Brian Rudman: The big winners from cost-benefit studies

Bill English. Photo / Mark Mitchell

After years of in-depth research, I've come to the conclusion that the main beneficiaries of the big events politicians subsidise at our expense are the cost-benefit analysts hired to justify the expenditure in the first place.

Think about it: what large event doesn't come with a preview report, oozing descriptions of the economic benefits about to engulf lucky Auckland, and a matching exit document, declaring how returns exceeded all expectations.

Last week came self-congratulatory statements from Auckland Council's events and economic development arm, Ateed, about the shower of gold dust spread across the city from the Rugby World Cup last winter and the Volvo Ocean Race stopover in March.

The rugby delivered "more than half a billion dollars in net additional expenditure" plus a further $216 million in "flow-on expenditure."

Ateed found the Volvo race a little harder to spruik, being reduced to highlighting that the stopover organisers had "returned a $201,000 surplus on budget". My advisers tell me that's a confession they slightly underspent the $3 million grant Auckland Council and central Government had handed out.

As a result of that slightly less than $3 million investment of public money, the "Auckland stopover generated an additional $6 million in GDP to the Auckland economy".

The much bigger, and longer, rugby festival cost ratepayers a lot more - the latest figure is $88.49 million - but, we're told, resulted in Auckland's economy growing $728 million between 2006 and this year.

Mayor Len Brown says "these are results we should all be proud of".

I'm sure the cost-benefit boffins who conjured up this figure definitely are. Indeed, the numbers are so impressive it makes you wonder why Mr Brown doesn't demand a Rugby World Cup every year. Think - the windfall after only four would be enough to pay off the underground CBD rail loop.

The cynical take on the process is that the whole cost-benefit palaver was introduced by politicians to put a veneer of neutrality on the decision-making on pet projects. Of course this pretence of "independence" is not without risks, as has been highlighted by the controversy over the proposed Puhoi to Wellsford "holiday highway".

In Parliament last week, Green co-leader Russel Norman had sport with Minister of Finance Bill English over the low cost-benefit ratio of this "road of national significance".

Opposition politicians have been baiting the Government for three years about its refusal to subject several pet highway projects dubbed "roads of national significance" to cost-benefit-ratio rules.

It came to a head just over a year ago when Transport Minister Steven Joyce rejected an Auckland Council report claiming a stunning $3.50 cost benefit for every $1 invested in its proposed city rail loop.

The Government, which opposes the loop, demanded that Government boffins do the sums again. They did, with predictably less flattering results. But before that, up popped a secret independent analysis of the Puhoi to Wellsford highway commissioned by the Government which showed a cost-benefit ratio of 0.4, which meant for every dollar invested the return was only 40c.

In other words, if the politicians were to put the political clamour of their supporters to one side, the holiday highway was a non-starter.

Dr Norman asked Mr English whether the Puhoi highway, and others, had been assessed against the Treasury's new "better business cases for capital proposals" guidelines "to ensure they represent good value for money, [and] if not, why not?"

As the answer was "no", Mr English beat around the bush, saying the guidelines were not retrospective so the Puhoi road "will not have been assessed strictly according to the better business case guidelines," but he hoped "that in future that would be the case" for such projects.

He eventually conceded the Government was committed to the "roads of national significance" and "they will go ahead".

Which is honest of him. But it does highlight how flexible politicians can be, when it suits.

That doesn't worry me that much. If politicians weren't there to bend the rules and carry out their political promises, why would we bother voting? But if they are going to support certain events and projects, despite the evidence of the cost-benefit analyses, why is so much public money wasted commissioning these expensive reports?