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Insights 31: 27 August 2021
The Power of Freedom: Personal budgets for social services by Matt Burgess
Podcast: The blackout on 9 August with Carl Hansen
Report: Fording the Rapids: Charting a course to fresher water by Dr Eric Crampton

What future, New Zealand?
Dr Oliver Hartwich | Executive Director |
I do not want to write about the Crowne Plaza exercise area. Or the glacial pace of immunisation rollout. Or the saline solution vaccines. 
I also do not want to write about the problems with the MIQ booking system. Or contact tracing capacity issues. Or the arbitrary lockdown rules. 
I will not go into detail about the processing time for Covid tests. Or, for that matter, the government’s refusal to use saliva testing. Or the long testing queues. 
Unlike last year, the media has focused heavily on government failures. As a result, I will not go over them here. 
But I would like to express how sad I am about the current situation. I am worried about the future of the country as an open and liberal democracy. My primary concern is the deterioration of our civil liberties. 
Some may accuse me of being ungrateful. They will claim that our government saved us from certain death. They will ask if I would rather be in the UK, Germany, India or the US. If I am unhappy, they may suggest I leave. 
All these criticisms miss the point. 
For the past 18 months, while other countries were in turmoil, we had relatively few restrictions. That is something to be thankful for.
But our current path is not promising.
Even once everyone had the opportunity to be vaccinated, the government will not remove all Covid restrictions.
The government will build its own MIQ facilities. That will take at least a year to complete. The ability to travel wherever we wanted and return whenever we wanted will be a treasured memory for many years to come. 
We will be unable to take international holidays. We will not be able to visit our friends and family overseas. Doing business worldwide will remain difficult. 
Meanwhile, life in New Zealand will change. We will always be bound by rules. Covid outbreaks will be a constant concern, shutting down parts of the country without warning. Any plan will always be subject to change. There will be no certainty. 
The power balance in our country will have shifted in favour of the state. We will live in a world where the state is in charge of our well-being and security. A state that, by the way, consistently fails at basic tasks.
No matter how grateful we are to be alive, who would want to live in such a dystopian society?
For Covid’s sake, how much freedom will New Zealanders sacrifice? The answer to that question will determine the future of our country.

Fresher water
Dr Eric Crampton | Chief Economist |
Freshwater politics is a nightmare. Long-term improvements in water quality depend on the development of systems that can withstand government and policy changes. 

But the path to get there is fraught. 

The Initiative published its second report on freshwater management this week. 

The first report proposed cap-and-trade solutions for freshwater abstraction with strong environmental protection. Existing consents would turn into tradeable water rights, with additional rights awarded to iwi where rights had not been otherwise extinguished. In this system, agricultural producers, water bottlers, city councils, and others could trade rights to abstract water from aquifers and rivers, while still maintaining minimum river flows and ensuring aquifer sustainability. 

This second report shows how similar systems could manage freshwater quality, but only in the longer term. A system like this would take time and effort to build, but it would provide a durable framework to improve water quality over time. Other measures are needed until a better system can be developed. 

Parts of that better system need to be built in any case. Parliamentary Commissioner for the Environment Simon Upton, responding to the recent independent review of the Overseer farm management tool, concluded that Overseer could “no longer be a central pillar of freshwater quality management.” 

If an upgrade or replacement for Overseer is needed regardless, that upgrade could make room for a future cap-and-trade scheme. 

Our scheme combines a front-end management system, such as Overseer, with more detailed modelling by Land and Water Science that analyzes the effects of land use on several pollutants, such as nitrates, nitrogen, phosphorous, sediment, and E. coli. When combined with a smart market, the system would enable trading in emission rights while ensuring environmental bottom lines were met. 

But freshwater politics is hard. 

Whenever central government looks out over the countryside, it sees overburdened catchments. And it looks to blunt measures to reduce those burdens that neither take account of the local communities or local water users affected by them, nor provide much sharing of the burden. 

Many communities are making commendable efforts. However, inadequacies at the local level led to overburdened catchments and central government intervention. 
To be sustainable, reform must be backed by those who bear the burden of regulations and transitions must be just. Cap-and-trade systems accomplish this by allocating rights to existing users and sharing costs. The system would require substantial work. It is worth it to manage freshwater sustainably in the long run.  

You can read our report Fording the Rapids: Charting a course to fresher water  here.

The power of freedom
Matt Burgess | Senior Economist |

Today, the New Zealand Initiative launches a new report on a powerful social services innovation: personal budgets.

The idea is simple. Give money directly to individuals so they can hire their own support staff.

The most significant application of this funding model so far is in disability support. There are 8,000 people on Individualised Funding, or “IF”, a type of personal budget.

