Alcohol harms and the NZ reforms

Man, I shouldn't have gotten my hopes up.

The Science Media Centre pointed me to reporting on some new work look at what's happened consequent to National's Sale & Supply of Alcohol Act 2012.

It always felt like a spot where some really good work could be done. Different locales implemented different district licensing plans at different times, so you could run a panel study looking at how different measures worked in different places.

But that isn't what this is. And what it is... well, let's go through it.

So the Science Media Centre points to this Newshub Newsroom (dammit) piece by Farah Hancock. It doesn't start well.

Alcohol industry appeals have “muted” potential benefits of legislation aimed at reducing the estimated $14.5 million a day cost of alcohol harm, a new study finds.

Massey University research shows the only effect of the Sale and Supply of Alcohol Act 2012 (SSAA) is a reduction in alcohol availability after 4am in cities.

The alcohol industry appealed 30 of 32 alcohol policies proposed by councils to reduce harmful drinking.

Lead researcher Stephen Randerson said alcohol related harm was estimated to cost New Zealand $5.3 billion per year.

“That was in 2005, so it’s probably going to have risen since then. The things that feed in to this are the cost of emergency services including police work where alcohol is involved in at least one in three call-outs, the emergency department and the health cost of chronic disease caused by alcohol.”

Recall that the $5.3 billion figure cited was from BERL's decade-old work and was their headline figure for the cost of alcohol and joint alcohol-and-other-drug use. The alcohol-alone figure was $4.8 billion. And that figure was very very wrong. Matt, Brad and I explained the problems in it in this NZMJ piece. A few of those problems:

• Counting as a social cost every dime spent on alcohol by anyone consuming more than about 2 pints of beer per day, including all alcohol excise paid by that cohort;
• Double-counting productivity costs of lost wages and VSL measures of statistical lives lost that encompass productivity costs;
• Counting as social cost every cost incurred by a heavier drinker, but not netting from those costs any benefits experienced by those drinkers.

A bad stat is hard to kill. And folks citing those kinds of stats who should know better, well, it tells me to be careful when reading what they've done.

And that brings us to the piece out in Friday's NZ Medical Journal by Randerson, Casswell and Huckle that's the basis for all this [Why oh Why can't news outlets just link to the study?!]

The piece uses survey methods developed in Casswell's International Alcohol Control study to structure interviews with 36 informants (main sources, according to the article, being police, liquor licensing inspectors, and public health officials) in early 2014 and early 2016, with 26 of the informants interviewed in both rounds of interviews. Plus a few police who do alcohol breathaliser checkpoints. 

Those informants scored a pile of things, like their view of regulatory compliance and enforcement, alcohol availability, trading hours, compliance with hours, difficulty of obtaining new licences, purchase age enforcement, and several other indicators. 

So I guess I'll have to keep hoping somebody credible does the panel data work I've been hoping to see - this is just a survey of what police, public health, and liquor licensing inspectors think about things.

Ok, so where's the evidence on big bad industry thwarting local communities? Here's the relevant section - there's also a bit in the conclusion I'll quote later.

Local alcohol policies

Only five LAPs were in force by the end of 2015, although 32 of 67 territorial authorities had produced a draft or provisional policy by this time (pers. comm. Jackson, 2016). Appeals were the most commonly reported impediment to developing an LAP. Some local authorities halted or deferred developing a LAP until appeals in other districts had been decided. Other difficulties cited were finding a compromise between the commercial goals of businesses and alcohol-related harm in the community; opposition from business interests, including the hospitality industry and supermarket chains; and time and cost.

Now if you've been paying attention to the LAPs, you'd know that there's some truth here. When Nelson-Tasman went for their LAP, they decided to hold back until Wellington's had been decided. But it wasn't industry that was appealing Wellington's LAP, it was the police and medical people who didn't like that Wellington wanted a 5am closing time and were trying to litigate them down to 3am.

