In a submission to the Ministry of Transport, the Taxpayers’ Union reveals that the cost-benefit analysis prepared by Ministry of Transport and used to advise Ministers on the Government’s Clean Car Standard and ‘Feebate’ policies has serious flaws which undermine justifications for the policies.

More than 90 percent of the Ministry’s estimated benefit is attributable to consumer fuel savings, but even in their most conservative assumptions they incorrectly pegged before-tax fuel prices at 40 to 50 cents per litre more expensive than in reality. This was due to their reliance on 2011/2012 price projections from MBIE which have failed to bear out. In short, they got the price of fuel totally wrong – using previous forecasts, instead of current reality. As a result, the proposed savings calculations do not reflect reality.

But that’s not the only mistake.  Even if you ignore the fuel price assumption errors, the Ministry simply assumes consumers are irrational and that the Government needs to intervene to rectify this issue – with no evidence or literature cited to reflect this position.

When preparing the Union’s submission on the clean car policies, we readily found plenty of evidence that consumers do in fact understand the benefits of fuel efficient cars – but none of this evidence is addressed by Ministry officials in their analysis. That’s potentially fatal for the Ministry’s analysis – if almost all the benefits from buying EVs flow through to consumers from fuel savings and consumers understand the value of these savings, there’s no good reason for the Government to intervene.

Finally, officials need to reconsider how they perform cost-benefit analysis. The infamous BERL alcohol paper has become a joke within economic circles in part because they counted all of the costs from alcohol, without taking into account benefits to consumers, like enjoyment. The analysis from Transport similarly counts all of the costs from driving a car which is less efficient than an EV or a Prius, but ignores the benefits to consumers which lead them to make that choice. Consider, for example, a ban on ice cream sales. It would be bizarre to count reduced consumer spending on ice cream as a ‘benefit’ without acknowledging the lost benefits to consumers from ice cream consumption.

The Government’s Clean Car Discount and Standard policies should not proceed until Ministry of Transport officials fix the analysis Ministers relied upon to set the policies.

Full submission:

Email correspondence with the Ministry of Transport: 

In a new briefing paper, the New Zealand Taxpayers’ Union can reveal that in the period 2013/14 through 2017/18, DHBs spent $20.37 million on redundancy payments.

Some redundancy payments are inevitable, but spending an average of $26,800 on 758 payments is a poor use of money. DHBs should be prioritising patient care and services, not golden handshakes to staff who are being let go.

Huge variance in the size of payments between DHBs should ring alarm bells. Waikato DHB, which has since had its board sacked, had the highest average redundancy payment of $47,800. In contrast, while South Canterbury DHB made more than 100 payments in five years, the average payment was only just over $10,000.

There’s no right way to manage redundancy payments – sometimes letting staff go is the efficient option – but DHBs should be careful to keep their average payments low so funding is going to patient care.

This information, obtained under the Official Information Act, has been released as the second of three briefing papers on healthcare productivity. The first briefing paper can be viewed here, along with the introductory report, Productivity in the Health Sector: Issues and Pressures.

The New Zealand Taxpayers’ Union is questioning the value of a $98,876 brand makeover at Porirua City Council. 

The official new avatar for the Council, which you would expect to be emblematic of the rebrand’s quality, is a limp and childlike smiley face. The design was apparently chosen because it ‘connects with the city’s youthful population’. When Porirua ratepayers gaze long enough into the face, the Council’s five percent annual rate hikes gaze back.

Councils do not need to engage in corporate branding exercises. Unlike businesses, councils are monopoly service providers and do not need to market themselves to their ratepayers, who are already a captive audience.

Porirua isn’t the only council to have indulged in an expensive rebrand, but this is no excuse. In our experience, branding exercises are driven by political egos and only serve to distract from inadequate services or rising pressure on ratepayers.

$25,000 was spent on photography alone for this rebrand, according to a response obtained under the Local Government Official Information and Meetings Act.

