Pity the UK

The 1970s are calling, and the UK is facing a sovereign debt crisis.  Let's be clear, it has next to nothing to do with Brexit (as France and Germany s face similar crises, although some other European countries definitely do not).  It has everything to do with economic malaise, a growing burden of welfare, pensions and the world's most centrally planned and provided health system (which is also the UK's biggest religion).  A punitive tax system, a sclerotic planning environment , a vastly over-generous state pension system, energy prices that have skyrocketed because of a blinkered commitment to Net Zero (with a planning system that makes new supply too expensive to develop in manu locations) and a fraying of public trust in institutions particularly around criminal justice and immigration, is creating a crisis in confidence economically and socially.

Editor of the Sunday Telegraph, Allister Heath, believes that the Starmer Government will have to call an early election, because the Labour Party wont be able to reconcile demands to cut spending and/or increase taxes and not deliver on a sufficiently socialist agenda. The hard-left may splinter to Trotskyite tankie Jeremy Corbyn's party of Marxist/terrorist/Islamist sympathisers, and others will fear a loss to Nigel Farage's Reform, whilst the Conservatives are scrambling for relevance (given they governed for 14 years before).

 From Allister Heath, in the Daily Telegraph (formerly the Editor of business paper - City AM):

Let us, for the sake of argument, first consider the “optimistic”, best-case scenario. Another wave of punitive tax increases, targeted at those who work, save and invest, would intensify our existing pathologies. We would be doomed to stagflation, rising joblessness, falling industrial and energy production and declining living standards. The best and brightest would flee, but there would be no sudden collapse....

The worst-case scenario feels more likely, and it would begin by an abrupt loss of confidence in the credit-worthiness of the British government. We need to borrow obscenely large amounts of money from the financial markets every month, thanks to Reeves’ lack of fiscal discipline, and yet our creditors are becoming increasingly jittery. They worry that our deficit is growing, not shrinking, that the economy is barely growing and that Labour backbenchers are vetoing all cuts. They are already charging us a “moron premium” to compensate for the growing risk that we default or inflate away our debt, and these higher borrowing costs automatically mean even greater deficits, and thus even more borrowing. It’s a vicious circle. The 30-year gilt yield recently hit 5.6 per cent, its highest since 1998; another substantial increase would surely topple the Chancellor....

Britain is facing a historic reckoning. The economic and social model constructed since 1997 has turned into an unsustainable Ponzi scheme, a farrago of lies, obfuscations and delusions.

The maths don’t add up. On one side of the ledger, growth and revenues are stuck thanks to oppressive taxation, poor incentives, net zero, the destruction of the entrepot economy, the throttling of the City, labour and product market regulations, low-productivity immigration and planning rules that make building anything difficult. On the other, spending is out of control: our ruling class is content to pay out of work benefits to 6.5 million UK adults and to serve as the world’s welfare state of first resort. Our free-to-use, taxpayer-financed NHS can’t cope with an ageing population.

An honest UK politician would have to give up promises to continually inflate state pensions higher than inflation, it would have to take a hardline on able-bodied adults not working and start to reform and ration the NHS.  A scythe will be needed to cut through the detritus of decades of micro-economic regulation, and most of all the post 1940s failed consensus of planning control that kneecaps the construction of homes, business and infrastructure, inflating the cost of that which is approved far beyond the costs of comparable construction on the European mainland.

The UK needs another Thatcher.  Conservative Leader, Kemi Badenoch, at another time, could perhaps have been that person. However, it is illegal migration and the provision of housing, welfare and health care at future taxpayers' expense (through debt), and the crimes committed by illegal migrants that is the focus of so much attention and concern.  Britons, both locally born and legal migrants regard this to be at best unfair, and at worst an invasion of people seeking to take advantage of what the country has to offer. 

It seems highly unlikely that Nigel Farage has what it takes to fix the economy malaise facing the country, when he is campaigning to nationalise water.

