Central government is squandering billions of dollars of householders’ income. It is doing so simply because it lacks the incentive to assess value for money with sufficient rigour.

Governments can and do squander money by spending our tax dollars wastefully and by using regulations to force us to spend our own money wastefully.

This is not happening because governments are stupid, malicious or ignorant, even if they are some of these things some of the time. It is happening because politicians want to get re-elected.

If wasteful spending is good politics, it will trump bad economics.

Prime Minister John Key pointed this out in a widely-cited comment in 2012: “Keeping student loans interest-free is not ‘great economics’ but it is ‘great politics.’” Ouch.

Much less publicity has been given to some frank observations by Finance Minister Bill English about the reasons for wasteful government spending.

He told The Institute of Public Administration in February this year that much public spending “is likely to be not working. But we continue to spend it because we are certain that changing it will create fuss.”

The fuss would, of course, be caused in good part by the privileged providers of these programmes, NGOs and employee organisations.

In a speech in June this year to a business audience, he identified public apathy as a further reason for ill-justified government spending.

“Too often government is flying blind. You let us get away with getting up and saying ‘we spent $20 million on a problem that shows we care.’ And you say: ‘Isn’t that nice.’ You have no idea whether it works, and neither does the government. And when it’s not sure, it just announces another programme and you go: ‘fantastic, they care, they know what they’re doing.’”

I have two views about these confessions. First, frankness in a prime minister is unusual and commendable but tolerance for waste by the person in charge of spending other people’s money is not commendable.

Second, the minister of finance is correct on all counts. In particular, he is to be congratulated on driving the public sector to produce much better information concerning costs and what works and what doesn’t work.

A better-informed public would be harder to fob off with pious good intentions.

What about wasteful spending through regulation? Potentially the problem is worse. Regulatory costs are less subject to scrutiny by parliament or the Auditor-General. Commonly they are not even quantified.

Take workplace safety regulation for example. Particularly, following the Pike River fatalities in November 2010, the pursuit of greater workplace safety has been a “good thing” in itself.

As long as few if any know what the costs of greater safety really are, good intentions alone may be good politics.

In 2011 the Ministry of Business, Innovation and Employment launched a campaign to reduce workplace accidents due to falls from heights of less than three metres in residential construction. The campaign is being zealously enforced by WorkSafe New Zealand. A worthy cause – perhaps.

The campaign has the potential to add billions of dollars to householders’ home ownership costs. The independent building industry researcher, BRANZ, put the cost at fractionally over $1 billion for new dwellings and additions and alterations to existing dwellings alone.

Ridiculously high cost

BRANZ calculated that many more lives could be saved and injuries avoided if the same amount were spend on improving, say, road safety.

On July 16, The New Zealand Initiative published a report indicating that the costs are likely to be much higher than $1 billion. (I was the author.)

Just to take one aspect, BRANZ’s cost estimates excluded additional costs in respect of home repairs and maintenance. Potentially, any worker caught standing on a roof to inspect it or a TV aerial or dish could be threatened with prosecution if an inspector deemed the means of access to be unsafe or that the worker was too close to an edge without “adequate” edge protection.

One builder told me that compliance had turned a relatively minor $4000 roof job into a $6000 job with no significant safety benefit. On an indicative calculation, that aspect alone could more than double BRANZ’s $1 billion cost estimate.

Long-standing industry practitioners with decades of solid safety records have been telling me that they consider that the costs of compliance are ridiculously high relative to any net safety benefits.

Yet the falls from height campaign was launched without any official estimate of the costs, let alone an attempt to demonstrate greater offsetting benefits. How was this possible?

Lack of both interest and necessity seem to be the only possible explanations.

The Health, Safety and Employment Act 1992 requires employers to “take all practicable steps to ensure the safety of employees while at work.” It imposes no requirement to quantify the costs to home owners or others, let alone demonstrate greater offsetting benefits.

No cost-benefit justification

It is disappointing that the chief executive of WorkSafe New Zealand’s reported responses to the publication of the Initiative’s report did not address the question of the lack of a cost-benefit justification for the falls from height campaign.

Housing costs and inadequately maintained homes are a politically sensitive matter in their own right. And so they should be. Regulation is a major cause, particularly the Resource Management Act (RMA). It is strongly biased against subdivision in particular.

But like the Health, Safety and Employment Act and too much other legislation, the RMA fails to specify that the activities it prescribes should only be pursued to the degree that they improve the well-being of New Zealanders.

In the case of the RMA, that wellbeing can be readily sacrificed to the pursuit of the ambiguous and nebulous goal of “sustainable management.”

So what can be done about waste in government? A great deal could be done to improve public information about waste in government.

In the private sector, the media in all its forms can play a big role, assisted by material and analysis from academics, broad-based think tanks and business organisations and organisations specialising in attacking public waste such as the Taxpayers Union.

Within government, the Minister of Finance is shifting mountains to improve the information base. In the past week, the Treasury has released a new version of its guide to (social) cost benefit analysis and the government has announced full or partial acceptance of all 44 of the New Zealand Productivity Commission’s recommendations for improving regulatory institutions and practices.

The degree to which better information reduces public apathy is hard to assess. Hopefully by enough in important cases to shift the balance of opinion.