Targeting makes sense

Simon Collins at NZ Herald reports:

A subsidy that has helped to insulate about one in every six low-income homes looks likely to be cut back in next month’s Budget to a more targeted scheme.

The Green Party, which won the subsidy in a post-election deal with the incoming National Government in 2008, is pushing for it to continue at the current level of about $70 million, reaching about 50,000 homes, a year. …

Energy Minister Simon Bridges said the Government was considering, as part of its Budget process, “whether or how the programme might be extended” beyond its scheduled expiry in September.

“Were it to continue – and I emphasise no decision has been made – consideration may be given to transitioning it to a more targeted programme towards households in need,” he said.

He said the scheme had been “a huge success”, with 204,000 homes insulated at a cost of $347 million.

A cost-benefit analysis led by Reserve Bank chairman Dr Arthur Grimes found the country gained almost $5, largely in reduced health costs, for every $1 spent on the subsidy – a net benefit of almost $1 billion.

But the study also found that the health benefits averaged $854 a year for households with community services cards, but only $336 a year for other households, and recommended that the scheme should be aimed at low income earners.

Targeting makes sense for me. Households that can afford to insulate should do so without taxpayer subsidies. Government assistance should generally be directed at the least well off, not those who have sufficient income to make their own choices.

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