The NZ Initiative's Eric Crampton says Parliament deserves better advice about the policies it is being asked to consider

By Eric Crampton*

Imagine that you and your partner agreed that you would buy a house together after the wedding – and you both had your eyes on a particular property. After the celebrations, you hired a building inspector to check the place out.

Would it really be sufficient if the inspection report said only, “You promised that you would buy a house together after the wedding. This is indeed a house. You must purchase it.”?

I’d expect any of us would refuse to pay the builder’s invoice. But I also expect that we would give the builder more than five minutes to inspect the place.

I wish that this were about something as inconsequential (in the grand scheme of things) as one couple’s imaginary experience with a dodgy building inspector.

But some of the advice that Parliament has been receiving about the policies contained in Labour’s 100-day plan are every bit as inadequate as that builder’s report.

Legislation in New Zealand is supposed to be accompanied by an impact summary. The bureaucracy is supposed to state the problem that the legislation or regulation is intended to address, to evaluate the options for addressing the problem, and to weigh the costs and benefits of these alternatives. Treasury is supposed to check through the reports and provide comment on their adequacy. Cabinet is meant to receive adequate information for making informed choices about regulatory options, and Parliament is meant to receive a politically neutral assessment of the merits of the legislation put before it.

All of that is meant to ensure that Members of Parliament have clear advice. Some legislation may have fishhooks that affect particular groups, and MPs representing those groups will need a heads-up. Other times, broad categories of policy risk need to be identified so that the Opposition can more robustly debate the legislation – and propose improvements.

This vetting process is also an important part of democratic accountability. If the Ministries or Treasury raise substantial concerns about a piece of legislation, voters need to be able to find out about it through this process. It’s far-fetched to assume anybody but policy geeks would read through the things, but if the boffins find a lot of fishhooks in a government policy, we can generally count on the Opposition to bring it up in Question period.

But it is not working as it should.

It has not been working well for some time, but has been especially poor since the change in government. The problem is not any flaw in Labour’s policy proposals per se, but rather the difficulty inherent in doing this job adequately under the pressures of a ticking 100-day clock.

Consider the Ministry of Education’s Impact Summary of Labour’s proposed abolition of Partnership Schools. I have copied below the Ministry’s summary table of the costs of Labour’s proposal.

While it may be the case that the government will not bear any particular fiscal cost from the proposal, is it likely that there are no costs, either monetised or non-monetised, for the affected schools and their students?

It is reasonable to argue about whether there are net benefits or costs from abolishing the partnership schools. As the Martin Jenkins final report on those schools’ performance has not yet been released by the Ministry, all we really can do is argue. But is it really plausible that there are no costs to abolishing the schools? The students who marched against the change think there will be a cost.

The 100-day plan also has done violence to adequate problem definition. Good policy requires identifying the problem that the policy is meant to solve, so that Parliament can adequately canvass the options available. That is a difficult task for a Ministry when presented with a solution it must assess rather than a problem it must solve.

When Treasury was asked to evaluate the impact of the ban on overseas home buyers, it defined the problem rather succinctly, saying “This proposal seeks to implement the Government’s 100 day commitment to “ban overseas speculators from buying existing houses.”” We could read that as a terse assessment that the policy serves only political purposes, but it would have been nice for that assessment to have included a more thorough enumeration of the policy’s potential costs. Treasury simply would not have had time under the 100-day clock to do the job properly.

MBIE’s Impact Analysis of changes to the Employment Relations Act provided a similar problem definition, that “The suite of changes gives effect to the Government’s 100 day commitments relating to the Employment Relation Act 2000 (the Act).”, before enumerating the changes.

In MBIE’s case, there was at least a stronger canvassing of potential costs and benefits of the changes, with each of Labour’s proposed changes evaluated as being a slight improvement over the status quo. Labour’s changes to reinstate union access to workplaces earned a green tick from MBIE. National’s 2010 changes were not opposed by MBIE’s Regulatory Impact Assessment at the time, though MBIE suggested there was no particular problem that the policy worked to solve. In 2012, MBIE and Treasury supported National’s starting-out wage. If MBIE has yet produced a regulatory impact analysis of Labour’s proposed reversal of that policy, I have not been able to find it. But I note that the 2012 evaluation followed a more thorough process than would be available under the 100-day constraints.

The bureaucracy is a servant of its political masters, and elections do matter. Newly elected governments have a mandate to implement their policy proposals. But in the absence of better official costing and evaluation of election policy platforms, Parliament often just does not have adequate information from the bureaus to assess whether policy promises still make sense after the election.

There is no simple solution, but we might consider one small improvement.

The Ministries will not always have time to provide an adequate assessment of the effects of policies. That can happen because of post-election pressures, but it can also happen because of unforeseen events between elections causing rapid political response.

When proposals have not had a chance to be more thoroughly evaluated, they should undergo more rigorous post-implementation review. A lot of Regulatory Impact Statements promise these reviews, but few seem ever to be undertaken. The reviews should be compulsory for policies undertaken under 100-day clocks.

When we buy houses, we make the purchase conditional on a good builder’s inspection. There often isn’t time to get a proper inspection report before making an offer, so we build in room to get it done properly after the offer has been made. And if the inspection report turns up cracked foundations, we have an out. Should we really expect less than that when it comes to policy changes affecting the whole country?


