The Spiralling Cost of ID Cards Will Exceed All Their Benefits

I WOULD like to think both proponents and opponents of ID cards could agree that the best way to decide whether gargantuan government projects should go ahead is on the basis of a cost-benefit analysis.

Add up the costs, financial and political, weigh them up against the benefits, and go ahead if the benefits outweigh the costs. Of course, both are subjective, but it is a good rule of thumb.

Some of the benefits turn out to be real, it is almost impossible for them to be worth the costs. I have written elsewhere about the extraordinary costs to liberties and the shakiness of the political benefits, but leave them aside for a moment and consider only the finances.

Imagine you are a new home secretary, turning to the biggest issues on your desk. Among them is ID cards, the "the largest, most complex and sensitive undertaking in government at the moment", according to the head of standards and practice at the Identity and Passport Service.

Imagine you are immune to the calls of party loyalty and lobbyists, and determined to do the right thing: check out the costs and the benefits of the scheme and evaluate fairly the costs and the benefits of pressing ahead with it.

The first obstacle you will probably find will be the number and cost of the contracts your department has already signed. You have, your mandarins remind you, a legal obligation to honour them.

They have been drawn up and agreed, and perhaps work has begun, irrespective of the strength of the political justification for the project. That alone could be enough to prevent your modest cost-benefit idealism in its tracks.

But the corollary is that the contracts themselves are unlikely to represent value for money. Government technology projects tend to go over budget. This is what happened with the NHS "spine" and it is happening with ID cards.

There are a number of structural reasons why this should happen. Foremost among them is simply that government is not particularly well qualified to commission massive technology projects. If you want value for money on a multimillion-pound project, you should want the agreement to be handled by someone who has experience of making such large deals — or at least someone who has done something like that before.

Government is rarely in that position. Most current ministers lack business or management experience, and many lack experience of deal-making at any level. They tend not to come from professional backgrounds that give them experience of ordering from suppliers or getting the best deal.

This is exacerbated when you picture things from the suppliers' point of view. They have every incentive to get as much money from the project as possible. Unlike their dealings with companies, they have detailed public knowledge about the politicians' stated intention to procure the service. They will know the market better than the minister, so they will know what options they have. And unlike their dealings in the private sector, they may even know how much taxpayers' money is available for the project. All of this makes bargaining harder for the minister and easier for the private-sector supplier.

I am aware of company directors who regularly met with government ministers and blinded them with jargon to get as much money out of them as possible, before saying that the project would be late or could not be delivered at all.

The propensity for suppliers to lie about costs is backed up by academic research. A 2002 article in the Journal of the American Planning Association presented the results from the biggest study of its kind — a sample of 258 transportation infrastructure projects costing over $90 billion (£55bn) from different places and times.

It found, in short, that the main reason so many were over budget was because the cost estimates were based on lies.

Unless you are willing to argue that big transport projects are, for some reason, different from other big projects, you have to concede that the taxpayer is unlikely to get value for money on big projects such as ID cards.

Azeem Ibrahim is a research scholar at the International Security Program, Kennedy School of Government at Harvard University in the US.