The New Zealand Taxpayers’ Union is asking DHBs to charge patients who miss specialist appointments, in light of new figures that show missed specialist appointments cost taxpayers $29 million in FY 2016/17.

District Health Boards need to become more efficient if we expect to keep healthcare costs manageable in response to an aging population. Tackling the $29 million annual spend on missed specialist appointments would be one way to meet that goal.

Some DHBs are worse than others: Counties Manakau, Waikato, Lakes District and Auckland each have missed specialist appointment rates above 10 percent. In contrast, South Canterbury DHB has an admirable 2.5 percent missed appointment rate.

DHBs need to work harder to reduce rates of missed specialist appointments. When patients miss an appointment, they contribute to a clogged health system and impose higher costs on taxpayers – in part contributing to the accelerating health costs demonstrated in our recent report Productivity In The Health Sector: Issues And Pressures.

Figures for DHBs across the country were obtained under the Official Information Act and have been released by the Union in a new briefing paper, the first in a series of three papers on healthcare productivity. The Union can provide raw figures for interested media.

The briefing paper makes three suggestions for DHBs:

1. DHBs should charge patients who miss their specialist appointments.
2. Those DHBs that do not measure (or report on the cost of) missed specialist appointments should do so.
3. DHBs should be more active in reminding people of appointments to reduce the number that are missed.

This op-ed, written by Taxpayers' Union Economist Joe Ascroft, was originally published on Health Central.

By 2060, Treasury’s Long Term Fiscal Model forecasts that government debt will reach 205.8 percent of GDP – approximately ten times our current debt burden as a proportion of the economy. Just financing that debt will cost 11 percent of GDP – one in every nine dollars in the economy will be used to just meet the interest cost of government debt.

Clearly that is an unsustainable future. When debt gets that high simply meeting the cost of basic public services like education, law and order, transport, and defence becomes extremely difficult – let alone welfare payments and superannuation.

So what’s driving our future of debt?

The two most important factors are superannuation and healthcare spending. While superannuation (expected to increase from 4.8 to 7.9 percent of GDP) routinely receives coverage in the media, healthcare (expected to jump more aggressively from 6.2 to 9.7 percent of GDP) is actually expected to be more of a burden on taxpayers.

Our aging population is one explanation for both factors. As the population distribution skews older, it’s natural that a greater share of resources will be used to fund superannuation and healthcare.

But population aging is not the only factor driving the accelerating cost of healthcare. When the Office of the Auditor General examined Treasury’s Long Term Fiscal Statement they noted that “non-demographic factors raise healthcare costs 35% faster than normal real output growth and 25% faster than normal consumer price growth. These two factors are behind most of the increase in healthcare costs during the 40-year projection period.”

In short, the OAG claims that a majority of the expected increase healthcare costs is attributable to healthcare cost pressures and higher demand for healthcare coverage associated with income growth, rather than an aging population.

So how can we mitigate those cost pressures if they are not related to demography?

Improving healthcare productivity would be a good start.

Productivity is a measure of how much output we get for the inputs we invest. Typically, we expect productivity to grow in response to new technology and capital investment. Productivity growth is the driving factor behind wage growth and prosperity.

Unfortunately, productivity growth in the health sector has been woeful for the last ten to fifteen years. In the period 2004 to 2015, cumulative health productivity growth was close to zero. In the period 1996 to 2017, labour productivity growth in the healthcare sector was half of the rest of the economy.

Put simply, any increase in output in the healthcare sector in the last two decades is largely attributable to more inputs, rather than any improvement in efficiency. It is wholly unsurprising that Treasury expects debt to climb to impoverishing levels, if one of the largest areas of public expenditure is failing to become more efficient in line with the rest of the economy.

Beating the debt apocalypse by taking on healthcare productivity is possible but might require the Government and DHBs to make difficult choices. Abandoning our public-focused healthcare model in favour of American privatisation would be a big mistake – instead we should focus on implementing a series of small reforms to cut costs while improving output.