*Eric Crampton is the chief economist at The New Zealand Initiative, which provides with a fortnightly column. 

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Oh dear.

So very true -- I love this piece by Eric Crampton,
No we should not expect less ...

Eric Cramptons' opinions would carry more weight if the NZ Intitative (business roundtable), had expressed similar concerns during the National's tenure.
Perhaps Eric could release the impact analysis of the introduction of charter schools, arbitrarily foisted on NZs education system, by the previous government.
Or the tenure review rip off, or the true cost of imported labour , taking into account the massive remittances that leave the country each week.

Thanks Macawsley. You can find me arguing for more robust cost-benefit assessment in 2014 (under National) here. For the other RISes you want, feel free to check Treasury's website.

Thanks for the reply Eric- but the link supplied, had no impact analysis of Charter schools.

Note that RISes produced prior to mid-2017 are on an archive page that's linked at the top of the page I linked. I linked the main page because that has all the explanations about RISes. There's at least one RIS on partnership schools on the archive page.

You might also check all of Treasury's released advice on partnership schools here.

Note that my piece isn't about the merits of partnership schools, but that the analysis in the statements around policies in the hundred day plan is wanting.

At least with the previous govt there was some concern about the outcomes.
With the current govt it seems to be about the inputs and propriety (read: acceptability to the unions) of the delivery mechanism.
The Charter Schools are a case in point; what has the govt done to demonstrate that there will be an improvement in outcomes?

What did the previous National government do to demonstrate the improvement in educational outcomes due to charter schools?- Nothing.
It seems, no proof required by NZ Initiative or National voters, which was the point I was making.;

It allowed kids an alternative to guaranteed failure in mainstream schooling.
Not that Hipkins cares about this.
He reports to the unions.

What did the National Government to do demonstrate the success of charter schools - Apart from publishing their results, and closing down the one that wasn't delivering good results, you mean?

Oh, no impact analysis required - see results published by the National party .
You are joking?

It's important to be clear about the distinction between the National Party and the previous Government.

Charter school results were published by the Government in the same way as the results for all other schools are published. If you are claiming that those may have been manipulated for National Party political purposes, that is a serious allegation about the integrity of public officials which you should either withdraw or substantiate with evidence.

Similarly, the National party does not undertake regulatory impact analysis. That was done by the Ministry for Education, and it would have been available to Parliament when the relevant legislation was passed, in the same way as regulatory impact assessments for any Government regulatory proposals are undertaken. It's published here

YES ! Why are we planning to make NZ smoke free by 2025 , but right now there is a Bill before parliament to allow the legalised growing smoking of Marijuana ?

Something that inhibits your ability to drive or use dangerous machinery , and has long term health effects when used in excess .

Its true that a bunch of clueless clowns are now our lawmakers , and the likely consequences are not even entering the debate .

How on earth can we take them seriously ?

Especially irksome in that this Bill was introduced by a clueless naive idealistic 22 year old............ for goodness sake , this is not the high-school Ball after- party organising committee ............... its our Parliament .

But did you not vote for one of the "clueless clowns" boatman?

I did indeed but did not foresee the unintended consequences .

I honestly believed that Winston would temper the immigration rate from inside the National tent .

I never imagined he would enter a coalition of losers to hijack the whole system

Something that inhibits your ability to drive or use dangerous machinery , and has long term health effects when used in excess.

I have never partaken of marijuana but it's pretty illogical that alcohol is legal (it does exactly as you describe here) and marijuana is not. This seems to be an area where the philosophy of "I know better than the government and personal freedoms are what's important" is inconsistently applied by some on the right. Surely they'd be in favour of more personal freedom and responsibility and less government interference. (No doubt by some folk on the left too, albeit they tend to be less visible.)

Strange that the US of all places is ahead of us on this one.

Getting back to the subject matter. Why would a compulsory requirement for rigorous post-implementation review be any more effective than is the compulsory requirement for impact analysis?

Got to have Demarcation and Overtime Rates perhaps. The quality of work in the example in the article does suggest they were all busy doing more important things, presumably. Be interesting to know how many Hours went into them.

It would be effective if legislation or regulation produced with a caveated RIS/RIA had a sunset clause built-in so that a successful PIR were required.

I wonder whether there would be some good even just in having by-department compliance figures on PIRs.

Good point: it would not, and for the following reasons:

  • We have ourselves, probably by accident, a fearless, inexperienced, academic (but I repeat myself) idealistic Gubmint which does not actually believe in such actions, and would feel free to ignore them even if implemented and publicised, because Diversity! and also We Know Best.
  • Consequences and costs or benefits take years if not decades to manifest, especially in social policy. Gubmints have their eyes firmly fixed on the next election, and all else is subordinated to that target - remaining in power - and generally doing so by feeding their base bags of goodies at regular enough intervals. Consequences don't actually matter to them.
  • Policy is essentially a PR snow-job, fertilised by rocking-horse poo and lubricated by pixie grease. As long as it induces the base to cough up the requisite votes, or at least to acquiesce, what other metric is relevant?

Such is the State of the Nation....