Disclosure - I was hired by the Hospitality Association to provide evidence on the international literature on bar closing times. Didn't wind up presenting in Nelson because all that was deferred to the Wellington decision, but I did have a lot of fun presenting in Wellington in 2014. Bottom line: it's a stretch to expect any major changes in harms with a couple hours' difference in closing times, but it's likely a good idea to have bottle shops close before the bars do.

Anyway, the police and medical lobbyists were going to have a tough time getting anything more restrictive than the national default hours in Wellington because, well, Wellington could always just choose not to have an LAP and stick with the default. But at least I got to have a bit of fun.

But all that Casswell's team has in this survey is respondents (police officers, licensing officials, and public health people) complaining that businesses selling alcohol will often object to the licencing plans that police and public health people want.

LAPs have significant potential to restrict trading hours, outlet density and location, but too few were in force in 2015 to affect the alcohol environment nationally. Appeals against LAPs deterred and delayed their implementation. Although medical officers of health and police mounted several appeals, appeals from off-licence alcohol suppliers were more widespread, and most commonly resulted in the relaxation or removal of restrictions from LAPs.29 In light of the substantial commercial conflict of interest which alcohol suppliers have with the SSAA’s aim of minimising harm from the excessive consumption of alcohol,30 steps to protect the LAP development process from their influence appear desirable. This could facilitate policies which are more likely to reduce alcohol-related harm, and reduce development time and cost.

So the problem they've identified with the Act is that tribunals and courts sometimes wind up siding with industry objections to local plans. Like, if industry were just raising objections that wasted time and were never upheld, then you could make an abuse of process case and hope that the courts might start awarding costs or something.

But the big SHORE-team complaint here is that sometimes LAPs are made more liberal after industry appeals. If the Police objected to some bit of criminal law procedure that made it harder for them to get convictions for people the courts wind up finding innocent, or that make it easier for people successfully to appeal convictions, I'd hope we'd want stronger basis for changes than just that observation from some surveyed police officers.

Immigrants and wages

Another for the growing list of articles showing that migrants do not hurt the wages of locals, in the latest American Economic Review, from Clemens, Lewis and Postel:

An important class of active labor market policy has received little impact evaluation: immigration barriers intended to raise wages and employment by shrinking labor supply. Theories of endogenous technical advance raise the possibility of limited or even perverse impact. We study a natural policy experiment: the exclusion of almost half a million Mexican bracero farm workers from the United States to improve farm labor market conditions. With novel labor market data we measure state-level exposure to exclusion and model the absent changes in technology or crop mix. We fail to reject zero labor market impact, inconsistent with this model.

In short, farms swapped out Mexican workers for capital investment, but neither wages nor employment of farm workers changed. Farm owners went from hiring Mexican workers to hiring machines instead, and shifted production a bit towards crops that could more easily be handled with machines instead of workers.

If for some reason you preferred that farm produce was picked by machines instead of by workers who had come in from Mexico, whether because you love machines or don't like people from Mexico, then I guess the policy was good at that. But it would be a mistake to view this as some productivity-enhancing capital-deepening. Output per worker would have gone up, but nothing happened to worker wages - employers were just paying machines instead.

Building materials costs

Phil Twyford's suggested that the Commerce Commission should use its coming market-studies powers to have a look at building materials costs.

When Twyford revealed the investigation he said the industry was rife with rorts and anti-competitive practices.

“That is because we effectively have a duopoly in New Zealand. Add to that rebates and junkets given to builders to use certain products. The industry is far too uncompetitive.”

The rorts are one of Edwards’ main complaints about building materials prices, which further hinders competition.

“There isn’t corruption in brown paper bags,” he says. “But there are rebates, which aren’t allowed in other parts of the world. If I am building a house or five houses in a year and I spend $50,000 on Gib, I get rebates from my supplier.”

This and the junkets add to the overall cost of the materials.

However, Tookey says even though it’s almost inevitable that other competitors are being kept out through the use of these types of rebates, it’s natural for companies to protect their interests.

