The bi-partisan supported Enabling Housing Supply Act affects a large chunk of the housing stock of NZ, which is valued at around $1.5 trillion, so in terms of impact it's the most far reaching piece of legislation possibly ever passed. The Act allows for 3 townhouses of 3 storeys to be built on almost any urban site without a consent. So you would have expected the NZ Treasury to have conducted its own, independent cost-benefit analysis, right?
Wrong. It never did one. So who did do the cost-benefit analysis (CBA)? In the words of Attorney General David Parker in Parliament, "It's prepared by PricewaterhouseCoopers & Sense Partners" (see the link below).
Oh. So a private accounting firm & a "boutique consultancy" came up with a CBA for this new law. Maybe it's because the government dislikes economists so much, as we reported recently, that it has run out of its own to do them?
Outsourcing the Cost-Benefit Analysis for such a massive regulatory change to the private sector is wrong. Why? An explanation can be found in the essay (below) by Professor Cass Sunstein, at Harvard Law School, who was in charge of the White House Office responsible for CBAs in the US.
The reason relates to how the impact of legislation, like the Enabling Housing Supply Act, is so vast it reaches over the entirety of government departments & agencies & councils. Consequently, a central public authority is required to collate & assess ALL the data & information, as gathered across the whole of government, to do a proper CBA.
Now here's the thing. A private firm won't even legally be allowed to access much of the information that's needed for the CBA since it's held by government departments, including the likes of the Ministry of Health.
In the case of this new Act, the outsourcing of the Cost Benefit Analysis to private firms was done by the Ministry for the Environment. Yet that Ministry is a tiny part of government. Even the Ministry of Housing, which also advised on the legislation, doesn't remotely encompass all of the parties affected.
In the US, the centralized assessment of whether all costs & benefits of regulations have been taken into account is done by the White House under the auspices of the Office of Management & Budget. Such process has been affirmed in law by a galaxy of Presidents, Democrat & Republican, from Presidents Reagan to Bush to Clinton to Obama.
But not in NZ. Here the Attorney General is happy to outsource the job of the People's Representatives & Civil Service to private consultants in order gauge whether or not legislation with trillion dollar consequences will enhance the nation's welfare. Why doesn't he outsource the job of Attorney General to private contractors?
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