That is about 20% of the 43,000 people who receive disability support. However, most disability support remains under the traditional services model, delivered by providers contracted to the Ministry of Health.

Each personal budget is set based on an assessment of an individual’s needs. An assessor determines the required hours of support each week, then multiplies by a standard hourly wage to set the budget.

With their budget, recipients hire staff, pay their wages and taxes, even settle personal grievances. In some cases, budgets can also be used to buy equipment.

Today’s report compares the performance of traditional services to IF based on research and the experience of people we spoke to.

Consider Lisa and her daughter Sarah, who has Retts Syndrome. When Sarah turned 12 or 13, the physical demands on Lisa began to take their toll. Lisa secured a few hours of support each week. But she found traditional services inflexible and unreliable. No support on weekends. Workers failing to turn up. Often a different person each time.

That all changed when Lisa and Sarah moved to IF. With her personal budget, Lisa hired the people she wanted and got support when Sarah needed it, including weekends.

Lisa says, “I want Sarah to be able to purchase her care. If they don’t provide a good service, she has the power to purchase elsewhere.”

That power is crucial. Academic research from New Zealand and overseas overwhelmingly confirms personal budgets deliver more flexible, more reliable services, with high reported satisfaction compared with traditional support.

But IF is not easy. Becoming an employer and managing a budget is onerous. “IF is more complicated than you might think,” John, another IF recipient, told us.

It is nearly 30 years since personal budgets first appeared in this country. It has scaled up only recently. IF might be the oldest new idea in social services.

The question now is where else can personal budgets be used. In principle, any service delivered in-home can be funded by personal budgets. Aged Care, mental health and drug rehabilitation seem prime candidates. This is only the start.

You can read our report, The Power of Freedom, here.

We will formally launch the report with a webinar today at 12 noon with Rt Hon Sir Bill English. Details are available on our website.


Second-hand smoke and second-hand Covid
Dr Eric Crampton | Chief Economist |
As the anniversary of the first Covid lockdown approached, the Ministry of Health had some time on its hands.   
It had issued a new consultation paper and was looking for feedback.   
The Ministry wasn’t seeking submissions about appropriate Covid testing systems that could provide rapid results in any new outbreak.  
Officials had already decided that they really were not interested.   
And it wasn’t even about how MIQ practice might need to change if a more contagious Covid strain  emerged.   
The Ministry instead wanted advice on outdoor smoking areas at bars and restaurants. Inadequate ventilation might expose people to second-hand smoke. When smoking is prohibited indoors, what counts as outdoors?  
The options provide an interesting contrast to MIQ exercise areas.   
The Ministry’s preferred option for outdoor smoking areas considered anything with even a temporary roof to be part of the Great Indoors. A picnic table umbrella might even trigger the indoor smoking ban. Another option proposed that if the roof and walls covered  more than half of the perimeter, it should be deemed to be indoors.   
Fast forward five months to the current Covid outbreak.   
A walkway beside the outdoor exercise area at Auckland’s downtown Crowne Plaza MIQ facility is being investigated as the source. Newsroom identified the problem a month ago. The outdoor exercise area is anything but. The hotel’s former taxi loop, a roofed long and narrow driveway, had been walled off on the street side. A public walkway is separated from the exercise area by a partial Perspex wall.   
Had the Crowne Plaza instead proposed that exercise area as an outdoor smoking area for its bar, it almost certainly would have failed under either of the Ministry’s proposed standards. It would have been considered as being indoors. It has a roof. It is enclosed, currently, on two sides.  
Second-hand smoke is not good for you, but it takes a lot of exposure to cause lung cancer. It only takes fleeting exposure to second-hand Covid to really ruin your day. Nevertheless, the site that would not pass muster as an outdoor smoking area, under the Ministry’s proposed standard, was considered safe enough for an MIQ exercise area. 
As we enjoy New Zealand’s second nationwide lockdown, let us hope the Ministry of Health dedicates at least as much attention to the risks of second-hand Covid as it does to the risks of second-hand smoke.  

On The Record

Initiative Activities:
  • Report: The Power of Freedom: How personal budgets for social services are transforming lives, by Matt Burgess 
  • Podcast: The blackout on 9 August with Carl Hansen
  • Submission: The Market study into the retail grocery sector draft report by Eric Crampton and Matt Burgess
  • Report: Fording the Rapids: Charting a course to fresher water, by Dr Eric Crampton
All Things Considered
  • Graph of the week: A fascinating snapshot of the electricity system from the Electricity Authority.
  • Countries where coronavirus is being handled most effectively with least social and economic disruption
  • The claimed success of Reading Recovery is based largely on a myth
  • "Museum of Failure" in Sweden which highlights 150+ failed products
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