I was emailed this post via the tipline, I know who sent it but they have requested their details withheld but they are someone in the industry that knows the ins and outs of housing policy.
Labour on the Earthquake Commission – via the tipline
Struggling homeowners – those middle income families who are walking a tightrope in order to manage household expenses – are on notice thanks to Labour’s policy for the Earthquake Commission (EQC). The policy announced by Labour’s Clayton Cosgrove will mean significantly higher rate bills, particularly for those residential property owners in the outer suburban neighbourhoods of Auckland and Wellington who are already feeling the financial squeeze from the compounding cost of local government.
Labour’s policy is unequivocal: universal insurance paid through local government rates, increasing EQC coverage (which means even higher rate bills to cover more generous insurance pay-outs), and the apportionment of liability based on the rateable value of property.
Let’s put things in perspective. EQC was established in 1945 to provide earthquake and war damage cover for the purchasers of fire insurance. The scheme was later amended to include other natural disasters, but excluded war damage. New Zealand’s insurance policy holders have been paying premiums since Peter Fraser first conceived of the scheme, thus allowing for a contingency fund to accrue for the day it was needed.
Those days have arrived. And the National Disaster Fund, the ultimate expression of political consensus has worked well. Yes, EQC’s reserves have been depleted. But New Zealand has performed remarkably well under unprecedented circumstances. Canterbury is moving from a relief to a recovery phase, which is the forerunner to an enormous rebuild that will generate construction and jobs in New Zealand’s second largest city for generations to come.
It would be unfair to accuse the National Government of imprudent stewardship during this harrowing past 12 months. EQC needs a boost, which is precisely the reason why Finance Minister Bill English announced in October that levies would rise. Insured homeowners currently pay 5c per $100 of insurance cover, up to a maximum of $69 a year (including GST), as part of their insurance premiums. Under the proposed changes, homeowners will pay 15c per $100 of insurance cover, with an annual cap of $207 (including GST).
Which brings us back to Labour’s announcement. Moving from an insurance scheme to a universal rating scheme proportionate to rateable values poses more questions than answers:
- If Labour desires a universal rating scheme, will this therefore require non-residential property owners (the people who own the factories, the workshops, the office blocks and the retail shops that provide the jobs for hundreds of thousands of New Zealand workers) to pay higher rates in order to fund a scheme that only benefits residential property owners?
- If non-residential property owners are be to liable for a National Disaster Fund, will those same ratepayers (who already pay a disproportionate amount of local government rates) benefit from that Fund? If not, why not?
- What is the rating system that Labour expects to apply? Historically smaller rural councils rate on land. Larger urban councils rate on capital. Why has Labour not clarified its rating methodology? Who are the ratepayers that will be hit hardest? Why won’t Phil Goff tell us who will pay the most?
Rating property generates many moral dilemmas. The widow who owns a family home in Bucklands Beach or the young family struggling to pay the mortgage for the 4-bedroom home in Whitby is assumed to have asset wealth because of the rateable value of their respective property. Yet the value of the family home does not mean the widow is any better off, or that the young family is flush with disposable cash in order to afford year-on-year rate increases.
Labour’s policy is a recipe for shifting the burden of cost to those ratepayers in New Zealand who already pay the most, and who are poorly placed to deal with the compounding cost of local government. Auckland Mayor Len Brown’s proposed Long Term Plan budget includes rate increases of up to 50 per cent for hardworking business owners in Pukekohe. Why should those hardworking New Zealanders – people who have never benefitted from the National Insurance Fund in their lives – now be singled out to pay Labour’s new wealth tax?
Labour has made a calculated decision to impress the voters in New Brighton and Shirley with a funding scheme that will ultimately hit every New Zealand ratepayer in the pocket. And Labour intends to shift the burden of responsibility to every city and provincial mayor in New Zealand to act as the tax collector. There is nothing courageous about that.
In 1945 Peter Fraser displayed a sense of vision. New Zealand today is better off for his foresight. Phil Goff’s craven calculation is mean-spirited and steeped in envy by comparison.
