying something important.  The system –  open scrutiny and debate –  worked.  And, secondly, a policy costings unit –  of the sort the government apparently envisages – would not have made any useful contribution to such a debate, which was about the overall implications of Labour’s fiscal plans, not about the costs of specific proposals Labour was putting forward.     Elections are messy things –  always were and probably always will be, and that isn’t even necessarily a bad thing.
  • some of the arguments made for a policy costings unit might have more traction if, somehow, every political party and candidate could be forced to use it (say, submit all campaign promises to the costings unit at least three months prior to an election, with the costings unit issuing a report on all of them say at least one month prior to an election).  But even if you thought that might be a good model, it isn’t going to happen (and there is no credible way that such a model could be enforced).  Instead, the proposed costings unit will be used when it suits parties, and not when it doesn’t, and will probably be most heavily used by parties that are (a) small, (b) cash-strapped, and (c) like to present themselves as policy-geeky.  The Greens, for example.  One might add that the unit would most likely be used by parties that believe their own mindset is most akin to that of those staffing the unit –  likely to be a bunch of active-government instinctively centre-left public servants.  Embedded assumptions can matter a lot –  The Treasury used to generate wildly over-optimistic revenue estimates for a capital gains tax, and it was probably no coincidence that as an agency they supported such a tax. 
  • the policy costings unit seems, in effect, to largely represent more state-funding for (established) political parties.  That might appeal to some, but even if you thought more state funding was a good idea (and I don’t) it isn’t obvious why this particular form of delivery is likely to be the best or the most efficient.  Money might be better spent on research and policy development (say) rather than “scoring” at the end of the process, for detailed plans that will almost inevitable change before they are ever legislated.  And if we want to spend more on policy scrutiny, I reckon a (much) stronger case could be made for better-resourcing parliamentary select committees.
  • the interim proposal for next year’s election would enable only parties already in Parliament to utilise the facility.  Again, this has the effect of further entrenching the advantage established parties have in our system (I hope it will be re-thought when the legislation itself is considered).
  • practicalities matter: there probably won’t be much demand on a policy costings unit in the year after an election, and could be quite a bit in the year prior to one.  How then will be unit be staffed and a critical mass of expertise maintained?  If people are seconded in from government agencies, would we really have an independence (including of mindset and model) at all?  And costings skills aren’t readily substitutable with bigger-picture fiscal policy (or macro policy) analysis skills.
  • the lack of transparency around the proposed institution should be deeply concerning.  As far as I’m aware there has not yet been any indication as to whether the policy costings unit would be subject to the OIA (as the Auditor-General and Ombudsman are not, and nor is Parliament more generally).   The Minister of Finance has indicated that any costings the unit did would only be released with the consent of the political party seeking the costings.  That should be a major red flag.  In my view, any new unit should be (a) explicitly under the OIA, and (b) the enabling legislation should require that any costings done for political parties should automatically be released 20 working days after being delivered to the relevant political party (or more quickly if the costing is delivered within 20 days of an election).  A policy costings unit should not be a research resource for political parties – the only possible basis for confidentiality – but a body that at the end of the process provides estimates based on the details the relevant party has submitted. (As I understand the system in Australia, costings provided during the immediate pre-election period are automatically released, but others are not.)

In sum, I’ve become quite strongly opposed to the notion of a costings unit.  Mostly it probably won’t do much harm – I thought some of the comments from Simon Bridges were a bit overblown –  and relative to other stuff governments waste money on to buy off their bases or to win over small support parties (Super Gold Card anyone) it is probably small in the scheme of things.  It won’t improve policymaking, it won’t change the character of elections, but it might –  at the margin –  create a few more jobs for economists.

.

23 thoughts on “A policy costing unit

  1. The Fiscal Responsibility Act has been working in NZ for 25 years. Most people would agree it has been a success and no Party has tried to change it. As a result Budgets have changed to a more of a “no surprises” type of exercise conducted once a year. My observation is that we have a kind of 5 year roll out of Public Sector spending that is fully disclosed on a continuing basis and changes can also be analysed on a continuing basis. There will always be political posturing about differing priorities but I am having difficulty seeing the need for an additional and costly entity.

    Like

    • Grant Robertson probably still believes he can try and get 100,000 houses to fit into a $2 billion budget which 7 so called independent NZ economists piped up and backed him that it could be done. Looks like the only honest person was Steven Joyce when he pointed to a $11.7 billion hole in Grant Robertson’s Labour Party budgetting numbers.

