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Insights 33: 6 September 2019
Dr Eric Crampton explains on Stuff why strict new water targets could push farmers out of business
 
Dr Oliver Hartwich discusses on Newsroom the constitutional case for Boris Johnson's actions
 
New Research Note - Hands-on: New suggestions to reform the vocational sector in New Zealand
Durable institutions matter
Dr Eric Crampton | Chief Economist | eric.crampton@nzinitiative.org.nz
The great legacy of the reforms of the 1980s and 1990s were the durable institutions that have since guided how we are governed.

The Fiscal Responsibility Act set a framework for balanced budgets that has withstood many changes in government. Had it mandated particular spending levels, it would have been fragile and would have broken with a change in government. Instead, the Act only required honest accounting, balanced budgets, and prudent debt levels.

Durable institutions matter. It is hard for anyone to operate when policy varies wildly with changes in government.

This week, Environment Minister David Parker announced some of the outcomes he would like to see in improving freshwater quality. The coming national policy statement will require substantial reductions in nutrient load in our rivers and lakes. A lot of those changes really are necessary for environmental sustainability. But without a strong enabling framework, the policy change will be fragile, and any improvement in environmental quality ephemeral.

A lot of farming activities have been by-right for ages. Business plans, investment decisions, and mortgages are all based around certain expectations about the regulatory framework within which farming operates. Requirements to massively reduce nutrient load in some catchments can easily bankrupt many farms – many of which will have played fair by every rule they have ever faced.

It does not make for a just transition.

Neither does it make for a durable environmental framework. The hardship caused by the changes will build political pressure to reverse them as soon as there is a change in government.

But there is a better way.

Cap-and-trade systems can achieve every one of Minister Parker’s environmental objectives, while building in a just transition. Existing use rights, whether irrigation consents or the implicit existing right to discharge nutrients, are turned into more formal and tradeable rights. Over time, the quantity of those rights allocated to existing emitters reduces. Additional rights would be provided to iwi in recognition of any rights to water they hold that have not been extinguished by contract, sale or treaty.

Crown buy-backs of rights within the system would reduce total use to sustainable levels.

As I explain in the latest issue of Policy Quarterly, such a system would be far more durable.

We can have the outcomes Minister Parker wants but only with a much better way of getting there. The environment is too important for fragile institutions.
Clearing the roads to bipartisanship
Dr Patrick Carvalho | Research Fellow | patrick.carvalho@nzinitiative.org.nz
Bipartisan politics is a rare beast in New Zealand nowadays. It is even harder to spot when political parties are shy to sponsor necessary policy changes that might arouse public backlash at first.

That seems to be the case with congestion pricing, which charges drivers with higher road user rates at peak times in overcrowded routes.

Fortunately, this thorny-but-effective policy solution to our increasing traffic woes could still materialise based on recent bipartisan developments.

Last week, the National Party launched a discussion paper on their economic policy platform for next year’s election. Hidden in the document was a brief mention of “exploring pricing mechanisms” to deal with car congestion clogging our major urban centres.

That is refreshingly similar to the Labour-led Coalition government’s Policy Statement on Land Transport, which also recommends new road pricing tools as “part of the solution to the [congestion] problems in high growth areas – particularly in Auckland”.

The case for congestion pricing is not new, with close to a hundred years of academic research backing it and plenty of international case studies validating it.

Among transport experts, there is widespread agreement that congestion pricing is the single most effective way to deal with traffic bottlenecks while also providing additional incentives to increase public transport use.

In New Zealand, both the Tax Working Group and the Productivity Commission have proposed congestion charging as an efficient way to modify behaviour and improve environmental quality.

So what is holding us back?

Partly behind the political caution in launching this time-tested, cost-effective transport policy is the public’s misunderstandings and fears about the new system.

To address these concerns, political leadership must be resolute and clearly communicate the gains against the status quo, including how New Zealand drivers are paying congestion charges anyway through lost hours idling in traffic.

Also, it is good to remind voters that variable peak/off-peak rates are already part of our daily lives, from electricity bills to bus fares to cinema tickets.

Most importantly, politicians must dissipate public fears of congestion pricing being “just another great big tax on everything”.

In this regard, National’s commitment to a revenue neutral system is commendable. Every net dollar raised through congestion charges shall be offset by, say, a dollar less through property rate collection or lower fuel taxes.

We might be at the threshold of a promising start towards a bipartisan solution to fix our congested roads, improving productivity growth and community interaction.

Let us hope our political leaderships can clear the roads to success.
Vape and mirrors
Toby Fitzsimmons | Research Intern | toby.fitzsimmons@nzinitiative.org.nz
“Giving up smoking is the easiest thing in the world. I know because I’ve done it thousands of times” – Mark Twain.

Despite the “ease” of giving up smoking, the government wishes to make it harder by smoking out an alternative, healthier way of intaking nicotine – vaping.

Legislation is due to be tabled to ban vaping ads – disregarding the logic that more smoking hot models vaping on billboards would mean more people quitting cigarettes. In fact, recent studies in the US suggest that banning vaping adverts on TV could cut the cigarette quitting rate by up to 16%.

Our own Associate Minister of Health, Jenny Salesa, lit up a tobacco company for promoting vaping by targeting poor smokers with free e-cigarettes. Salesa said it was “absolutely not [okay].” What about real estate agents targeting homebuyers, luxury car dealers targeting rich people and universities targeting students? Perhaps all ads should go up in smoke.

But then, if the government wants to crack down on vaping maybe there’s something wrong with vaping. There’s no smoke without a fire… except there is vape.

So to hedge its bets, the government runs a website with taxpayer money to promote vaping as a healthy alternative to smoking while snuffing out companies for doing the same for free.

With these mixed messages on the safety of e-cigarettes, consumers are in a haze, which does not smell of strawberry shortcake.

To clear up the smog, Salesa was asked on The AM Show whether vaping is safe.  After some shilly-shallying, she said vaping is at most 95% as safe as smoking. But the actual Public Health England statistic says vaping is at least 95% safer than smoking.

Barely perceptible through the smoke and mirrors surrounding vaping, the government’s motive seems unintelligible.

When asked what was in vape liquid, Salesa said “nicotine”, “flavours” and “various things that the folks who are manufacturing vaping products put in.” Actually, the manufacturing folks use propylene glycol and vegetable glycerine. (No, I am not available to work as the Minister for Health).

With little evidence of vaping doing harm, vaping’s valid use as a quitting tool, and the 5,000 deaths caused by smoking every year in New Zealand, the government needs to consider that thing called evidence-based policy.

Perhaps the Minister misunderstood Mark Twain. If vaping caused people to quit once rather than a thousand times, then it must make quitting harder?
 
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