Talk of private property rights is usually the stuff of law journals and academics and receives little public attention. Like many things in life, it is only when something is taken away that you really come to appreciate it.
New Zealand has seen a worrying erosion of private property rights under the current Labour-led coalition. On their own, each of the events has drawn little serious attention, but cumulatively they represent a worrying trend.
It was Adam Smith, the 18th century economist, who pointed to private property rights being fundamental to the healthy functioning of economies. Smith argued that secure property rights provide the necessary incentive to align effort and reward and to allow individuals and firms to plan for the future and invest in economic improvements. The protection of private property rights makes economic progress possible and so is the most important duty of government.
We can see in recent history that countries with poor records in protecting private property rights had lower levels of economic growth. You only have to look at the examples of East and West Germany and North and South Korea to see evidence of the truth of Smith’s theories. Each has identical resources but have resulted in vastly different outcomes.
The first signs of weakness in the coalition’s protection of private property rights came when Fletcher Housing attempted to commence works at a site it owns at Ihumateo, near Auckland International Airport. It had consent to construct 480 new homes, a portion of those earmarked for low-income Maori families. Fletchers had owned the land since 2016, having purchased it from the Wallace family, who had owned the land since the 1870s. Before Fletchers were able to get very far, a group of Maori protestors took up occupation of the site. They claimed the land had spiritual values to Maori and that it should not be developed. They want it returned to Maori.
The police were called in, who handed out eviction notices. However, Prime Minister Jacinda Ardern stepped in and asked the parties to talk about it and see if they could reach a resolution. She asked Fletchers to put their work on hold until a resolution could be reached. A year later there is no resolution. There has been some talk of the government buying the land from Fletchers but Deputy Prime Minister Winston Peters vetoed using public money to buy private land. In the meantime, law-breakers with no right to be on the land have been successful in halting the development. The government has shown no sign that it intends to stand up to the trespassers and protect the rights of Fletchers and indeed has not even condemned their behaviour.
Compare this situation to the illegal occupation in 1976 by a group of Maori protestors at Bastion Point in Auckland. They objected to the proposed development of the waterfront site and erected a temporary village and occupied the land. This ended when Prime Minister Robert Muldoon sent in the police on 25 May 1978 to dismantle the village and evict the 222 protesters.
The second, more worrying development, is the passing of the Racing Industry Act 2020. New Zealanders, on the whole, have little interest in horse racing. This has enabled the passing of a statute which enables the confiscation, without compensation, of land owned by racing clubs.
Some background to the lead up to this insidious piece of legislation is required. Racing in New Zealand has been in decline for many years. Various fixes have been tried and failed. These range from throwing large sums of money at marque races, offering generous tax write-downs on the purchase of bloodstock, to a reduction of the duty levied on betting turnover. Nothing has halted or even slowed the decline.
Post the 2017 general election the two main parties entered into coalition talks with the Winston Peters-led New Zealand First party. As we all know, the result was the coalition between Labour, New Zealand First and the Greens. Winston Peters emerged as Racing Minister. It was not Peters’ first stint as Racing Minister. One of the first steps Peters took was appointing NSW racing administrator and proprietor of Arrowfield Stud, John Messara, to conduct a review of New Zealand Racing. The result was the Messara Report, handed down in August 2018. One of the key findings of that report was that New Zealand has too many racetracks and that the number should be reduced from 48 to 28.
Winston Peters, a former lawyer, put together a piece of legislation enabling racing’s governing codes to withhold licenses to racing clubs and then when the clubs had not held a race meeting for two years, confiscate their property and put the proceeds from that property back into the industry to improve facilities at other racetracks. The legislation is based on the assumption that reducing the number of venues and improving facilities at the remaining venues will solve the problems of the industry.
The Racing Industry Act 2020 in section 21 mandates that all racing club property is to have a memorial registered against its title preventing the registration of any dealing in that land without the consent of the governing body. That is a direct attack on the freedom of racing clubs to freely deal with their property and to contract with third parties as they deem fit. The club must obtain the written approval of the racing code before transferring the fee simple or leasing, mortgaging, giving a security interest in or otherwise dealing with the land that comprises a racing venue owned by the club.
The Act goes on to provide that if a club does not conduct a race meeting for two years then the governing body may confiscate its assets and use them for the betterment of other properties. Section 27 provides that if an agreement is unable to be reached regarding the transfer of a “surplus venue” then the Governor-General may, by Order in Council made on the recommendation of the Minister approve the transfer of the property. There is no requirement that a fair market price be paid or indeed that any compensation is required to be paid. Section 32 sets out the effect of a transfer of a surplus venue. The transfer may be made without consideration and all trusts applying to the surplus venue are extinguished.
This draconian legislation was passed with the support of all the major parties in the New Zealand parliament and has attracted little attention except in racing circles. Such is the depth of political commentary in New Zealand and the level of debate in the New Zealand parliament.
Winston Peters, the sponsor of the legislation, has a long-standing interest in racing, having previously been Racing Minister in the 2005 government. However, had Peters done some cursory research he would have found Messara’s analysis to be faulty. New Zealand has 49 racecourses, for a population of around 5 million people, giving a ratio of one racetrack to every 102,000 people. Victoria has 67 racetracks for 6,357,000 people, a ratio of one racetrack to every 94,910 people. New South Wales has 126 racetracks for 7,544,000 people, a ratio of one racetrack for every 59,873 people. Messara’s argument does not stack up.
If one looks further, the big difference between New Zealand and Australia comes down to one thing – bookmakers. In New Zealand, all betting on racing is conducted through the TAB, which holds a government-mandated monopoly. Bookmakers were banned from New Zealand racetracks in 1910 – 110 years ago. The world has changed since then. The ongoing ban on bookmakers in New Zealand ignores the ease with which punters can open accounts in other jurisdictions, most notably Australia. If Peters really thought about why racing is unattractive to people, he would have looked at the bland one-size-fits-all betting product, rather than going down the road of confiscating private property. He could have gone to a picnic race meeting in the middle of nowhere in Australia and seen the bookmakers ring with around 10 bookmakers vying for business and adding colour. Instead, he has started New Zealand on a dangerous path where private property is no longer sacrosanct.
Back to Adam Smith. He wrote that:
“the first and chief design of every system of government is to maintain justice, to prevent members of society from encroaching on one another’s property, or seizing what is not their own. The design here is to give each one the secure and peaceable possession of their own property… Law and government, too, seem to propose no other object but this, they secure the individual who has enlarged his property, that he may peaceably enjoy the fruits of it”.
New Zealand is now well on the path to its citizens having their private property rights whittled away, with the government and its agencies able to interfere at will with people’s property or stand by and ignore the incursion into private property rights by people with no legal standing and pursuing a historical grievance. While the upcoming election will primarily concern the response to the coronavirus and dealing with the aftermath, people need to be paying attention to the bigger picture and the threat to their rights and the economy.
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