      Like

  2. Couldn’t agree more. Let individual parties pay for it out of their party funding. That works just fine. The other thing about costings is that the cost of a policy is only half of the equation, the other half being the benefits – and that involves forecasting, and forecasting involves more assumptions than even the costings side. It’s not a subjective exercise. For example, it would be absolutely impossible for anyone to attempt to forecast the benefits of the Provincial Growth Fund.

    Like

  3. Policies don’t get implemented in a bubble. For a start, political bargaining, manoeuvring and oversight of Parliament will change the impacts. A unit saying a particular policy would cost, say, $20m would mean nothing unless we were also given the trade-offs, like:
    – is the sum being paid for by reduced spend somewhere else, raised taxes, “efficiency savings”?
    – what is the impact of other policies’ implementation on the effectiveness, cost or affordability of the policy?
    – if a programme is cut, what are the impacts of that cut, including the inefficiencies caused by a change in policy?
    – how long will it take for the benefits of the policy to be recognised?

    Some of these would no doubt be included in the policy costing. But would all of them be?

    The only real benefit would be if the entire party’s policies were costed as a whole so the full picture could be seen. Even then, the whole MMP thing ruins it all.

    Like

  4. Your argument is sound but I have two quibbles.

    The GoldCard is a great idea; used it today for two bus journeys without it i would have been another single pensioner driving a car. Good for congestion, good for CO2 emissions, good for reducing road accidents. Economists may say it costs money but so does putting white lines down the middle of the road and other roadway signage. Its main fault is not being available to children – even with my GoldCard taking a couple of school age children to the zoo has me using a car.

    “”… more state-funding for (established) political parties. That might appeal to some””. That’s me. We had this debate once before. Unfortunately we really do need some form of state funding for polical parties. To some extent it is provided by MP’s salaries and generous expenses but that tends to discriminate against new parties. To see why it is so important just look at the Hong Kong protests. That number of people out protesting in the streets in an unpleasant climate shows how valuable simple democracy is to a population who knows the alternative. Note how many protested despite the issue having no personal impact on them.
    Of course there is no funding problem when there is a single party but in a multi-party system there is a serious issue of ‘he who pays the piper calls the tune’. I saw it growing up in the UK with various politicians excessive obsequience to the trade unions to the detriment of the public. I think I am seeing it in NZ with no politician willing to speak about human rights issues in China and probably with the businesses wanting more low paid immigrants despite the majority of New Zealanders preferring a stable population.
    The best idea I can think of would be to pay voters to vote giving them a choice of $10 to keep or put in a collection box for the party of their choice. This would encourage voting so most would register and that in itself would improve our census data It might even be cheaper than repeating the last failed census.

    Like

    • It’s a funny old world Bob, the brave souls in Hong Kong fighting for democracy while we are busy destroying it. I don’t know about actively encouraging people to vote though. Perhaps our freedom, our democracy would be better served if only those that truly value it voted. The inclusion of the cannabis referendum with the general election; a cynical attempt to get the drop kick labour and green voters out of bed and sober enough to get along to vote?
      It’s not the people that want restrictions on free speech, open immigration or the destruction of the democratic nation state. Our democracy is dying on the alter of globalism, the climate change deception and an agenda to replace traditional cultural and religious values with a flailing fake morality seemingly made up on the fly.
      Here’s a very good essay by Daniel Ben-Ami on the destruction of genuine democracy via the courts and supra national organisations.
      “The strangling of European democracy”
      “The EU is the high point of an anti-democratic project that has been brewing for a hundred years”.
      https://www.spiked-online.com/2019/08/23/the-strangling-of-european-democracy/

      Liked by 1 person

      • “The best argument against democracy is a five-minute conversation with the average voter”. While Churchill never said it, it still holds up reasonably well.

        Like

      • I’m not too bothered by ‘genuine’ democracy – nothing is perfect (well I can think of interesting exceptions but…). We deserve at least a rough and ready democracy that lets us improve it as and when required.

        Encouraging people to vote is a polite expression – I expect some would call it bribing them to vote – but I would prefer to describe it as a celebration of democracy. Auckland council is happy to celebrate all manner of things and some I enjoy but isn’t my vote worth way more than my rare visits to the art gallery?

        So will Phil Goff get another contribution from a foreign source (see 2016 headline “Chinese dinner adds $250,000 to Phil Goff’s mayoral war chest””) – no problem if they were all NZ citizens of Chinese origin. It worries me. How can my family – all NZ citizens of Papuan origin compete?

        Very happy to read of better suggestions for financing politics in New Zealand.

        And thanks for the link.

