Robbing Canberra to pay Armidale: cost analysis doesn’t support ‘national interest’

By David Donaldson

Monday November 28, 2016

The cost-benefit analysis of Deputy Prime Minister Barnaby Joyce’s election promise to move the federal pesticides agency to his own electorate was finally released on Friday, confirming concerns that relocation would disrupt the Australian Pesticides and Veterinary Medicines Authority’s work for several years while new staff are recruited and trained.

It appears to be a case of robbing Peter to pay Paul — except that everyone else pays too, and ends up poorer at the end.

While the general theme of the findings come as no surprise — typically fewer than 20% of staff will move with an agency relocated from the city into a rural area — the numbers are shocking: the analysis suggests that moving the APVMA from Canberra to Armidale may end up costing the cropping and chemicals industries up to $200 million.

It’s not hard to see why Joyce held out on releasing the analysis, which is dated August 1, for so long. Indeed, the Deputy PM conceded long ago the result was unfavourable.

“If I did it on the premise of the cost-benefit analysis, you wouldn’t — but I’m not doing it on the benefit of the cost-benefit analysis, we’re doing it on the benefit of what’s best for this nation,” he told Sky News.

It’s unclear how Joyce’s decision is in the best interests of the nation — unless of course by “this nation” he meant “my constituents”.

The direct cost to the taxpayer will be an estimated $25.6 million, according to Joyce, for things such as: property relocation, redundancies for the 85% of staff who have indicated they do not intend to move with the agency, and recruiting and training around 160 new employees. This may end up being higher if the government decides to fund strategies to mitigate the serious risks highlighted by the report.

While the move will boost the local economy in Armidale (and have a negative impact on Canberra), there doesn’t seem to be much in it for the rest of the country, including industry stakeholders. The benefits for the Australian economy “are modest”, the analysis says, “because the strategic and operational benefits of having the APVMA operate out of Armidale appear to be limited.”

There is “no material economic benefit associated with” two oft-touted reasons for the change: locating regulators and researchers closer to farmers, and co-locating them with the University of New England.

The only long-term benefit the cost-benefit analysis found was lower property costs due to land being cheaper in the country.

Getting the APVMA back to its current capacity is predicted to take three to five years as the agency finds new people and rebuilds lost corporate memory.

The potential costs to industry, while uncertain, are high: it is estimated that a one year delay in the approval of new chemicals could lead to potential loss of crop value of between $64-$193 million, and potential loss of revenue of between $790,000-$2.37 million for the chemical industry.

It is “highly likely” the APVMA will be able to relocate without losing key executive, management and technical assessment staff, the analysts think. Highly likely impacts include:

  • Being unable to sustain quantity of service delivery (service capacity and efficiency) or quality of service delivery (service quality and effectiveness) over the short to medium term.
  • Potential for negative productivity and environmental impact on national agriculture industry including exports.
  • Delays to the registration and approval of new products.
  • Increased cost of regulatory compliance.
  • Undermining of recent efficiency measures.
  • Damage to the reputation of the APVMA and Australian agricultural industry.
  • Impact on the government’s reform agenda.

To help deal with the multiple serious and highly likely risks of relocation, the report suggests a range of mitigation strategies:

  • short term phased transition;
  • medium term phased transition (parallel organisations);
  • the development of a new business model;
  • regulatory scientist training program;
  • relocation/recruitment incentive packages;
  • outsourcing technical assessment work; and
  • technological solutions to assist collaboration and engagement.

The document was released after the government put in place regulation requiring the APVMA to be located at least 150km from a capital city.

Given the significant risks and costs to be borne by the taxpayer and industry for shifting localised economic benefits from one town to another, it’s difficult to see this as anything other than pork-barreling.

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