I believe it was a lesson learnt in the very early stages of Economics in high school, maybe in the first week of classes; Cost vs. Benefit. For those that missed that class, a Cost vs. Benefit analysis (CBA) involves collating the total expected benefits of a decision and the total expected costs and then comparing them to those of other actions or decisions which could be made. This type of analysis is done in banking and all forms of business everyday, either formally or informally. I don’t see how a financial decision of any significance could be made without a CBA being carried out as a minimum.
The BER program has been getting more than its share of criticism by politicians, talkback radio hosts and various sections of the media. The program has had a profound benefit for schools and their communities. The scheme was not an infrastructure scheme, it was a stimulus scheme. “BER is a key element of the Australian Government’s $42 billion Nation Building - Economic Stimulus Plan, which aims to provide economic stimulus by supporting employment through local infrastructure projects.” (http://www.deewr.gov.au/schooling/buildingtheeducationrevolution/Pages/default.aspx)
Considering the program is not a building program and it is a stimulus program, the basis for which the program is judged is by how many jobs it created in the economy and what was the flow on economic benefits. The value for money argument only carries weight if you consider it in the context of stimulus and not the end use of the project. I have done my best to find the total benefits (monetary and non-monetary) of the scheme and the total costs of the scheme (including restriction on future employment opportunites due to government debt) as would be needed in carrying out a CBA but I don't think they exist. Gillard and Rudd can’t tell you the total cost per job they saved and I don’t think that is good enough. They may have made a great financial decision to run with this scheme. But who knows?
My gripe with the now cancelled insulation scheme is slightly different to what has been reported in the media. While the deaths are shocking, the house fires are inexcusable and the rorting criminal, in the context of stimulus none of these things are really relevant. My concern is; why was the scheme ever implemented in the first place? What was the stimulus benefit? I have tried pretty hard to find treasury documents that show that the money spent on installing insulation is going to produce benefit X. I am yet to find one.
Questions which I would expect to be relevant for an insulation scheme are: What is the cost saving in energy bills per year? What are the dollar values of the environmental benefit? But these are only relevant as side points in the context of stimulus. The real questions are: How many jobs were prevented from being lost? What was the flow on benefit to other parts of the economy?
As an electorate we are asked to vote for who we believe is best going to represent our community and who we believe will make the most beneficial decisions. I can’t tell you and I don’t think anyone outside of Treasury can either (and probably not inside of Treasury), if the total cost of the stimulus, including the cost of the loss of life, the cost of the house fires, the cost of the rectification works, the destruction of industries (the insulation and school building industry will now move to recession once the stimulus runs out) will exceed or be less than the total benefit to the community. However the success of the stimulus has nothing to do with all those points. The success of the scheme rests solely on this: if all those jobs saved were allowed to be lost, would the costs of welfare and economic recovery have outweighed the total costs of the stimulus scheme? Was the debt we are in worth saving your job? Did it actually save it?
No comments:
Post a Comment