“If you didn’t do it in that way, there would be substantially more competition,” he says.

Twyford says the enquiry can’t happen until the Commerce Amendment Bill currently

before Parliament gives the Commerce Commission stronger powers to conduct market studies and take action against anti-competitive behaviour.

The Bill would enable studies into market competition and give the Commerce Commission new enforcement tools.

“Once Energy Minister Megan Woods has conducted her market study into the fuel industry, I’d like to ask the commission to examine building costs,” says Twyford.

I have no special knowledge about what's going on in building material costs. They're stupidly expensive here compared to Canada, but a lot of stuff is stupidly expensive here because we're a small market at the far end of the world. Sorting out whether it's small-and-distant problem or anti-competitive practice isn't simple.

But I know one thing. When electronics seem stupidly expensive, anybody can go online and order direct from Singapore or Hong Kong. When that started being easy to do, there were a lot of potential savings there. Price dispersion on PriceSpy between the direct importers and the normal retailers was pretty wide. Since then, it's become a bit harder to find really big savings once you factor in shipping costs and tax and exchange. Hopefully, the government doesn't wreck the pro-competitive effects of direct-to-consumer imports with what it winds up doing on GST at the border.

Regardless of the merits of a market study by ComCom, mightn't it just make sense to instruct MBIE to fix building materials regulation to make it easier to import building materials? If there are problems in competitiveness, letting people route around them can solve. If there aren't, that would be revealed as well.

We'd just need two things.

First, we'd need to deem any building material approved for use in a comparable jurisdiction to also be approved for use in New Zealand. I would start with Seattle, Vancouver, and Tokyo. Seattle and Vancouver are wet and shaky. Vancouver's gone through its own leaky homes thing in the 90s and has updated since then. And it is ... basically insane ... to think that materials fit for use in Tokyo are not good enough for New Zealand. I'm sure there are other places that would be great to include as well.

Second, we'd likely need an NPS or something comparable to it instructing Councils on how to deal with consent applications involving materials with which they are not familiar - and likely a coupling of that with a removal of Council from joint-and-several liability for failures. Council liability as last-man-standing drives risk-averse, cost-inflating practice around building permits. Maintain joint-and-several among construction companies if you want, but limit Council's liability to its proportion of the overall problem. So if a court winds up finding that 10% of some future problem is Council's fault, it gets only 10% of the cost - not 100% as the only remaining entity.

If I were Twyford, I'd be telling MBIE that we'd be implementing this starting 1 July unless they could provide excellent and convincing reasons why not before then.

Oh - and get rid of any remaining anti-dumping tariffs on building materials. If people want to sell us building materials at very low cost, during a giant construction push, we should probably say thank you. If we care about construction costs and housing affordability.

Previously:

• Construction payola? (2015): Why shouldn't Ngai Tahu be able to just start importing in bulk from abroad, and launching Treaty complaints if blocked from doing so? Ngai Tahu Construction should be able to build as they like on Ngai Tahu land. 
• Construction costs (2013): In which I note that one part of central government was all mad about construction costs (ProdComm), but other parts of government put tariffs on wire nails and plasterboard in the middle of the darned Christchurch earthquake rebuild.
• And, from this year, if we're going to make cartel activity criminal, then the regulators whose regulations create a cartel should be thrown in jail. Regulatory cartels are particularly bad because every player in a private cartel has incentive to chisel and defect; regulations can prevent defection and block entry. If the government's rules around material imports have acted as a cartel mechanism, then government should be investigating and prosecuting itself. 

Foreign buyers again

I was a bit surprised that Labour thinks that the latest Statistics New Zealand release on foreign home buyers is evidence in favour of their ban. 

Bernard Hickey writes:

Yesterday Statistics New Zealand reported that 8.0 percent of buyers across New Zealand were either not citizens or held only temporary visas, while 19 percent of buyers in the old Auckland City Council area (now known as the Waitemata local board) were not citizens. See chart above. Across Auckland, the percentage of foreign buyers was 7.3 percent, while it was 9.7 percent in the Queenstown Lakes District.

