Scrutinising Labour's policy

All political parties and policies deserve to be given close scrutiny, and critiqued as required. Some political policies have titles as strident, and meaningless, as headlines in the tabloid news. What lies behind them needs to be teased out. In doing this a balanced and informed approach is essential. One item in particular in Wednesday’s Press showed little enthusiasm for the latter part of this approach.

In the Perspective section of the Press (page A19), there is a piece prominently headed Stinging criticism of Labour’s generous Christchurch offer. In it the writer looks dismissively at Labour’s proposals to intervene in the property market and make land available at “affordable” prices. He is similarly dismissive of the proposal to intervene in the insurance industry. The overall supposition is that the policy is broadly interventionist, would exploit almost war-like powers, likely to become messy if Labour were given the chance to implement it, and likely to annoy those unaffected by the earthquakes.

While the article is in the nature of a comment, rather than insightful analysis and perspective, that is no excuse for inadequacy. The arguments put forward in discussing or dismissing the proposals demonstrate no understanding of either the past or the present.

The Past

Nothing in Labour’s Canterbury Earthquake Recovery Plan is unprecedented in New Zealand. Perhaps it is now unknown that New Zealand (and the Labour Party) has a rich, if not always glorious, history of government participation in the areas of land, housing and insurance. Much of the intervention of the past has been in the face of strong political and vested-interest opposition, and yet has worked when the chance was available.

Government support for, and provision of, affordable land and housing has been a policy platform for a number of political parties since the 19th century. Affordable land and housing for servicemen was a significant factor in the rural and urban development of New Zealand. Land was balloted by the government for those who returned from wars. Not everyone was successful, but a scarce resource was distributed as fairly as could be done. Those who preferred to settle in urban areas after WWII had cheap mortgages made available via the government. From the 1930s many families who could afford neither home ownership nor private rentals had housing provided to them by the government.

All of these were interventionist policies based on enabling principles. Various government agencies came into being for these purposes: the Department of Housing Construction (building state houses along with Fletcher Construction), State Advances Corporation (low cost housing finance and management of state housing), Housing Corporation of New Zealand.

As for insurance – New Zealand has had government insurance companies since the second half of the 19th century – State Insurance, now since sold, and EQC which remains. The reasons for which government insurance was set up in the 19th century exist again today, and the Victorians were no less market oriented then than the National party is now.

Omitting the experiences and successes of the past makes the article seem plausible. However, in light of what has been achieved in the past, it may well be that what is envisaged is achievable. True, the policy does not spell out the detail but, as is the nature of all initial announcements of political policy, they are designed to paint the big picture. An attempt at a balanced article would have traversed this.

The Present

As far as the present is concerned, the writer says that intervention would not be popular with developers faced with losing an opportunity for profit. Quite understandable, but is it really a big issue? Why? The article continues:

“Labour leader Phil Gough talked about ‘price gouging’ and ‘profiteering’ among developers, but new sections are usually more expensive simply because they are bigger and, compared with quake-hit suburbs, safer.”

The first claim regarding price and size is a distortion of what is happening. For the amount being paid on land,  sections of a similar value are either unavailable or much smaller than those being abandoned in the Red zones.  Land of the same size is priced much higher than the value of that being left behind. In many cases sections can be both smaller and more expensive.

The claim that the sections now available are comparatively safer doesn’t stand up to scrutiny: safety isn’t an issue, stability is. Either way, not a single section is being sold with any guarantee that it is “earthquake safe”, so how can the price reflect this?

The article

The article is headed in large bold type “Stinging criticism …” as if this were the case. Despite this headline the article makes no mention of stinging criticism, let alone where it came from. As an aside, it is the biggest headline in the whole of that first section of the Press and so perhaps intended to be significant? Pity the content wasn’t as substantial as the headline that accompanied it. Despite the shortcomings of this article, there was an example of much poorer political journalism in Wednesday’s Press.

The editorial on page A18 called for more substance, and labelled Labour’s policy as “a fine-sounding wishlist”. Many of us would agree with these sentiments. However it is an odd observation to make, as all political parties turn out policies that are fine-sounding wishlists. The editor, after stating the Labour party has performed a useful service in putting forward ideas for discussion, then decrees that “This is largely driven by the party’s poor showing in opinion polls”.

