Monday, March 14, 2011

No one's trying to reduce government waste

Government waste is like the weather: everyone disapproves, but no one does anything about it. Oppositions accuse governments of creating it, but governments don't seem to try too hard to eliminate it.

And this doesn't seem to worry you and me too much because our main use for government waste is as an excuse to oppose every suggestion that we pay more tax - and, indeed, to resent the extortionate amount we pay already (always conveniently forgetting what we read time and again: that Australia's total tax burden is quite low compared with other advanced economies).

Were someone to magically eliminate all government waste, would we then be willing to pay more tax? Somehow, I doubt it.

This makes it likely we have an exaggerated view of the extent of waste. It suits us to believe waste is endemic. The sums we hear about seem huge - they are huge relative to our household budgets - but we're bad at putting them into the context of the billions of dollars our governments play with. We have no conception of how big Australia is when you add up its 8 million households and more than 1 million businesses.

That's my guess - that we have an exaggerated view of the extent of waste - but I can't prove it. I doubt if anyone has surveyed our impressions on the topic. Nor do we have any figures on the actual size of government waste, whether it's getting better or worse, or which side of politics has the worse record.

I guess no one's game to spend money measuring the extent of waste for fear of the talkback know-alls who'd say this was itself a waste of money.

And, of course, measuring waste wouldn't be nearly as easy as many of the sidewalk supervisors imagine. Waste is deceptively easy to allege, not so easy to prove and very hard to eliminate.

I've no doubt waste exists, and will always exist. There's plenty of waste in our own homes - the excess food we buy, the expensive gadgets we rarely use, the empty bedrooms, the kids who don't take advantage of the expensive educations we've provided, the holiday houses that are rarely occupied, the boats that rarely enter the water or leave their mooring - so why do we imagine governments could ever conduct their affairs without waste?

Because some degree of waste is inevitable it would nice to have some measure that allowed us to say whether its present level was excessive. And there are different types of waste. Often what the casual observer regards as waste merely reflects their lack of knowledge of all the circumstances.

Often there's a lot of subjective judgment involved. Is it wasteful to have bedrooms that are rarely occupied? Is it wasteful not to bother trying to rent out your holiday house when you're not using it? Or is it just the way you choose to enjoy your affluence?

At the government level, there's undoubted waste but there's also debatable waste. I may consider paying the family tax benefit to someone on your income a case of wasteful spending, but you probably disagree.

Tony Abbott and his colleagues are always accusing the Rudd-Gillard government of wasting money - as though waste was a recent invention - but when they're obliged to come up with their own list of spending cuts they're pretty light on. Too many possibilities that could cost votes.

It's no doubt a good thing oppositions carry on about waste - there'd probably more of it if they didn't. Even so, you don't get the feeling governments put much effort into hunting it down. They're always boasting about cracking down on petty welfare fraud, but not much else.

And when you consider how little publicity the media give to auditor-general certified waste, you get the feeling the public isn't all that worried about waste beyond using it to justify their objection to higher taxes.

One class of waste is ineffectiveness: government spending that doesn't achieve its stated objectives, or doesn't achieve them as well as some other program might. You'd think that, in this day and age, governments would put a lot of effort into assessing the effectiveness of their spending programs, but in this we lag well behind the Americans.

Perhaps because of the crowing they know the Opposition might do, ministers and their department heads have little enthusiasm for reviewing the effectiveness of their programs. They don't want the auditor-general poking his nose in and what evaluation occurs is usually pretty Mickey Mouse.

In the US, by contrast, it's common for Congress, when passing spending bills, to earmark a small proportion of the funds for program evaluation and to specify the rigorous methodology to be used. They've even got to the point where they're using randomised controlled trials. You have a treatment group and a (non-treatment) control group and you allocate participants between the groups by the toss of a coin.

Provided both groups are big enough, this approach makes it more likely the differences in outcomes between the two groups are the result of the treatment rather than extraneous factors.

Such an approach, which is widely used in medical trials, could be used to evaluate many - but not all - social spending programs.

And Dr Andrew Leigh, a federal Labor backbencher and former economics professor, has moved a private member's bill proposing we do just that. I'd like to see Abbott and the soon-to-be-elected O'Farrell government promising rigorous evaluation of spending programs. That would test their sincerity. And the Baillieu government in Victoria could get right in and do it now.