In 2011 Australia set up a Parliamentary Budget Office (PBO) to provide an impartial costings of the election commitments of political parties during the campaign period and to assist parties in their costings outside the campaign period. Canada had set up a similar office in 2006.
The Congressional Budget Office, with a much more expansive mandate was established in the US in 1974. The New South Wales Parliament followed the federal example and set up its own PBO.
In this context the proposal by Metiria Turei to set up an independent costing unit for New Zealand seems very sensible and mainstream.
It is a major change to the conventions around election costings in New Zealand. The current position as set out by the SSC and Treasury in their guidance for public servants published on their websites in the lead up to the 2014 election is that only the Finance Minister or relevant portfolio minister can request costing of party election promises.
This not an option open to the Opposition or other non-government parties. In 1998 the Howard Government in Australia introduced the Charter of Budget Honesty Act. While modelled on New Zealand's Public Finance Act in providing for a pre-election "opening of the books" it also expressly provided that during the pre-election period the Prime Minister and the Leader of the Opposition could request the Secretaries of the Departments of Treasury and of Finance to prepare costings of their publicly announced policies. Since the establishment of the PBO in 2011 minor parties can also request costings and parties can approach the PBO instead of Treasury and Finance.
Allowing non-government parties to have their policies properly costed levels the playing field between the government and other parties and can improve the quality of policy debate in the lead up to an election. Whether this actually happens depends on how the costing unit is structured, but a lot more on how the parties make use of it.
Ideally an independent parliamentary costing unit sits outside the public service and is led by a parliamentary officer responsible to the legislature not the executive. If the unit is only to function during election campaigns, this may seem prohibitively costly. If it is to function throughout the life of a Parliament determining the appropriate location is of greater importance.
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The Australian Parliament considered placing the Parliamentary Budget Office within the Parliamentary Library. This may be a viable alternative to a standalone agency for New Zealand. Wherever the unit is located, it would need the power to second from other agencies to inform its costing approach.
Whether costings are to be confidential or automatically made public is one of the most important structural decisions and debate on this nearly derailed the establishment of Australia's PBO. The established practice from Australia under the Charter of Budget Honesty and continued following the introduction of the PBO is that during the campaign, only publicly announced policies are costed and the costings are automatically released.
This prevents parties from gaming the system by refusing to release costings they don't like. If the goal is to improve the quality of policy debate the same system should apply in New Zealand.
Outside the election period the role of the PBO in Australia is quite different. It assists parties in policy development by independently costing policies while they are still in development. This process is kept confidential. During campaigns the focus is on transparency and ensuring the incumbent Government cannot just assert opposition and minor party policies do not stack up financially.
The approach the parties take to using the costings is just as important as the structural settings Already the Green Party proposal has been criticised for prioritising fiscal cost over other merits of policies. This does not need to be the case. Transparent, independent costing of policies does not lock parties into saying they believe in either fiscal consolidation or expansion. It just sets out the costs of competing approaches.
In most elections there will be parties who think the incumbent Government is too spendthrift and should rein in its spending and others who think a focus on spending cuts means high priority issues are not being addressed. Having transparent independent costings of policies does not prevent these important debates. It just makes the parameters clearer. It also prevents incumbent governments being able to charge well thought out opposition or minor party policies as reckless.
Parties committed to a meaningful discussion with the public during the election period should welcome the opportunity for transparent, independent costing of their policies so they can focus the debate on the substantative merits of their specific policy proposals and overall approach to governing.
Marcus Ganley was Deputy Chief of Staff to the Australian Finance Minister, Senator Penny Wong, and worked on the introduction of Australia's Parliamentary Budget Office. Earlier Marcus was senior adviser to NZ Finance Minister, Dr Michael Cullen.