        Like

      • Fair enough Minsk although Churchill did say “democracy is the worst form of government, except for all the others”
        Usually the voters have a lot more sense than the politicians and the hectoring elite. When the people voted on the introduction of race based local body representation the proposal was overwhelmingly rejected, jumped up weather boy and all round lightweight Tamti Coffey pronounced it “a failure of democracy”. Churchill had it right.

        Like

      • There’s a reason why I don’t think you should encourage/bribe/compel folk to vote; you need to make yourself aware of the issues but if you’re not informed or are unsure/undecided then, surely, you’ve a moral obligation not to vote. Isn’t voting as a “celebration” a degradation of your responsibility as a citizen, a perversion?

        Like

      • My proposal doesn’t force anyone to vote nor take the $10 nor donate it. Turn up, get your name ticked off the register and collect $10 – whether you chose to enter the voting booth is another matter.
        A different subject – why do we have online voting – after 45 years of earning my living as a computer programmer I just don’t trust them. Like the citizenship ceremony where ever possible voting should be a public event although the vote itself is private. Celebration – with free tea and biscuit.

        Like

    • On the Gold Card, it is quite plausible that bus companies might choose to offer cheaper prices in the middle of the day (they have a fixed stock of buses that need using) but why should the taxpayer be interfering directly – and why shld your fare be free but mine not?

      I’m not totally opposed to the idea of “party tax”, which people could choose which party to direct it to, but I worry about the panoply of other rules that might come with it ( eg how are new parties supposed to fund themselves). Sadly rules/subsidies won’t stop the deference to the PRC – needs decency , a sense of right, integrity etc to do that. A recognition that some things matter, and things that matter often come at a cost.

      Like

      • GoldCard – it works. I’d be happier with free buses for all outside the rush hour(s). Why me and not you? All you have to do is live as long as me – it just needs healthy living and a working wife. Your same argument would apply to superannuation.

        My suggestion (and there must be a better solution) would leave it to the discretion of the voter and any party willing to stand for a constitutency election would warrant a collection box. That solves the new party problem – so at the last election I might have donated to TOP although I wouldn’t have voted for them. Seems simple.

        I really can’t blame the PRC for trying to bribe NZ or Trump offering to buy Greenland but a well financed party is in a stronger position to do the right thing.

        Like

      • Gold Card

        “why should the taxpayer be interfering directly – and why shld your fare be free but mine not?”

        Think bigger picture – the aim is to get the elderly out and about, keeping them active, getting exercise and vitamin D – the long term pay off is in a reduction in doctors costs and hospital costs and chemists costs and disability welfare costs (however small individually) – better to have Bob Atkinson exercising rather than using his car

        Like

      • Iconoclast: you have seen me drive?

        Incidentally from a strict economic point of view the last thing you want is to keep us pensioners living longer – we cost too much.

        Like

      • I’m for free buses for everyone. It’s a far better solution to reducing congestion than any of the alternatives.

        Like

      • Kate: removing ticketing speeds the buses resulting in fewer other vehicles being delayed by the buses – at some degree of congestion it becomes the most economically efficient system.

        Like

  5. The Treaty of Lisbon was a clever piece chicanery. The individual European states gave away their sovereignty and many individual rights and freedoms. Only a few people I have spoken to either in or from U.K. seem to know what took place. Bureaucracy, the likes of which we have not seen since the Middle Ages where the Church ran the show, now has control of Europe.

    Liked by 2 people

  6. The proposal for this kind of independent costings unit is a cynical move by the Greens to push politics down the popular (with Lefties) cul de sac, whereby everything becomes a technical discussion about “the facts”, as determined by experts. You can see where this leads from the Brexit debate – essentially two sides talking past each other (or at least the remainer side talking loudly and extensively about one narrow segment of the debate, and ignoring entirely the more philosophical, historical and constitutional arguments from the leave side). As you say, you can safely predict now that the bent of such an organisation will be left wing cosmopolitan – it becomes a way of giving unpopular arguments a gloss of respectability.

    The Greens are no doubt even more enthusiastic than the usual lefties about this as they have the eternal trump card of climate change up their sleeves – whatever lunatic idea they propose can always be costed against “the science of climate change” which as we all know, costs the NZ economy $50 billion per second or something. In an economy dependent on consuming fossil fuels or generating methane, climate change is a carte blanche for regulating basically anything you feel like.

    None of this necessary providing you have a semi-educated population, strong opposition and a robust and diverse media sector. NZ is ok on the first point,weak on the second, but extremely poor on the third. Frankly I would be more in favour of a state funded, genuinely intellectual public broadcaster than this costings unit (although I am not generally in favour of state funded broadcasters). Any economic fantasies from a party during an election ought to be exposed and rebutted with evidence, either by the opposition or the media.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s