Show me the money: Costing party policies in advance of the election

Labour has refuted the costings produced by the Treasury on the grounds that they are based, not on Labour’s policies, but on assumptions provided by Conservative politicians about what these policies involve. Pre-emptive costing of opponents’ policies is not a new practice: successive governments have asked the Treasury to cost Opposition policies since the 1980s, but the Opposition cannot itself ask for costings of planned policies. In recent years there have been calls to allow the main Opposition party to have their policies independently costed. Last March the Chair of the Office for Budget Responsibility claimed that allowing the OBR to cost party policies would ‘offer the prospect of improving the quality of policy development for parties… and potentially improve the quality of public debate’. Other countries have already developed processes to allow both opposition and government parties to have policies costed in advance of an election. As part of our work on year five of the coalition government, the Institute for Government explored pre-election costing mechanisms in Ireland, Australia and the Netherlands. Here we set out some of the lessons from international practice about how such systems work. In Ireland, all parties are able to have policies costed by officials in the Department of Finance at certain points in the electoral cycle: in advance of the annual Budget, in the lead-up to a general election, and during negotiations to form a government following an election. The party submits policy requests to the Department of Finance to be completed by officials before being returned to the party, which may make them public if it wishes to do so. Officials are not told who a request is for, and the content of requests and responses is not shared with the other parties or the political leadership of the department. In Australia policy costings can be carried out by the Departments of Treasury and Finance or by an independent body created in 2012, the Parliamentary Budget Office. While the two government departments will only carry out a policy costing in the weeks ahead of an election, and publish those costings automatically, the PBO costs policies confidentially for opposition parties at any time during the parliamentary cycle. The PBO also allows parties to submit different iterations of a policy to revise and develop their plans. The Netherlands has the most long-standing and extensive pre-election costing mechanism of the countries we examined. The Central Planning Bureau (CPB) not only calculates the costs and short-term budget impact of planned policies, but also assesses party manifestos against a range of other indicators, including the forecasted impact on long-run debt sustainability, economic growth, employment, the financial impact on households at different points in the income spectrum, and the effects on other measures such as carbon emissions and traffic congestion. The CPB publishes a detailed analysis of all parties’ manifestos, with ratings on this wide array of indicators, around a month before polling day. The costings systems described above differ in many ways – including the scope of the offer (should the costings process apply to individual policies or the entire manifesto?) who carries out the analysis for the parties (civil servants or an independent body), and when this facility is available (throughout the cycle or only before elections). If the role of the OBR were to be expanded (or if any other facility were created to analyse the costs of all parties’ policies), thought must be given to these and other design questions. Despite their differences in scope and design, the international models we examined also offer a number of general lessons which should be taken into account:

• Ensuring the confidentiality of the costing process. While the ultimate goal of a costing mechanism should be to encourage parties to be more transparent about costs, parties must be confident that draft policies and costings will not be shared with their political opponents or the media until they are ready to release that information. Once policies are finalised, there should be an expectation that parties do then release relevant costings analysis.
• Minimise the scope for ministerial interference. Ministers should not be aware of individual officials’ involvement in costing opposition policies, nor should they have the power to grant or refuse costings.
• Ensure clear terms of access to government data. Independent costing bodies are often reliant on government figures and models to carry out costings. It is important to put in place clear and enforceable agreements around what access these bodies have to government data, and how long departments should take to respond to requests for information.

Pre-election policy costings are not a guarantor of ‘better’ policies – they do not, for example, assess the implementability of a policy. And they are not unproblematic, as they make heavy demands on official resources and may discourage innovation by incentivising parties to develop more cautious or safe policies with lower up-front costs. Overall, however, officials and politicians in the countries we spoke to in the countries we examined felt that these mechanisms can improve the quality of policies and improve public debate by producing costs based on accurate assumptions rather than political guesswork. The four months before polling day are likely to be littered with rhetoric about funding black holes and radical spending cuts. An independent policy costing process could inject a welcome dose of objectivity and transparency.