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Insights 12: 16 April 2021
Newsroom: Eric Crampton discusses why doing business in NZ is getting riskier
Podcast: Eric Crampton and Oliver Hartwich on policy uncertainty
The Project: Joel Hernandez on the effectiveness of state, state integrated and private schools

Incentives on the agenda
Dr Oliver Hartwich | Executive Director |
Between a policy idea and its political take-up, many years can pass. But that makes it even more satisfying when it eventually happens.

No one could be more thrilled about National’s housing policy package than I am. One of its key proposals derives from research I did in London more than 15 years ago and which the Initiative has refined over the past decade.

Back then, Professor Alan W. Evans, a senior urban economist, and I worked on a policy project to improve Britain’s housing affordability. We argued that planning reform was not sufficient to achieve this goal.

Based on our international research, we recommended a ‘social cost tariff’ worth £500k (approximately $960k) per hectare. This payment should incentivise communities to develop housing areas and compensate them for infrastructure costs.

Though the idea is straightforward, the political implementation is not. Local government does not have the best reputation, neither in the UK nor here. And central government rarely wants to give up power or money, no matter whether it is London or Wellington.

Still, under Prime Minister David Cameron, the British Government moved in this direction with its New Homes Bonus scheme. However, the funding was much more modest than we had proposed – just under £10k per house.

When I came to New Zealand in 2012, the situation was familiar. Unaffordable housing, weak councils, and lack of infrastructure funding are features Britain and New Zealand share.

Once again, I argued that financial incentives for councils are crucial to solving the housing crisis. The objections I encountered were the same I had heard before.

Still, the economic logic behind the idea is compelling. Once councils got compensated for new development, they would find it easier to convince residents that development is positive.

Right now, residents have little to gain from new housing. Instead, they must put up with more congestion, extra competition for public services, and higher rates to pay for their new neighbours’ infrastructure.

It took countless research reports, speeches, presentations, interviews, and columns to establish that councils need better financial incentives. And finally, with National, a major party has accepted them.

National proposes $50k per extra dwelling above a 5-year building average. Whether that is enough is a good question. For some councils, the figure may be closer to $100k for each new build.

We hope that the Labour government builds on this concept, forming and implementing a maybe even better version of its own.

Bloomfield’s reticence is baffling
Roger Partridge | Chairman |
New Zealand’s highest stakes bet is taking place at the country’s border, where Covid infected Kiwis and returning residents are arriving almost every day. When you are betting the farm, you need to play your best hand. Unfortunately, what is obvious to any card player continues to elude the Director General of Health.

In response to the latest outbreak among managed isolation and quarantine workers in Auckland, Bloomfield was reported this week as saying “he would have hoped the latest MIQ workers to have tested positive for Covid-19 had been vaccinated by now.”

Yet achieving that outcome is not something the Director General should be leaving to “hope.” At least not when he has an ace up his sleeve.

In force since May 2020, the COVID-19 Public Health Response Act permits Bloomfield to direct anyone to take or refrain from taking any action likely to contribute to the risk of the outbreak or spread of COVID-19 within the boundaries of a single District Health Board. It grants the Minister of Health the same powers over the entire country.

It is this Act the Minister of Health Chris Hipkins belatedly used in September last year to require all border workers to be tested for Covid-19 at regular intervals following Auckland’s devastating August cluster. The Minister used the power again just this week to make it mandatory for employers to use the Border Worker Testing Register from April 27 following revelations that MIQ “case B” had not been tested since last November.

Using similar powers, Queensland’s Chief Health Officer issued a public health order on 31 March 2021 requiring all health workers deployed in quarantine facilities to have received at least one dose of an approved Covid vaccine by the end of that day. If the workers were not vaccinated, they could not work at the border.

In mid-February, the Ministry of Health said it expected to have vaccinated all New Zealand’s frontline staff within “two or three weeks.” A chart released a few weeks later by the Minister of Health set that date as the end of March.

To make sure that happened, all Bloomfield (or the Minister) needed to do was make an order (or orders) prohibiting employers from deploying any person in a border facing role who had not received at least one dose of the Pfizer vaccine. This would have focussed the minds of health providers, security and transport firms and all others with border facing responsibilities. It would have side-stepped employment law or civil liberties issues. And provided it was properly policed it would have been effective.

Instead, more than a month after vaccinations of the country’s frontline staff commenced, hundreds remained unvaccinated. When will the Director General learn the country’s Covid security is too important to leave to chance?

Closer to the heart
Dr Eric Crampton | Chief Economist |
If you’d thought that sorting Wellington’s transport issues was at the heart of the latest efforts to solve Wellington’s transport issues, well, you don’t know Wellington.

For the past five years, Let’s Get Wellington Moving has been consulting with over ten thousand people and 75 stakeholder groups. This week, Wellington councillors held another whiteboard session mapping out potential strategies.

Councillor Diane Calvert was reported as saying they didn’t reach consensus but could agree on one thing: reducing carbon emissions is at the heart of Let’s Get Wellington Moving.

That tells you a lot about Wellington and the prospects of fixing transport.

Carbon emissions are one of the few things that transport planning does not need to worry about.

Transport emissions are covered by the Emissions Trading Scheme. If Wellington’s transport emissions go down, someone else buys the ETS credits and emits instead.

Council does need to worry about whether demand for buses and EV charge points might change, but it does not need to try to force emissions down through transport planning.

Normally, councils complain about costly mandates forced on them by central government. Here, Wellington is trying, at high cost, to fix something already being handled by central government.

Or maybe I have this all backward. A committed localist such as myself should perhaps welcome every effort by local councils to take over areas of central government responsibility, however futile.

Maybe we should put national defence at the heart of Wellington’s transport planning. If anyone ever lands tanks here, we want to make sure that the roads are congested enough that they cannot make it to the Beehive. A crumbling sewerage system will also create helpful pitfalls to stall the tanks’ advance.

Or maybe inflation should be at the heart of Wellington’s transport planning. Maybe you think that the Reserve Bank already has that well in hand, but can we really take that chance? When CPI looks to be running on the low side, Wellington transport could helpfully make things more expensive by stalling transit. They might need a plan for easing congestion if inflation ever creeps up though.

But in any case, under no circumstances should getting Wellington moving ever be at the heart of Let’s Get Wellington Moving. Because Let’s Get Wellington Moving isn’t about that, is it?

On The Record

Other Initiative activity:
All Things Considered
  • Graphs of the week: Forecasting failure
  • New Zealand’s new housing policy is really just a new tax package — and it’s a shambles
  • What to make of AstraZeneca?
  • A system that can be hacked by lying is not a good system
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