The following information provides guidance for public servants on costing political party policy proposals during the government-formation period after a General Election.
What this guidance covers
For detailed guidance on public sector processes before, during and after a General Election, refer to the Public Service Commission | Te Kawa Mataaho General Election Guidance 2023.
Since 1996 successive Governments have agreed to continue the practice of not requesting that public service agencies cost political party policies in the pre-election period (CAB-23-MIN-0224 refers).
However, public sector agencies can be asked to cost policies proposed by political parties during the post-election government-formation period. The Public Service Commission’s General Election Guidance 2023 states that:
Inter-party negotiations to form a government are the business of politicians. However, the negotiating parties may want information and analysis from the public sector on issues that might form part of any coalition, support or other agreement. This includes policy costings information.
During the government-formation period, the Public Service Commissioner manages the access of political parties to public sector agencies, including requests to cost political party policies. Political parties should not make policy costing requests directly to agencies; any such requests must instead be referred to the Public Service Commissioner, who will ask government agencies to cost the proposed policies.
The Treasury’s role is to ensure that costings are consistent and reliable across the public service. The Treasury must therefore always be consulted on these requests. If they have been requested to cost proposed policies, agencies should contact their Treasury Vote team.
The extent of the Treasury's involvement in costing political party policies will be determined on a case-by-case basis. This will take into account the relative availability of relevant information and expertise in the Treasury and in the agency receiving the request.
If clarification of the policy is needed to carry out the costing, it may be sought through the Public Service Commissioner from the political party requesting the costing. Please refer to the following guidance from the Public Service Commission for further information on the standards expected of public service agencies asked to provide information for political parties during the government formation period: Standards: Providing information to political parties during negotiations to form a government.
Costings are subject to the Official Information Act 1982. Further, the Government may choose to proactively release them.
What is policy costing?
“Policy costing” is the estimation of the fiscal impacts that a proposal will have. These are made up of positive or negative changes over the forecast period (the current year and the following four years) in:
- Revenue and/or expenditure (operating or capital).
- Operating Balance before Gains and Losses (OBEGAL) and net debt.
- If relevant, contingent liabilities and fiscal risk.
How to cost a policy
There are a number of general principles to be followed when costing policies.
- Estimates of costs – whether point-estimates or ranges – should be stated as accurately as possible. If only the direction of change (i.e. higher or lower costs) is known but cannot be quantified, this should be stated.
- If additional costs are expected beyond the forecast period, these should also be made clear.
- Information to explain the costing should be provided. All assumptions should be explained and justified. Only substantiated assumptions should be used, i.e., unsubstantiated or subjective assumptions should not be used.
- Value judgements and policy advice on the merits of the proposal should not be included.
The methodology for costing is as follows:
- Establish a baseline from the current policy. Consider how the costs of the activity affected by the proposed policy would be expected to develop in the absence of the proposal. This can be informed by the Pre-Election Economic and Fiscal Update (PREFU), which provides the most recent set of forward estimates of government spending and the financial position.
- Establish which of the fiscal indicators (see under “What is policy costing?”) are impacted by the proposed policy.
- Estimate the proposed policy’s first-round impacts and, if they can be estimated accurately, second-round impacts. For example, increasing the excise on a product would increase the revenue raised. However, the resulting increase in the price of the product may decrease its demand, which would have a second-round impact on the revenue raised.
Technical assumptions that should be used in costing are as follows:
|Operating expenditure||GST exclusive|
|Transfer payments||Transfer payments should costed net of income tax|
|Capital expenditure||GST exclusive
Include depreciation, capital charge and/or financing costs (where relevant) in the operating statement impact
|Financing costs||Include if it is clear the policy would not be funded from existing fiscal provisions (operating and capital allowances)|
|Economic assumptions||Check the Pre-Election Economic and Fiscal Update (PREFU) for relevant economic assumptions (eg, forecast CPI inflation)|