The Taxpayers’ Union proposes some of these reforms in a series of papers released in the coming weeks: attempting to limit hospitalisations associated with adverse drug reactions (i.e. becoming ill because you have incorrectly taken prescription medicines), cutting down on missed specialist appointments, and minimising large redundancy payments.

DHBs might also want to consider tying remuneration of board members and executives to the financial health of the organisation, in light of the Government having to call in commissioners to Southern and Waikato DHBs. The Government could also consider increasing the proportion of each board appointed by the Minister, rather than elected by the public in notoriously misunderstood, low-turnout elections. Finally, amalgamating some DHBs might help to cut down on administration costs.

Each of these policies will need to be considered on their merits and none of them are a silver bullet, but if the Government implements no reform, taxpayers will be on the line for eye-watering levels of debt. 

The report can be found by linking directly to the PDF here.

The New Zealand Taxpayers’ Union is calling on the CEO of Invercargill City Council to take responsibility for untraceable cash spending that occurred on a trip to China.

In late 2017, four Invercargill City Councillors visited the sister city of Suqan, China. The CEO withdrew $3,000NZD worth of Chinese yuan for expenses. At the end of the trip, $1,780.45 was returned.

This is not surprising. What is surprising is that when the Taxpayers’ Union asked for receipts, the Council said that none were collected. It is a core responsibility for any CEO to ensure that expenses are recorded. The fact the CEO was ready to untraceably spend up to $3000 is alarming.

When asked for further details about the trip, Invercargill City Council stated that “Chinese currency was purchased for incidentals” and that “no receipts were received.” When asked further, the Council stated the currency went towards taxis and trains.

Quite frankly, the Council’s explanations can never be satisfactory because ratepayers are forced to take them on their word. It’s standard for ratepayer money to be used on incidentals, including booze and entertainment, but without any receipts it’s left to our imagination just how much fun Councillors had on the ratepayer dime.

Most concerningly, the Council says this is standard practice for its sister city visits. Other Councils collect receipts for all travel expenses. We’re calling on the CEO to take responsibility for this basic failure of accountability, and to introduce better practices. In the meantime, ratepayers are left wondering whether this behaviour reflects a deeper culture of arrogance within the Council.

Attendees of the trip included Crs G Lewis, R Amundsen, L Soper and A Crackett. With them was CEO Richard King and a staff member. Venture Southland and Chamber of Commerce officials also attended but paid their own way.

With health spending as a percentage of the economy expected to increase more than 50 percent between now and 2060, the Government needs to put greater focus on efficiency, says the New Zealand Taxpayers’ Union.

Our latest report Productivity in the Health Sector: Issues and Pressures investigates the recent failure to achieve efficiencies in the health sector and offers some possible opportunities for reform. According to Treasury forecasts, debt is expected to hit 205.8% of GDP if we don’t make changes to superannuation or health spending – unsustainable if we want the Government to continue funding public services as current levels.

However, while superannuation receives a lot of attention from politicians, health spending is actually expected to grow at a faster pace – nearly ten cents in every dollar in the economy will be devoted to health spending by 2060. If we can reduce that spending by achieving efficiencies across the sector, public debt will be much more manageable for taxpayers.

Our report argues that the best approach for reform is in line with OECD recommendations: the Government should not up-end the entire sector, or introduce American-style private markets, but instead seek to introduce incremental reforms that deliver better returns for every dollar the taxpayer spends. In each of the next three weeks, we will be releasing an issues paper focusing on wasteful spending at DHBs – eliminating those instances of waste would ensure funding could go to more surgeries and better care for those that need it.

Key figures:

1. Health spending is expected to grow from 6.2% of GDP in 2016 to 9.7% of GDP by 2060, contributing to debt hitting 205.8% of GDP by 2060.
2. Between 2004 and 2015, there was zero cumulative growth in healthcare productivity.
3. Between 1996 and 2017, labour health productivity growth (0.9% per annum) ran at half the rate of the rest of the economy (1.8% per annum).

Further to this report, the Taxpayers’ Union will release three briefing papers containing original research on areas of waste in the health system.

