Bowden's alarming Treaty analysis

Muriel Newman's latest NZCPR Weekly contains an alarming analysis by Roger Bowden, former professor of economics and management at Victoria University. Bowden's advice, in a nutshell? Forget all that government propaganda about the proceeds of state asset sales going towards health and education, because the money will be entirely swallowed up paying for Treaty settlements.

These ongoing liabilities include the outrageous "top-ups" built in to the Tainui and Ngai Tahu settlements, whereby what were considered fair compensation sums at the time they were negotiated get ratcheted up to ensure some sort of spurious relativity is retained.

Here's the most salient bit from Bowden's analysis:

Let’s start with the annual appropriations for running costs, covering such things as negotiation costs, the Waitangi Tribunal & representation, and disbursements under the Marine and Coastal Area (Takutai Moana) Act. The 2012 budget request is $169,969m. The same annual sum (can it ever diminish?) capitalised over 10 years at the current NZ govt bond yield, as the opportunity cost of capital, comes to $1,409m.

Now add in the cost of outstanding and projected settlements up to 2016 (not 10 years, but bear with me here), amounting to $2,800 m. Together with the capitalised running costs, that comes to $4,209m, if my arithmetic is correct.

I’m not sure whether this includes the ratchets promised to Tainui and Ngai Tahu in previous settlements, which at the time envisaged a total of $2 billion instead of the $4 billion so far awarded or projected. Last I heard, Tainui and Ngai Tahu will be sharing a top up of $138.5m, but there will be more down the track as the settlements continue to mount. Nor does this year’s Waitangi Vote allow for future annual costs under the ‘co-management’ regimes that are becoming the norm for Waitangi settlements.

But any way you add up the sums, the message is that present and future commitments under just the one Vote, Treaty Negotiations, will comes to something like 5-6 billion dollars in total present value, probably even more. It’s hard to find Votes with a similarly spectacular explosion. No doubt there are others on a smaller scale; the ministerial travel budget, perhaps? But otherwise, even the traditional biggies like Health and Education seem under control, at least on Treasury projections, especially for Education, which is projected to level off, even turn negative. Expect yet more belt tightening after the latest revenue figures.

 

Coincidentally, the latest Treaty settlement bill, compensating Auckland's Ngati Whatua tribe, passed through Parliament yesterday. Compared with the Tainui and Ngai Tahu deals, it's relatively small beer. But there are many more potentially large settlements in the pipeline, and there's a very real prospect that the Crown will have to negotiate water access river by river, hapu by hapu, if the courts rule in favour of Maori water rights .

Bowden concludes by saying: "The conclusion is inescapable. We need the partial asset sales to finance the soaring costs of the Treaty industry."

All of which raises the question that no politician seems willing to confront: how far can New Zealand continue wading into this morass before it becomes completely unaffordable (if it isn't already)?