An Act devised by silly people, passed by silly people, enforced by silly people

The Online Safety Act in the UK has a name that could come from a dystopian movie, but it was introduced under previous Prime Minister, Rishi Sunak and of course the Starmer Government is in favour of it, boots and all.

As with so much legislative fervour nowadays, it was introduced to protect children by empowering a national regulator to block content, as well as require that end-to-end encryption. 

Sean Thomas in The Spectator writes:

Since the Act came into force (originally in 2023, but with greater effect in recent days), the absurdities have piled up fast. Entire Reddit communities – from harmless subreddits about cider to basic vape advice chatrooms – have gone half-dark, unable to easily implement the age verification systems. Niche forums for LGBT teens, survivors of abuse, and mental health support groups have shrunk away rather than risk falling foul of vague ‘harmful content’ clauses. A forum about ‘fixed gear cycling in London’ (yes, really) shut down because it feared it couldn’t afford the compliance overhead.

The absurdity of it was seen a few days ago when Peter Kyle, the Secretary of State for Science, Innovation and Technology, said that Nigel Farage was on the side of Jimmy Savile - the late disgraced former DJ and TV star who, after his death, was found to have committed multiple sexual offences against young girls (none of this online or facilitated by the internet, as he was as technologically illiterate as the politicians supporting this Act). 

Thomas rightly says:

it’s a naked attempt to distract from the fact that Peter Kyle – a man so well suited to his role as Technology Minister that he appears to have no background in technology, no experience in the technology sector, no career with technology companies, no obvious technological training, and a degree in ‘International Development’ – has no argument.

Former Conservative Secretary of State for Digital, Culture, Media and Sport, Nadine Dorries apparently: once walked into a meeting with Microsoft and bluntly asked when they were ‘going to get rid of algorithms’.

One of the most egregiously inane things any politicians can do is to pass laws as a kneejerk reaction to a problem and especially being seen to address a problem.

This is an example of that. Thomas points out the threats not just to free speech (which politicians care about that nowadays, as it is so often seen as coded with being a Nazi, a pedophile or a terrorist), but to the whole IT sector in the UK.  

The result is a legal ambiguity so vast it could engulf an entire industry. Startups will die under the compliance burden. Larger tech and AI firms will shift labs and headquarters abroad. And Britain’s AI industry, briefly a potential world leader, will find itself reduced to the digital equivalent of a wine bar shut down for not having a government-approved corkscrew made of chocolate.

Let us hope our local politicians don't think this is a model to copy, bearing in mind both sides of politics seem to not be immune to this.

No to another mega-Ministry

One of the ideas getting traction within the Government is the idea of merging the Ministry for the Environment (MfE), Ministry of Housing and Urban Development (MHUD) and the Ministry of Transport (MoT) into a mega agency. The “logic” behind it is threefold:

• More integrated policy thinking that will not only enable more housing to be built, but also the infrastructure to support it;

• Diluting the de-growth and pro-central planning culture of MfE (which most recently decided it was appropriate to submit on the Regulatory Standards Bill);

• Saving money (through administrative rationing).

This is a mistake, because its theoretical basis is rooted in some assumptions that don’t bear close scrutiny. Working backwards the notion that mega-departments are more efficient is largely a chimera. The larger the bureaucracy the slower it works and the less responsive it is, and it more difficult it is to retain specialised knowledge and experience as it gets swamped within multiple layers of management. Treasury likes mega-agencies for two reasons:

• Fewer managers is said to be more efficient;

• Fewer agencies makes them easier to monitor and hold accountable.

Unfortunately, this ignores the behavioural responses of public servants to this sort of structure. In a large department it becomes harder to get the attention of the top layers of management. In some cases that can help, because clever and competent public servants can get on with their work unbothered by the chief executive or deputies, but that also means the less clever and competent have their work not subject to the same scrutiny. The Adam Smith Institute in the UK has called for the UK Home Office to be broken up for exactly that reason. The incremental savings of a few fewer managers (which is disputable when you look at the structure of MBIE – New Zealand’s existing mega-Ministry – which has large units, with branches under them and sub-branches) is lost when there is significant failure both in delivery and public policy.  