The figures are significantly higher than LINZ's figures, which focused on tax residency rather than whether buyers were citizens.

Economic Development Minister David Parker said the figures vindicated the Government's looming ban on foreign buyers of residential properties.

"I think it's clear that these statistics back up our decision to ban overseas buyers of existing New Zealand homes. We've no doubt that buyers are having an affect on New Zealand housing market," Clark told RNZ.

"How significant that price is no one really knows but in those suburbs where there's an 18 percent participation by foreign buyers buying that number of houses it must be having a significant effect I would have thought."

I'd had a look through these numbers when they were released yesterday.

First up, a trivial bit: I'm pretty sure that Bernard's transposed the wrong figure. Table 1 of the release has 8.0% of home transfers in which at least one NZ resident visa holder (but no citizens) are buyers, but 3.3% of buyers being neither citizens nor residents. So when Susan and I sold our place in Christchurch, and bought our place in Wellington, we'd have been in the "At least one NZ resident visa (but no citizens)" category* because we have permanent residence but have not yet applied for citizenship. I'm pretty sure that Hickey's 8% is an error that substantially overstates the extent of foreign buying - and that I hope doesn't get repeated elsewhere.

But here are the more substantial takeaways.

First up, I remember there being a big deal made about the "affiliation unknown" category last year and how that could be skewing things. In December quarter 2016, when they started collecting these stats, that category was very large: multiples of the figure for which they had citizenship data. Some folks suspected that the unknowns were disproportionately hiding foreigners.

The quarterly number of "affiliation unknown" buyers dropped from 36,237 in December 2016 to 4,287 in March 2017, to 450 in June 2017, and ratcheted down to 39 in the current March 2018 quarter. So the 'unknowns' problem was largely solved by September 2017.

Over that period, the proportion of "No NZ citizens or resident visas" among those buyers for whom affiliation is known went from 2%, to 2.1%, to 2.4%, to 2.3%, to 2.9%, and is now 3.3%. The biggest jump was from September 2017's 2.3% to the current quarter's 3.3%. But by September 2017, they'd basically identified all the buyers' affiliations.

So either there was never any substantial hidden foreign buyer contingent in the "affiliation unknown" category, or there was and many of them exited the market. The increase in the proportion of foreign buyers was really after they'd sorted out identifying foreign buyers.

Next up, the recent surge. I expect this is best explained by folks rushing to get ahead of the ban. Anybody who is here on a work visa and is trying to sort out residence, or who hopes to renew their visa, and has any ability to buy a house, will want to get that sorted absolutely immediately before they're banned from buying anything. The growth in sales by foreigners has not seen the same recent surge - although that might yet come if living here becomes sufficiently uncomfortable for foreigners.

It's also worth having a very good sense of proportion here. That 3.3% of buyers, across the country as a whole, in the March 2018 quarter, represented 1,083 house purchases. In the same quarter, non-citizen non-residents sold 501 houses. So, on net, in March 2018, "foreigners" (which will include people living here on non-resident visas, whose residence visas may be in progress) on net acquired five hundred and eighty-two houses in that quarter.

If we include all sales over the year to March 2018, we have 3,834 home purchases, across the whole country, by non-citizen, non-residents - and 1,899 home sales. So, on net, foreigners owned 1,935 more houses in New Zealand at the end of the year March 2018 than they did at the start of it.

Labour has implemented a ban on all house sales to foreigners on the basis of this. Just under two-thousand houses - some of which could have been new builds financed by foreign buyers in the first place.

Sales to foreigners are relatively concentrated in two places: Auckland and Queenstown.

In Auckland, in the year ended March 2018, 2,307 purchases (5.7% of purchases)** were by non-citizen non-resident buyers. That category also sold 1,050 homes (2.6% of sales). So net foreign ownership in Auckland, for the whole year, increased by 1,257 homes. In a city of 1.5 million people.

