NZ govt policy failures

NZCPR | 19 July 2022

Since their election in 2017, Jacinda Ardern’s Labour Government has embarked on an ambitious  programme of significant public policy transformation and reform.

In line with the PM’s deeply held socialist view that more State control produces better outcomes, centralisation has been the preferred approach.

Accordingly, on 1 October 2019 three housing agencies – Housing New Zealand, its development subsidiary HLC, and the KiwiBuild Unit from the Ministry of Housing – were merged into the new Homes and Communities mega-agency, Kainga Ora.

Next it was the turn of vocational training – on 1 April 2020, the country’s sixteen Polytechnics, along with Wanaga and Industry Training Organisations, were merged into the New Zealand Institute of Skills and Technology, Te Pukenga.

Then, on 1 July 2022, the country’s 20 community-based District Health Boards were merged into a new centralised system with Health New Zealand coordinating the delivery of health services across the country, along with the Maori Health Authority as an independent statutory authority, and a new Public Health Agency.

Water is next, with legislation now in front of a Parliamentary Select Committee that would confiscate ratepayer-owned fresh water, storm water, and wastewater services operated by the country’s 67 local authorities and centralise them into four mega-agencies, under a co-governance arrangement that will deliver effective control to iwi.

Since water is such a crucial public resource and the proposed Three Waters merger is so radical – with high risks and high costs to water users and taxpayers should it fail – let’s examine how successful Labour’s other reforms have been to assess how real the risk of failure really is.

The housing reforms have turned into a basket case. Leaked documents reveal a massive debt blowout at Kainga Ora – from a forecast peak of just over $20 billion in 2033, to almost $30 billion – raising concerns the Government would be unable to repay the increase over the next 60 years.

Meanwhile as the state house waiting list has exploded from 6,000 to more than 27,000, with over $1 billion spent on Emergency Housing for thousands of people living in motels, the agency has spent $24 million on head office renovations, it has hired 1,700 new staff, and is planning on hiring another 485 in 2023.

So what about the Polytech merger – given the Regulatory Impact Statement warned against the planned reforms: “The programme is high risk, being extremely complex, with substantial scale and scope and many and varied stakeholders. The desired rapid pace of change… presents challenges for successful implementation. The key risk… is that, from 2021 when the reforms are likely to take full effect, training volumes and completions could decrease. This could result from a number of factors including reduced confidence in the system, reduced capabilities within the system, and the disruption of learning programmes in the transition.”

It turns out that Labour’s $200 million centralisation of the New Zealand’s vocational education sector has also ended in a shambles – with the Chief Executive Stephen Town on his $13,000 a week salary now on indefinite personal leave. The mega polytechnic Te Pukenga is facing a $110 million deficit, declining enrolments, a damning Tertiary Education Commission report, and the prospects of widespread job losses.

So, if Labour can’t successfully merge three housing agencies nor 16 polytechs, how have they managed merging 20 district health boards? 

Not very well, it seems.

While the new system is only a few weeks old, the Government’s concentration on the reforms over the past fifteen months, instead of on ensuring the health system can cope with the added pressure of the pandemic, has resulted in 900 doctors across 30 different areas of medicine revealing in a New Zealand Women in Medicine Charitable Trust survey, that “we are at risk of a catastrophic collapse of the healthcare workforce.”

While hospitals allegedly need another 3,000 nurses and the aged residential care – which is currently being forced to close down facilities – another 1,000 nurses, New Zealand is also desperately short of 1,500 GPs, and 1,500 medical specialists.

Furthermore, the Association of Salaried Medical Specialists has estimated that if New Zealand was to match Australia’s per-capita staffing levels, we would not only need 3,000 more GPs and specialist doctors, but 12,000 more nurses.

Meanwhile, to manage this crisis, the Ministry of Health has hired nearly 1,000 new consultants over the last 11 months, making up 1,359 in total!

So given this dismal track record of policy failure, how can New Zealanders possibly have faith that Labour’s plan to centralise council-run water services into mega bureaucracies controlled by iwi is going to work out well?

They can’t, of course, because the fundamental problem with Labour’s reforms is that their main purpose is political.

Their housing reform was announced when the embarrassing failure of KiwiBuild was big news. It was designed in such a rush – to ‘bury’ the agency and get it out of the headlines – that the regulatory impact statement revealed officials were unable to reliably estimate the cost, impact, and risks associated with the proposed merger.

The centralisation of the polytechs was another rushed job that aimed to give iwi greater control of vocational training. The Health Boards were also abolished to empower iwi – in this case to control health through the Maori Health Authority and Iwi Partnership Boards.

It’s the same story with Three Waters – iwi will gain a controlling influence over water at many levels.

Taumata Arowai, the new water regulator, answers to a Maori Advisory Board, which is chaired by Local Government Minister Nanaia Mahuta’s sister, Tipa Mahuta.

With half of the seats on the regional representative bodies of the four mega Water Entities reserved for iwi acting in their own best interests, nothing will happen without their approval.

And at a local level, only iwi have been given the power to issue “Te Mana o te Wai” directives to the Boards running the Water Entities that cannot be ignored.

