Talk is cheap

This piece was originally published in the National Times 18 November, 2011

There is a widely held view amongst those who work on natural resource management that talking to ‘the community’ about natural resource problems generates better policy outcomes.  Statements like “people are part of the problem and should thus be part of the solution” are common place. 

In reality, it does not always pay to talk to communities about policy changes, especially if the general citizenry has little to offer in the form of additional knowledge and particularly if there are vested interests who will use the ‘consultation phase’ to maintain or expand a particular resource endowment.

Evidence of the costs of ‘talking to the community’ has emerged as a result of the Murray-Darling Basin Plan.  The latest version of the Plan is to be released later this month, but few would be unaware of the vociferous reception that attended the release of the earlier version of the Plan – the Guide to the Proposed Plan released in October 2010. 

For those who may have forgotten the detail, the Guide indicated that between 3,000 and 4,000 Gigalitres would be needed to provide a reasonable chance of improving the ecology of the Murray-Darling.  At the time, the Board of the Murray-Darling Basin Authority had dismissed a higher volume of 7,600 Gigalitres on the grounds that this would generate unacceptable social and economic costs on irrigation communities.

What was particularly ‘courageous’ of the Authority was the decision to include an extra consultation phase around the Guide – the Act does not require that communities be consulted beyond the standard consultation that would be needed to pass the Plan into legislation. 

So was this a useful step?

The personal costs of this approach proved to be significant.  The Chair of the Authority resigned after the Minister claimed a differing interpretation of the Act.  The Minister was keen to point out that this should not be taken as criticism of the Board or the science, but most observers realised that the 3,000 to 4,000 Giaglitre target was to be reduced because of the political fallout.

At a broader level, a benchmark for assessing the benefits of ‘talking to communities’ can be extrapolated from the Productivity Commission’s work on water buybacks in 2010.  The Commission estimated that if the government simply continued with the water buyback scheme, which involved no discussion with ‘communities’, this would deliver around 2,500 Gigalitres of water for the environment.  This includes the water already accumulated via earlier attempts to address over-allocation, like the Living Murray program.  The total cost of this approach was around $3.1 Billion.

It is now the case that the Basin Plan will deliver around 2,800 Gigalitres of water to the environment, only 300 Gigalitres more than the volume that would have been realised through buy-back. 

It is also pretty clear that the government has moved away from the low-cost, low-consultation process of water buy-backs and is now positioning to spend most of the $5.8 Billion set aside for subsidising farmers’ irrigation infrastructure in an effort to recover this water.  For example, it was recently announced that the taxpayer will pick up the $1.2 Billion bill on stage 2 of the irrigation renewal project in Victoria.  

Even if we ignore the findings of agencies like the Victorian Auditor General that dispute the level of realistic water savings to be made, this will come at a cost of $5,600 per Megalitre – at least twice the cost of simply purchasing the water.  If we also invoke the heroic assumption that these types of projects will not get more expensive and will continue to deliver water, the extra 300 Gigalitre will cost the taxpayer $1.7 Billion – half as much again as what would have been spent on buyback to bring the total to 2,500 Gigalitres.

A more realistic assessment is that all of the $5.8 Billion will be spent to deliver the extra 300 Gigalitres in the Plan, and this will still be short of the volume that was recommended to ensure any improvement in the environment.
The next time someone tries to tell you that talk is cheap it might be worth remembering the cost to taxpayers when a so-called ‘consultative’ planning process is offered to groups with a vested interest.

Lin Crase Professor of Applied Economics Director of the Centre for Water Policy and Management La Trobe University