As a proportion, some of the figures can look bigger. If you look for the place with the biggest proportion of non-citizen, non-resident buyers in the year to March 2018, it's Auckland's Waitemata. 12.9% involved non-citizen, non-resident buyers. That's 573 houses. Non-citizen, non-residents there also sold 384 homes (8.7%).

Now if you think effects in Waitemata are particularly important, then maybe Labour could just have banned foreigners from buying houses and apartments in Waitemata. Now that would be silly because it would just encourage people to shift outside of that boundary line - but that also reveals the problem in asserting stuff like "Well, those horrible foreigners must have had a big effect in Waitemata! Look at their proportion there!" Auckland's market is bigger than that. An increase in demand in Waitemata will have some folks with weaker locational preferences pick spots outside of Waitemata. So any effect would be spread across the Auckland region.

In Queenstown-Lakes, foreigners made 7% of purchases (129 homes for the whole year) and 5.1% of sales (93 homes for the whole year).

Can foreigners on net acquiring thirty-six more houses in Queenstown and 1,257 more houses in Auckland in a single year really blow up the the housing market in those cities? If it does, shouldn't we be terrified of the financial stability risks inherent in Auckland? It should not be possible to break the housing market in a city of 1.5 million people by buying a couple thousand houses. If it is possible, then how many mortgages would rapidly be underwater if demand dropped by 3,000 houses in a year for some reason?

It all suggests to me that we don't need a ban on foreign buyers but rather reform to the supply side to unfreeze that blade of the supply-and-demand scissors so that quantity can start adjusting.

During the election campaign, Labour liked to note restrictions on sales to foreigners in other countries, and then Labour turned that into a justification for a ban. But foreign examples are almost never a ban. Denmark has something close to a ban on sales to non-EU citizens, and Austria will make you get permission from local government. But look at the US, the UK, Canada - heck Portugal will give you a residence visa if you buy a house there. Like, pick your favorite model country, and check whether a Kiwi could buy a house here. This site seems as good as any for checking that, though it might be missing some recent changes.

I guess I just have trouble seeing how it makes sense to ban sales to foreigners, across the whole country, to prevent 2,307 sales to foreigners in Auckland in a year whose figures will be somewhat inflated by folks rushing to get in ahead of the ban. And remember that the ban isn't costless to locals either.

Update: Hickey's Monday newsletter, at the very bottom, after his collection of interesting links, notes that the correct figure is not 8%. 

* Or we would have been had those stats then been collected.

** Note that I am here figures from Table 3. They differ from the Table 2 figures that Bernard Hickey is using. I am not sure why they differ, but I am using Table 3 because it provides the absolute figures rather than just the proportions, and because it includes the better regional breakdown - Table 2 does not have a separate breakdown for Queenstown-Lakes, for example. Since all of this is small number stuff, small changes in small numbers can make for bigger looking differences in proportions.

Afternoon roundup

Today's worthies:

• Cabinet has not yet produced a cabinet paper on the Taranaki oil ban, and Simon Bridges says that the government instructed officials not to provide advice on the ban. Even if you think that 'doing something about climate change' was part of a Labour/Green political mandate, wouldn't it make sense to make sure that whatever is done is the thing that can most cost-effectively abate emissions? If Bridges is right that the government instructed officials not to provide advice, can there be any good reason for that instruction? The most obvious explanations are not good. 


• Kiwisaver provider Simplicity runs a very low fees model that is very attractive. But not one that's attractive to me, since they seem to have very strong non-return preferences baked into their model. If tobacco, gambling, oil or porn stocks started looking like attractive investment options, would they change their mind about the ban? 