The UK already has had experience merging Transport, Environment and Local Government, from 1997 until 2002. Transport was split out again because the cultures of the agencies clashed internally, slowing down progress and making it difficult to get institutional focus on major reforms.  

Australia by contrast does have a mega-agency responsibility for transport policy at the Commonwealth level, in an organisation called DITRDCA (Department of Infrastructure, Transport, Regional Development, Culture and the Arts), which struggles to retain institutional knowledge in any segments of its activity. However, as a Federation, many of the functions in those sectors are carried out by States and Territories, so it is less of a day to day concern. Similar mega agencies do not exist at the State level.

The benefit of smaller agencies is that they can be nimble and responsive, and can pivot quickly when policy priorities change.  They can readily collaborate and work together with each other, if there is clear project leadership across agencies. The idea that collaboration within a large agency, with managers and branches with their own interests is necessarily easier than between smaller agencies is largely theoretical, because it depends on the individuals. Bear in mind MoT implemented radical restructuring of ports, airports, land transport funding, the governance and delivery of urban passenger transport all as a small agency, stripping down its functions over the years.  It's not clear what radical reforms MBIE as a major agency has done, and it is abundantly clear that DIA, with its de facto oversight of the water sector (i.e. next to none) did little until the Ardern Government saw it as a way to bail out local government and start to implement the principles of He Puapua (which remains on ice). 

On the second point, the idea that a key reason to merge agencies is to dilute the culture of the one you don’t like, or which is corrosive to government policy is not a good way of diluting the poison, because it spreads the poison across a wider field. The answer for the Ministry for the Environment is not to merge it, but to cull its responsibilities and split what remains among other agencies.

The Partnerships, Investment and Enablement business group should be abolished because Government should not be seeking to “tangibly shift mindsets and change behaviours in New Zealand through effective partnering and engagement within the public and private sectors”. The culture of MfE is anti-development, anti-growth and it the behaviours that need changing are those ones.  

At best the Environmental Management and Adaptation business group should be placed within the Department of Internal Affairs to work with local government, specifically regional councils on their statutory function, and the Climate Change Mitigation and Resource Efficiency business group should be part of MBIE, which has oversight of economic regulation of natural resources.  

It is so obvious that the next time a Labour-led Government takes power, almost certainly with the Greens, that a Ministry of Housing, Infrastructure and the Environment would be rebranded into a Ministry of Sustainable Development or the like. The culture that would be dominant will be the one inherited from MfE and will seek to decimate private provision of housing, as well as turn transport policy into one big behavioural change programme that treats active travel and public transport as being good, at any cost, while treating private motoring and the movement of freight by road as being malignant. 

One of the legacies of Labour Governments is that they implement structural reform of Government that National Governments rarely reverse.  Don’t forget the optics of splitting MfE (“integrating environment across policy”) may not be great and of course the Opposition will cry that it is about decimating the environment, but the public largely will not care (other than the ones who vote Green anyway). Splitting MfE into Internal Affairs and MBIE will dilute MfE’s culture because it divides it. Merging it with MHUD and MoT keeps it intact, despite pleas from some that it will dilute the priority of the environment, it will place it in the centre of two agencies seeking to resolve issues that are, in part because of the prioritisation of the environment through the RMA that stops stuff being built.

The MHUD is essentially an oversight agency for Kainga Ora, as well as the regulator of rental housing and other accommodation. The synergies with the MoT are weak, especially given MoT’s functions range from monitoring the land transport funding and regulatory sector, through to the economic functions of all transport modes. There is little that MHUD can bring to aviation policy, and indeed most of the transport policy issues affecting MHUD are undertaken by local government. 