Tuesday 6^th: Missed Specialist Appointments
Tuesday 13^th: DHB Redundancy Costs
Tuesday 20^th: Adverse Drug Reactions

The New Zealand Taxpayers' Union can reveal that the Government spent $133,530 on producing its ‘Wellbeing Budget’ document, a cost blowout largely driven by spending on graphic design and photography.

The $133,530 price tag compares to $86,268 for the 2017 Budget – an increase of 54.8%.

The Government spent $31,682 on external designers and photographs. These costs were zero for the 2017 Budget, which the Taxpayers’ Union asked about for a comparison.

Even general printing and proofreading costs increased for the Wellbeing Budget compared to 2017.

The Wellbeing Budget was a great gig for the beret-wearing hipsters who designed it, but not so great for taxpayers, who were forced to pay for the PR blitz.

It’s a minor spend in the scheme of things, but it is concerning because this document, prepared by the Finance Minister, sets the fiscal tone for the rest of the Government. If Grant Robertson starts splashing out on glossy design, other departments might think it’s okay to do the same.

The New Zealand Taxpayers’ Union has identified an absurd case of mission creep at Wellington City Council: the decision to spend $21,750 on two Consumer NZ investigations into different brands of bike lights.

Information released to the Union reveals that Wellington City Council initially paid Consumer NZ $10,600 for a comparison of bike lights in 2017 and paid the organisation a further $11,150 for an updated version of the report this year, totalling $21,750.

Consumer NZ purchased 61 bike lights and tested their battery run-time, light output, ease of charging, lighting modes, water resistance and fitting.

This sort of spending says the lights are on, but no-one is home. Consumer NZ’s product comparisons are a service to its subscribers, so why should Wellington ratepayers be the ones forking out?

$20,000 might only be a drop in the Council’s budget, but this is a worrying case because it hints at a culture of mission creep. The Council’s decision to get involved in niche consumer matters, that would usually be dealt with privately, only results in more neglect of core services like roads and rubbish.

The Wellington City Council would be wiser to conduct a comparison of the value of its own spending projects, particularly while it’s hiking rates and dealing with unexpected costs from the Town Hall and Library.

Raw information:

Proposal
Email chain

Update: New Plymouth District Council has corrected information it gave the New Zealand Taxpayers’ Union regarding ratepayer-funded flight expenses in 2017/18.

A Council spokesperson states:

Former Govett-Brewster Art Gallery/Len Lye Centre director’s Simon Rees’ overseas travel was not ratepayer funded.  Supplied information should not have included three overseas trips by Mr Rees, which were funded by the Molly Morpeth Canady Fund. This funds all the director’s travel and associated expenses.

Therefore, the updated total of the Council’s 2017/18 flight spending is $279,355, $23,121 of which was international travel. The Council keeps its place as the country’s fourth-highest spender on air travel for 2017/18.

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The Taxpayers’ Union can reveal that New Plymouth District Council was the fourth highest-spending council in the country when it game to air travel in the 2017/18 financial year. The Council spent $285,391 on flights, $256,235 of which was domestic, $29,157 international.

Click here to view the Council's information release.

For comparison, that is more than twice Palmerston North City Council’s spend, and even slightly higher than Christchurch City Council.

International destinations included LA, Vancouver, Sydney, and Brisbane.

New Plymouth District Council’s travel habits are eye-wateringly expensive, both in real terms and relative to other Councils.

The Council will argue that it faces higher costs due to its remote location, but that’s also true for Councils like Whangarei who managed to keep costs down. The question ratepayers will be asking is why is so much travel necessary in the first place? Every day spent travelling outside the district is less time focused on local needs.

Flight expenditure is important because it reflects the culture within the Council. How can ratepayers be assured they’re getting value for money on roads and rubbish when staff fail to display frugal attitudes on less important spending like travel?

This information has been collected as part of the Taxpayers’ Union’s annual Ratepayers’ Report, which will be released in full later this year.