• The government's looking to repeal the three-strikes legislation. Farrar points out that three-strikes policy is fairly popular, but I'd be surprised whether people remember come 2020 unless crime figures become salient. I rather liked New Zealand's legislation, and especially in comparison to American examples. The point of three-strikes, from an economic perspective, is to maintain marginal deterrence. In short, you need a stronger expected formal penalty for a second offence or third offence than you do for a first offence to achieve the same deterrent effect. Why? Because the first offence comes with a giant informal "Now you have a criminal record and a whole pile of things you thought you could do with your life are now going to be very very hard" penalty. That informal penalty's sunk after you've got the first conviction, so you need a stronger formal penalty for the later offences. And where California induced problems by having the same harsh penalty for second and third strikes across broad classes of offences, New Zealand maintained proportionality by linking everything to the sentence-specific maximum penalty. But, all that said, I doubt there'll be any particular effect on crime. There were just too many high profile cases where judges thought any application of the strike penalties was unjust, and so invoked their discretion (in my view) inappropriately. If folks don't expect the penalty will be applied because the judges won't apply it, the law's useless even if it's great in theory. 


• Is there any simpler explanation for the meth-mess than that Housing New Zealand had excess demand for houses and using an insanely sensitive hair-trigger for evictions let them free up some houses? Plus the usual stories around how agencies are more likely to be punished for not being sufficiently risk-averse than for being too risk-averse? 


• And, finally, some good news. Catherine Healy is now Dame Catherine Healy. She heads the New Zealand Prostitutes' Collective and helped see prostitution legalised in 2003. And how can you not love a union that, on seeing abuses of migrants on temporary visas illegally working in the sex industry, argues for legalising their work too instead of having more labour inspectors going around to deport competitors? America's ahead of us on marijuana reform, but we're miles ahead on this one. Too many Honours go to career public servants whose main merit was having diligently undertaken their day-job for 40 years. This one isn't like that. 


• David Friedman at Oxford Union on market failure. HT: Jim Rose.  

Teacher pay and living costs

Adele Redmond asked me last week for some of the numbers around CPI and the current pay disputes in nursing and teaching. Her story's up at Stuff now.

I'd pulled the LEED data on median earnings by industry [Table 4: LEED measures, by industry], noting that while the School Education one will be close to teacher salaries (but also includes all school-employed support staff), but that nurses will be spread across a few different sectors - and that each of those sectors will include a broader set of salaries than just nurses. So if doctor and administrator salaries had been surging and nursing salaries had been lagging, you could still see a rising green line for median earnings among those employed in hospitals.

There's never room in any story to include all the details I'll have sent through, so I'll often copy them here. Here's what I'd sent though (as well as a bit of preamble with warnings around interpreting the industry classifications as wages for any particular employee group). But on first cut it looks like wages in education overall have been keeping up with wages in other professional service industries. Unfortunately, the data only goes through 2017.

“Inflation has been very low since about December 2011. Since that quarter, the annual percentage change in household living costs has never been above 2%. That overall figure includes rent, but would not include the cost of buying a house. It is difficult to explain salary increases substantially above 2% as representing cost-of-living adjustments, unless salaries had been frozen for any substantial length of time.”
 
“In our 2014 report on declining student numeracy, we worried that declining relative teacher salaries, as compared to other professional salaries, might have been making it harder for the sector to attract quality teachers. But we found that, from 2000 through 2013, median salaries in teaching (primary and secondary schools) had generally kept pace with other professions like scientific research services; architectural, engineering, and technical services; legal and accounting services; and management and consulting services. Salaries differed across those areas, but increases in salaries from 2000 through 2013 had been roughly comparable across the industries. An updating of those figures through 2017 suggests that salaries in primary and secondary schools, and in hospitals, have been keeping pace with salaries in other professional service industries.”
 “In other areas, salaries are a matter for negotiation between relatively small employers and their employees. And, in most cases, they will be able to set pay and conditions to reflect local realities. If the cost of housing in Auckland means that it becomes harder to employ lawyers in Auckland, then law firms can either increase salaries in Auckland or relocate to places where the cost of living is lower. Schools and hospitals cannot relocate in response to local cost pressures, and it may be harder to set local pay in national level agreements to adequately reflect local conditions. But it can also be difficult to attract skilled staff to some places where the costs of living are very low, because they may not have the local amenities that professionals might demand.”
 
