Sunday, 4 April 2010

Leaky homes and taxes

Recently both Matt Nolan and myself got irritated about this report of a comment made by North Shore City Mayor Andrew Williams with regard to government tax revenues from leaky buildings repairs,
Williams said the report showed that the Government's contribution to a rescue package should be at least 25 per cent because the tax receipts would make it cost-neutral.
Williams made this comment based on a report by economic consultants Covec which stated that about 25 per cent of spending on leaky building repairs would go back to the Government in tax revenue. I now see that the Covec website has the following statement on it:
Following work we carried out recently regarding leaky buildings, some comments have been made in the media which, unfortunately, have not accurately characterised our analysis. Consequently, we have provided the report below along with the following clarifications:

* Tax receipts from leaky building repairs should not be considered additional ‘windfall’ revenue. In the absence of spending on leaky buildings, the Govt would have collected revenue from other spending.
* The fact that the Govt obtains 25% tax revenue from spending on leaky building repairs does not provide an economic justification for the Govt to fund repairs to the tune of 25%, or any other amount. (Emphasis added.)
* However, there is a strong policy rationale for some form of Govt involvement. Although the costs of repairs has been estimated at approximately $8bn, the total economic cost of this problem, including dispute costs (e.g. legal expenses, expert witnesses, court time) has been estimated at $11.3bn. Consequently, without effective Govt intervention, the country could end up incurring $11.3bn in costs to fix an $8bn problem.
* From an economic perspective, the extent to which the Govt intervenes should be based on a full cost-benefit analysis, where the costs of intervention (i.e. costs of Govt funding) are compared to the benefits, which include avoided dispute costs and public health benefits of quicker repairs.
Well done Covec for correcting misinformation about their work.


dragonfly said...

Presumably you have read Covec's report by now. Are you as inclined now to say 'well done' as you were on 4 April?

gih said...

maybe he really was.

dragonfly said...

gih: I'm not entirely sure what you mean. One of the points I'm making (not altogether obvious, I know) is that there seems to be a little self-sustaining ecosystem of economics bloggers, of which I have only just become aware. In these blogs is some interesting and enlightening criticism of the likes of the PWC report on adult community education and the Berl alcohol report.

However, I have also noticed that many of these blogs have very few followers, and the comments they do get seem to be from other members of the ecosystem. It also seems to me that some of the criticisms applied to the PWC and Berl reports could be applied to the Covec report. I'm wondering if the members of the ecosystem are prepared to criticise each other's work.

I'm interested to know therefore, does Paul Walker genuinely consider the Covec report to be quality work, and if he doesn't, is he prepared to say so?