It is both cynical and sordid to make the accusation that the policy exists primarily to boost popularity, rather than the result of any compassion or desire to help those who have suffered from the earthquakes and their aftermath. This is particularly so when aimed at a party that has a better history than any other of trying to help those in need. Unless evidence can be produced, such accusations should not be made. This tabloid-style approach to a complex and emotional subject ought to be left alone.

It is to be hoped this is not what our fare will be from now until the election.

Labour's Canterbury Earthquake Recovery Plan – issues of detail regarding insurance problems

Labour’s Canterbury Earthquake Recovery Plan, like all policy documents, has the big picture but no detail.

Of particular concern is the absence of timing for each of the proposals. When will a specific policy be initiated? What priority will it be given in the whole raft of post-election policies the incoming government would bring with it?

Some proposals are more time sensitive than others and, despite the good intentions, there is a risk that without proper planning many will not happen in time to be useful. Of these time-critical issues the following two in particular come to mind:

  • Funding test cases against insurance companies
  • Establish an Independent Insurance Commissioner

Funding test cases

Funding test cases against insurance companies is critically time sensitive in Red Zone areas because of the reducing amount of time available to accept the government’s offer (closing in May 2012). By then significant insurance related legal questions will need to have been resolved (e.g. the situation of an insurance company opting for a rebuild on Red Zone land). Anyone intent on taking Option 2 (insurance company for the building) will have little time to establish what pitfalls there might be, and only until April 2013 to resolve them with their insurance company.

Even assuming some mechanism could be set up within a few months, the eternity of the due process of law could see all but the most hardy give up. Unless additional judges are made available to handle the cases, and a common sense of urgency agreed (as with the recent case between EQC and insurance companies), there would be little capacity and commitment to getting the issues resolved. As a consequence the May 2012 and April 2013 deadlines (and the threat of using compulsory acquisition) would coerce homeowners into giving up.

Independent Insurance Commissioner

Setting up an independent insurance commissioner will take time, and protracted negotiations can be expected as insurers take whatever steps they can to ensure their interests are protected. Chances are only those who live in the Green Zone, and face a wait of years before their insurance company does anything to help them, will have an opportunity to benefit from this proposal.

Time and feasibility

Clearly time is crucial, and the pressure comes from the deadlines set by current government policy.

The ongoing delays in rezoning Orange areas is making the decision deadline of the end of May 2012 more threatening as each month goes by. With some areas facing a wait until early next year the much vaunted “nine months to decide” (see the CERA Time Guide to your settlement here) is increasingly hollow.

Would a Labour Government suspend or extend the current deadlines for deciding on the government offer, and vacating Red Zone properties? If this was on the agenda then suddenly everything becomes feasible.

Labour's earthquake recovery policy

The Labour Party have information on their earthquake recovery policy available on the website here. The full policy document can be downloaded from here.

The key points of the policy (taken from the policy document) are:

  • Intervene to Give Homeowners Choice
  • Resolve the Insurance Gridlock
  • Make Community Engagement a Priority
  • Use Youth Unemployment to Fill the Skills Gap
  • Establish an Independent Insurance Commissioner
  • Labour will Fund Test Cases (NOTE – these are court cases where residents appear to have been unfairly treated, and to set legal precedents on some major issues)
  • Education in Canterbury
  • Ensuring the Return of Activity to Christchurch CBD
  • Review of the Earthquake Commission

The document also covers the fiscal implications of the policy and the impact on business. There is a total of 11 pages of summary and detail so, if you find some of the above items are missing from media or political commentary, check out the document for yourself (here). There is another policy document due out soon relating to Labour’s policy to strengthen New Zealand’s response to natural disasters.

The response of the government will be interesting. Everyone will have anticipated the “open chequebook” attack, along with horror stories of budget blow-outs, damage to the market etc. The most intriguing part for me will be the role played by Bill English.

Bill English, as Minister of Finance, will have many looking to him for a reasoned analysis and critique of the implementation costs and efficiencies, or inefficiencies, arising from the policy. In the past he has been forthright to the point of stridency with these things.

Bill English is also the Minister in Charge of the Earthquake Commission (EQC). A comparison of the strength of his commentary on the the Labour recovery policy, with his silence on the performance of the EQC (for which he has ministerial responsibility) will be an interesting measure of his conduct as a senior Minister of the Crown.