“If the employer, in this case the government, has a difficult time attracting and retaining quality staff in education or in health, then there can be a case for increasing salaries regardless of CPI or relative pay across industries within New Zealand; teachers and nurses can be internationally mobile. Similarly, if the government wishes to substantially change the characteristics of the employment pool by increasing salaries, then there could be a case for increases. But we might note that private sector firms finding it necessary to increase salaries across to attract and retain quality staff, or to improve the quality of incoming staff, may couple that with performance assessment.”

Political risk aversion

Few bureaucrats get fired for being too cautious about health and safety. Maybe this latest Housing New Zealand debacle will change that.

Recall our base theory here, going back to the kind of stuff Alex Tabarrok talks about. Consider a government agency trying to mitigate some kind of risk. It can screw up by being too cautious, or by not being cautious enough. We should all want it to minimise the expected cost of error, so to weigh the costs of getting things wrong in either direction. But the political incentives go the other way. If you err on the side of being too cautious, putting more weight on health and safety risks, for example, you'll typically impose costs across the whole sector that aren't all that visible - everybody pays $10k more than they should on a house repair because of really stupid scaffolding rules, for example. But nobody gets fired. If the bureau errs the other way, and somebody dies for lack of caution, then John Campbell's all over it and the Minister starts busting heads down the Ministry because the Minister's incurred political costs.

It's made worse by health and safety liabilities on directors, where they can take on pretty substantial cost if they're not sufficiently risk-averse.

And then we wind up in the meth-mess, where Housing New Zealand imposed stupidly risk-averse standards for determining meth contamination and so the whole sector wound up bearing a lot of cost - and a pile of people got needlessly kicked out of their houses.

Blaise Drinkwater's summary seems best here.

1) Twyford did what previous Ministers should have done: Gluckman was the only circuit-breaker in sight
2) Other than that, I'm not sure what Ministers *could* appropriately have done 3) HNZ procedure for houses with low meth residue is deep in the territory of the "operational"

— BK Drinkwater (@BKDrinkwater) June 1, 2018

4) That is, Ministers don't usually get to tell the Departments, Crown Agents, etc how to interpret statute, regulation, & guidelines
5) They *can,* but it's regarded as Ministers exercising authority: there is no presumption that they're informed or competent to make such calls

— BK Drinkwater (@BKDrinkwater) June 1, 2018

6) It's rare, & it's meant to be politically costly
7) The idea is that Ministers, being the government, can change state sector behavior by *changing the law*
8) Problem: govt lacks access to that lever in the case of so-called "tertiary legislation" like guidelines

— BK Drinkwater (@BKDrinkwater) June 1, 2018

9) Problem: what if both executive (eg HNZ) and (quasi-)judiciary (eg TT) get the *interpretation* of tertiary legislation wrong?
10) Let me be clear: English or Bennett, years ago, should have done what Twyford did. But other than that, I don't know what they could have done.

— BK Drinkwater (@BKDrinkwater) June 1, 2018

11) So I think people on high horses demanding that they should have done unspecified "something" aren't really bring reasonable.

— BK Drinkwater (@BKDrinkwater) June 1, 2018

12) Either MoH and Standards NZ failed to make clear their guidelines to Housing NZ or the Tenancy Tribunal, or the latter two were either willfully or idiotically dense. That's what left government, and tenants, wide open to dishonest industry.

— BK Drinkwater (@BKDrinkwater) June 1, 2018

I think we need to figure out ways of making the public sector, and regulation more generally, bring the real costs and political costs of the two kinds of error into line.

This episode might help in that - there are, in this case, political consequences for having been too risk averse around health and safety. The Ministries behave as though they expect massive penalties from the Minister for not being sufficiently risk averse, but no particular consequence for being too risk averse. Those expectations have to change or we'll keep getting excessively risk-averse Ministerial interpretations.