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Greens and National failing to commit to cost-benefit ratios

Greens and National failing to commit to cost-benefit ratios
ACT Leader Jamie Whyte

The government has spent $3.4 billion on Roads of National Significance. Yesterday the Greens announced their discovery that the benefit-to-cost ratio of the spending on these roads has been either “low” or “medium”. Since the money could have been spent on projects with high benefit-to-cost ratios, it has been ill-spent on these roads.

Transport minister, Gerry Brownlee, replied that the Auckland rail loop that the Greens want brought forward has a benefit-to-cost ratio of 0.8, which is not just low but negative.

It is a shame that the Greens cannot avoid making the very mistake they criticise. But that is irrelevant to the matter at hand. That your critics are keen on wasting money doesn’t mean that it is OK for you to waste it too.

Government spending is apt to be wasteful because the people who make the decisions are not spending their own money. That is why government spending should have to pass a benefit-to-cost ratio test.

According to Radio New Zealand, Gerry Brownlee said that the government is not fixated on benefit-cost ratios because there are clearly benefits from having a good roading network around New Zealand. This is hard to understand. If there are clearly these benefits, they should already be included in the benefit-to-cost analysis.

I fear that when politicians talk about benefits over and above those included in the benefit-to-cost ratio they are talking about political benefits. That is precisely why taxpayers should demand that the government be fixated on benefit-to-cost ratios.

The Land Transport Management Act 2003 was drafted, under the influence of the Greens, to allow more political input into land transport decisions though a Government Policy Statement (GPS) on land transport. The NZ Transport Agency must now take into account the wishes of politicians in the GPS whatever their cost-benefit analysis says about the wisdom of these projects.

The GPS has opened the door to extraordinary political discretion and potential waste. We should close that door by amending the Land Transport Management Act 2003 to ensure that its prime objective is to provide New Zealanders with an efficient land transport system. That means applying the cost-benefit analysis to the pet projects of politicians in the GPS, not exempting them.

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