If there is a case for a merge, then MBIE makes more sense for MoT than MHUD, because MBIE does look after network industries in infrastructure, such as energy and communications, but that was tried before in the late 1990s and ultimately abandoned. 

So the idea of merging agencies should be put in the bin. There is a better case for reviewing their functions and determining whether some should exist at all, and if so, who is better placed to manage them.  Putting climate change policy in the DIA or MBIE is likely to be preferable than having it dominating housing and transport.

Merging MfE, MHUD and MoT smells of something that the Greens or TOP (remember them?) would advocate. MfE is by far the agency with the most dominant culture, and it is one that is philosophically antagonistic to the Government it is meant to be serving.  It should not poison housing and transport policy with that culture. 

The Government should run a mile from it.

Local government will not be constrained by the current proposals

Like many one of my biggest concerns about local government is how unconstrained it is about what activities it enters into, whether it be an impost directly on ratepayers through spending, or an indirect impost in the time of Councillors and Council staff misdirected away from core business into other activities. Whether it is foreign affairs, shiny things (typically sport, arts, culture, entertainment), unviable businesses or any other "nice to do" activities, local government tends to attract a greater proportion of people who promise to "do stuff" which is typically not a promise to stick to the core.

It is rare to get candidates for local election who promise to simply ensure the roads are well maintained, the rubbish collection remains reliable, litter and graffiti are addressed, (all types of) water infrastructure is managed efficiently and effectively, and parks are well maintained.  It's especially rare to get any who want to get Councils out of the way of building more homes, commercial or industrial property, or who want to make it easier to set up new businesses (unless they are tiny businesses, in Council premises, of certain pre-selected types).

So while I was hopeful that Simon Watts would announce a sea-change in the legislation governing local government I ended up being sorely disappointed.  His main announcement is the abolition (again!) of the "four-wellbeings".  This should be familiar with those who know about the local government sector (unfortunately in a previous career I got to know about local government legislation), because the Key Government did it before. You can be forgiven for not knowing that because it made not a jot of difference to local government, except perhaps slowing down its growth.  

So while I think all of the proposals have some merit, they don't tackle the core cause of the problem, which is the "power of general competence" which Sandra Lee under the Clark Government got passed to reform local government. It was part of a vision of expansionist local government (which Lee, when she was in local government cheered on with alacrity) that represents the wet dream of the hard-left.  The idea that "communities" (activist groups) would engage continuously with democratically elected representatives to get local government to address the cultural, social, environmental and economic wellbeing issues of their "communities".  Of course the only ways local government can "address" these things is through its two instruments of compulsion: Taxing and subsidising (mostly rates, but also fees on anything the Council does and of course lobbying for central government to give it more power to tax) and regulating (forcing people to do what it wants, banning them from doing what they don't).  It's the idea that "highly engaged" communities (which doesn't realistically include most entrepreneurs or the self-employed or busy workers, because they don't have the time) pushing everyone else around with a "democratic mandate". The sort that comes up with "Should Wellington become a sister city with Ramallah?"

My friend Peter Cresswell writes adroitly on the debacle of the power of general competence (dare I note that Greater Wellington Regional Council Chair Daran Ponter, pictured on PC's blogpost, was once a bureaucrat who worked on the Local Government Act reforms in the early 2000s).

I wrote a bit about it around a generation ago.  It's not called that explicitly in the Local Government Act 2002, but it is Section 12 in the Act:

12  Status and powers

(1) A local authority is a body corporate with perpetual succession.

(2) For the purposes of performing its role, a local authority has—

(a) full capacity to carry on or undertake any activity or business, do any act, or enter into any transaction; and

(b) for the purposes of paragraph (a), full rights, powers, and privileges.

As you can see it gives local government carte blanche to do just about anything it likes. This is at the heart of the problem.

If Simon Watts is NOT proposing to replace Section 12(2) with something else, then he is tinkering around the edges of the problem. I'm not surprised he isn't proposing to replace it, because the Department of Internal Affairs (DIA) would not have advised in favour of it. 