Meanwhile Minister Mahuta has launched a $2 billion ‘Better off’ fund designed not only to bribe councils into accepting the Three Waters proposals, but also to ‘gag’ them by requiring those accepting the money to agree to not do “anything that can reasonably be expected to have an adverse effect on the reputation, good standing or goodwill” of the Labour Government.

In addition, Jacinda Ardern is now politicising the Three Waters submission process by emailing Labour supporters and asking them to send in submissions. This unusual move suggests submissions opposing the Bill are flooding in, and Labour is now desperate to avoid the humiliation of forcing through a law change that’s opposed by the majority of New Zealanders. 

This week’s NZCPR Guest Commentator investment analyst and former local body councillor Frank Newman shares his review of the financial models being used by Minister Mahuta to justify the law change, concluding they are flawed and should not be relied upon:

“To put it plainly, the underlying assumptions made in the government’s modelling are unrealistic. This creates significant risks to water users and central government.

“The most likely long-term outcome of the 3Waters reform is that the assumed cost and capital efficiencies will not materialise, due to a cumbersome governance structure subservient to cultural interests. The Water Industry Commission for Scotland make it very clear that the efficiencies will only arise if the entities are run with private sector management practices and disciplines. That would seem impossible given the complex governance arrangements and direct influence of iwi.

“When considered in the context of the risks associated with the high debt, it is likely that the water entities will not remain viable without central government support or additional cost to water consumers. The water reforms as proposed in 3Waters is a high-risk proposition, with much higher risks than that faced by the 67 local authorities individually.”

So why is the Ardern Government failing so badly in virtually all areas of governance?

Dr Eric Crampton, Chief Economist at the New Zealand Initiative, provides an insight into their policy development process.

On Thursday March 10, a 1News Kantar public poll revealed National was leading in party support for the first time since the pandemic, with Labour falling to its lowest level since 2017.

Christopher Luxon’s claims that New Zealanders were suffering from a “cost of living crisis” saw his ‘preferred PM’ rating rise, while Jacinda Ardern, who denied the crisis, fell to her lowest ranking since becoming PM.

Just four days later, on Monday March 14, the Herald reported: “Jacinda Ardern has this morning finally acknowledged a cost-of-living ‘crisis’… She indicated Cabinet was today considering temporary relief on some of the tax that Kiwi motorists paid for fuel. ‘We are looking at additional things we can do to ease the pressure on families. Any decisions taken today, we will speak to this afternoon.’”

Official Information Act requests into the policy U-turn reveal a chaotic process.

At 2.53pm on Sunday March 13, about a dozen New Zealand Transport Agency and Ministry of Transport officials received an email from an NZTA senior manager headed: “Cabinet paper: Urgent.”

They were asked to provide details on how much it would cost to reverse the increases in Road User Charges and Fuel Excise Tax that had occurred since 2018 – for a Ministerial Cabinet Paper due by 11am the next day.

The email trail shows officials worked well into the night, with the last message sent at 11.42pm. They met at 8.30am on Monday morning to firm up their costings for the 11am Cabinet meeting. At 4pm – just over 24 hours after being first approached – the Prime Minister announced the policy.

Dr Crampton says, “NZTA did an admirable job, under circumstances that should not be faced except under real emergency. There was no emergency that required inventing policy on less than 24 hours’ notice to officials, forcing them to work past 11pm on a Sunday night. There was only a political emergency caused by Labour’s drop in the polls. It is a terrible way to run a country.”

The same knee jerk policy development was evident in the $1 billion cost-of-living package announced in May’s Budget.

On May 3, just two weeks before the budget, a Newshub-Reid poll showed most New Zealanders didn’t think the Government was doing enough to manage the cost-of-living crisis. 

As a result, “Urgent advice” was requested by the Minister of Finance from Inland Revenue on the possibility of a cost-of-living package being developed and included in the Budget.

Given the rushed timeframe, the Minister was warned against the scheme: “Given the narrow scope of the commissioning and the speed at which advice was produced… there is a risk that significant issues have not been identified.”

He was also warned that a $1 billion hand-out would fuel inflation: “Treasury has advised that strong aggregate demand, combined with constrained supply and a tight labour market, will result in inflation staying above target in the near term. In this context, an increase in the level of fiscal support would further exacerbate inflation.”

Despite Treasury’s warning, the $1 billion package went ahead, funded from the Covid relief slush fund and as predicted, interest rates have now risen to 2.5 percent, as the Reserve Bank continues increasing the Official Cash Rate at the fasted rate in New Zealand’s history.

Then on Sunday, another surprise announcement – the transport relief package was being extended for a third time through to January 2023 – this time to counteract the record inflation figures due the next day!

With inflation now running at 7.3 percent – the highest since the Reserve Bank Act was introduced 32 years ago and well above the Bank’s 1-3 percent target – this latest $600 million package means even higher interest rates are in store.

Labour policy is driven by polls and media headlines. Advice is ignored, or not even sought. Is it any wonder that Labour’s reforms are a catastrophic failure? 

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