Tuesday, December 18, 2007

Tuesday column: Bring on the evidence.

"Labor’s guiding principle appears to be that any promise made during the campaign - no matter how stupid, no matter how dangerous, no matter how bereft of supporting evidence – will be kept."

To technocratically-minded types such as myself the new government is a dream come true. Its leader Kevin Rudd says his decisions will be “evidence-based”.

It’ll mark a change. The previous government axed what it said were “job-destroying unfair dismissals laws” without first asking its Treasury to find out whether they were in fact job-destroying.

It ordered its Employment Advocate to stop collecting information about the award conditions that were being stripped out of Workplace Agreements when it became embarrassed by the information that he was coming up with.

It introduced “media reforms” that hugely enriched moguls such as James Packer and Kerry Stokes without conducting a single piece of economic research on their impact and $10 billion worth of “water reforms” that hugely advantaged existing irrigators without even running the idea past the departments of Finance or Treasury until it was too late.

Its Treasurer Peter Costello derided the econocrats in his own department who could have given him advice about the best way to spend $10 billion of taxpayer’s money by declaring that his department was “no water expert”.

“Treasury is good at Treasury, but Treasury has not been engaged in water,” he said.

Until the Prime Minister changed course this time last year, the Treasury had also not been asked for an economic assessment of the impact of climate change.

Where Treasury advice did get through it was at times ignored, suppressed or misrepresented. The Treasury told the government in the lead-up to the May budget that Australia’s productivity growth had fallen to zero.

When asked after the budget whether he had received such advice the Treasurer replied with apparent pride: “Well, you can look all the way through the budget papers and you won’t find any figure like that”.

The centerpiece of the Coalition’s reelection campaign was a tax package that included a slashing of the top personal rate from 45 to 42 per cent and eventually to 40 per cent.

The Treasurer said he had access to Treasury modeling that showed it would “boost the estimated workforce by around 65,000”.

But he wouldn’t release the modeling. Last week we found out why. The new Treasurer Wayne Swan who had put forward an identical tax plan but without the cuts to the top rate said that Treasury modeling showed that showed his plan would also “encourage around 65,000 people into the workforce”.

It was the same modeling. What the Treasury had found was that there was no extra benefit to employment from cutting the top rate. None whatsoever. But the Coalition didn’t allow the design of its campaign centerpiece to be guided by that evidence. It preferred to misrepresent it.

So it’s a genuine relief to discover that from here on decisions are about to be evidence-based. Note the use of my qualifying words “from here on”.

The new Finance Minister Lindsay Tanner gave the game away in a Lateline interview last month...

He said he wouldn’t blatantly ignore Treasury analysis “like the previous government did, for example, announcing a $10 billion water program written on the back of a serviette yet after a long lunch without being adequately costed or assessed by Treasury or finance and without even being taken to Cabinet. We won't do that sort of thing, I can assure you.”

He was then asked whether he would keep the water program anyway.

His reply: “Yes”.

Labor’s guiding principle appears to be that any promise made during the campaign - no matter how stupid, no matter how dangerous, no matter how bereft of supporting evidence – will be kept.

The requirement for evidence relates only to the future.

Wayne Swan demonstrated last week that his $31 billion of proposed tax cuts were almost completely bereft of supporting evidence when he said they were good value because they would entice an extra 65,000 Australians into employment.

Right now employment is growing by an average of 22,000 Australians a month. Last month it grew by 53,000.

The new Treasurer is proposing to spend $31 billion over three years in order to buy (at most) an extra three months of employment growth.

At around $500,000 per job it’s expensive. That might be good value if there were other reasons for cutting tax, but as Access Economics made clear this week at the moment those tax cuts will actually do the economy harm.

Labor’s $2.3 billion Education Tax Refund is similarly bereft of supporting evidence. Labor says it will ensure parents spend money spent on books and computing equipment for children in need. In fact the parents who already spend that money will simply pocket the refund, and the ones who are too poor to spend it on their children will remain too poor. The partial refund won’t be paid until well after they spend the money they still won’t have.

There is doubtless evidence available as to how $2.3 billion could be well spent on education. Labor either didn’t seek it or didn’t publish it.

Labor has also been tardy in producing evidence to support its contention that every child in upper secondary school needs their own classroom computer.

In fact for years now study after study has failed to find any link between access to computers and classroom performance.

The most recent British study, released just last week after the campaign did find a link but only a slight one. A doubling of computing funding was found to boost the number of students doing well in English by 2 percentage points, the number of students doing well in Science by 1.6 percentage points, and the number doing well in Maths not at all.

Is it worth doing? Perhaps. Might there be a more effective way to spend the money on education? Probably.

And don’t get me started on solar cells on schools.

Labor’s election policies were shockers when it came to evidence.

The good thing is that from here on the new Prime Minister and Treasurer have promised to do things properly. I’ll remind them of it every chance I get.


Stephen Machin, Sandra McNally, Olmo Silva New technology in schools: is there a payoff? 14 December 2007