DIA supports the power of general competence because it mopped up a wide range of highly specified powers that previously existed that meant that local government couldn't undertake activities unless legislation specifically said it could. Now the law says it can do pretty much whatever it likes (with some provisions constraining regional councils and territorial authorities overlapping).  A Council could set up a restaurant, a school, a taxi company, a radio station, a supermarket and a brothel. A Council can publish books, make movies, open up a liaison office in Equatorial Guinea, campaign in favour of Russia's invasion of Ukraine and open a nudist camp. 

DIA would not have wanted the repeal of Section 12(2) because they would say it would require a "lot of work" (for them) to identify what Councils do and don't do now so activities wouldn't be suddenly banned. Frankly that would be a rather good thing.  It would be simple enough to give Councils powers over their own property and then list the types of property Councils should not be allowed to own, and businesses it should not be allowed to own (a good start would be any type of business already existing within its boundaries).  Then allow Councils to only exercise their legal obligations under any other legislation (e.g., RMA and its replacement) and limit it to rubbish collection, public spaces (parks, pools, coastlines, rivers). 

The debacle over "three waters" has pretty much proven why the "power of general competence" was a mistake.  We have had over 20 years of local government being given full capacity to look after water, waste water and stormwater infrastructure whether as a business or any other form of structure, and many have failed abjectly to do so.  With a few exceptions, local government simply isn't up to managing large complex infrastructure networks as far too few Councillors and well-meaning local bureaucrats have the skills and experience to do so.  The local road network is far from perfect, but at least NZTA and its predecessors for the last thirty five years have had some oversight of performance so that the network isn't crumbling. 

Some may say the problem is Councils don't have enough powers to tax and regulate (that would be the Greens who rarely find a problem they don't think would be solved by forcing people to do what they think is best for them), some may say the problem is too many small Councils without the capacity to be more responsible, but then Auckland Council is hardly the shining city on the hill to emulate.  Some may say the problem is that "the community" doesn't vote enough, and maybe teenagers who are deemed not fit to decide on whether they consume alcohol, tobacco or pornography should be allowed to vote.

It's pretty basic. We have had over twenty years of the "power of general competence" and Councils have proven incapable of managing their assets effectively, and most think that their problems can only be fixed by getting other politicians to make taxpayers bail them out (that's, in part, what Labour was going to do with Three Waters). 

It's time to end the power of general competence. Tell local government exactly what its functions are.  Don't put up with excuses from DIA about how long it will take, just get some clever people together to do it. You can be sure if something is missed out, then the affected local authorities will cry loudly at the Select Committee stage of the Bill and you can decide if it is worth addressing then. If the local authorities fail to identify that pending legislation will ban something they are currently doing, then it's pretty obvious how incompetent they are.

Oh and yes, you should cap rates increases to inflation.  

Who likes swinging the wrecking ball?

 Popular vulgarian journalist Andrea Vance has written this:

"With every lurch toward the extreme, politicians become more brittle, reactive and combative... Ministers no longer explain or debate. They post. They lash out at critics in increasingly personal, petulant terms. And they don’t even pretend to hide contempt for the media....

Whether it’s tantrums, teardowns or rule-breaking, the result is the same. Compromise is out, consensus is dead and the behaviour trickles down.

It corrodes public trust and in turn feeds cynicism and ultimately disengagement.

Voters are left wondering: if nothing lasts, and no one listens, why bother participating at all?

There are no rules anymore. In their place, we’re left with grievance, score-settling, and a political class increasingly reckless with power."

Two months ago she wrote about how the Finance Minister did "girl math" and of course famously:

"So long as you are prepared to be a c*nt to the women who birth your kids, school your offspring and wipe the arse of your elderly parents while you stand on their shoulders to earn your six-figure, taxpayer-funded pay packet"

Who is brittle, reactive, combative, lashing out, engaging in a tantrum, grievance and score-settling now?