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Gerry Brownlee interview transcript

Published: 11:59AM Sunday September 04, 2011 Source: Q+A

Guyon Espiner interviews Gerry Brownlee

PAUL 
It came at 4.35am on September 4th one year ago today, an earthquake centred near Darfield measuring 7.1 on the Richter Scale.  It frightened the hell out of Cantabrians, the damage was immense, and we just thanked our lucky stars, New Zealand, that no one was killed.  The quakes, however, did not stop, and in February, the bad got much much worse when the second big quake came, killing 181 people.  The CBD, as you see there, remains a wasteland.  The EQC is working its way through 400,000 claims.  Its reserves are now exhausted.  The government this week said repairing Christchurch would cost double the original estimate.  So this morning the man leading the government's efforts, the Earthquake Recovery Minister, Gerry Brownlee, is with Guyon Espiner live in Cathedral Square in quite a chill, I would imagine.  But first the Opposition's view.  From Labour's Earthquake Recovery Spokesman, Clayton Cosgrove, how well do they think the government is doing?

CLAYTON COSGROVE - Labour MP
 You know, I'd give them six and a half, seven out of 10 for some things. I think as we get to the 12th anniversary, there is frustration at a number of things.  Firstly, that we now know that people's equity won't be preserved, and that's a broken promise, and perhaps that promise should have never been made by Mr Brownlee.  People who are watching this show from out of Canterbury, they have got to understand - they could be forgiven for thinking that, you know, we're all a pack of whingers in Canterbury and people have been so generous to us, and, to quote Mr Brownlee, why don't we get on with it?  But you've got to understand, 12 months later, for Mrs Bloggs in a silt-ridden house in the east or in Kaiapoi or whatever, she might have her offer document, she might know she's red or green or whatever, but she's still there or she's still in emergency accommodation.  So in practical terms, people are still doing it hard.  We've still got 1600-odd houses who don't have a dunny.  I think the lesson that we have to take out of this and the Waimak District Council is a shining example of it - tell the people, trust the people.  I think Keith Holyoake actually said that - tell the people, trust the people.  Give it to them warts and all.  People are banking, literally, on Mr Brownlee's every word and his commitments and Mr Key's.  And as one constituent said, 'It's like a big pile of cash sitting on the table - this is my budget to get my life and my house back.  And every time I work out the deal, suddenly Mr Brownlee takes another pile of cash off.'  As one constituent said, $80,000 worth of home improvements, no increase of footprint of house - that's 80,000 bucks gone.  This earthquake for the whole of New Zealand presents a, you know, if there's any positive to come out of it, a fantastic training opportunity en masse.  Not a few nickels and dimes, but en masse, to get young people into trade training, to get those people who have just gone out of jobs who are now on the dole, on the scrapheap, to get them and redeploy them, because we're going to need 30,000 or 40,000 tradespeople.

PAUL 
So many valid points there.  That's Labour's Clayton Cosgrove, and now Guyon is joined by Gerry Brownlee in the Square.

GUYON Thanks, Paul, and thank you, Minister, for joining us this morning.  We really appreciate your time.  Can I start with some of those comments that Clayton Cosgrove made there?  And at its most basic, I guess, 1600 homes still without a toilet - is that good enough after this time?

GERRY BROWNLEE - Earthquake Recovery Minister
Well, it is the reality of what we're dealing with.  I'd need to check that number, but-

GUYON  What's your understanding?

BROWNLEE   My understanding is certainly in the Christchurch city area that sewerage is back on to quite a large number- well, to all but a very small number of homes, so I'm a bit surprised by that figure.

GUYON  In the eastern suburbs?

BROWNLEE In the eastern suburbs, yeah, temporary arrangements have been made, and just how strong that is, of course, is uncertain because the structure of the ground there is so loose that you will get periodic breaks, but I'll check that number.
 
GUYON And if it was that high, you'd want something done about it?

BROWNLEE I think that number's too high.  I think we'd need to do something to try and sort that out, but the information I have is that there's all but a few in Christchurch city who have that trouble.  I think Waimak is a different matter, but those numbers seem very high for Waimakariri. 

GUYON So you'd put the number at what?  Under a hundred or something?

BROWNLEE Well, I think if you consider that we've put 900- roughly 900 houses red in the Waimakariri district, most of those do have sewerage as far as I know, so 1600 seems excessively high.

GUYON  There are about 9000 properties in the orange zone waiting to hear if they can rebuild or not.  Perhaps four months before they find out - why should it take that long?

BROWNLEE Timelines have been difficult all the way through this, and for a very long period of time, I kept saying, 'I'm not going to be drawn on a timeline.'  Eventually, we decided, 'Right, we'll put out some timelines that are sufficiently long for us to be able to meet them.'  So we're trying to come inside those timelines as quickly as possible.

GUYON And what is that roughly?  Four months?

BROWNLEE It would range, but what I do have to say is that as you get over the most obviously damaged areas into areas where you've got to have a more detailed or a more individual consideration, then it becomes harder.  And it may be that we'll be able to put together enough information to be able to advance some of those areas much more quickly.  It's certainly our desire to do that.
 
GUYON What is the major impediment?  Obviously, everyone wants to know because they want to get on with their lives.  Obviously, you would tell people as soon as you practically could, I imagine.  What is the major impediment?

BROWNLEE Well, two things, really.  One is can an area-wide remediation be affected, and secondly, if it can't, on an individual basis, does it become a realistic proposition for a homeowner to be told, 'Look, the extent of your insurance cover is to this point, but you need to spend yourself an extra $100,000 or so on your foundations.'  We've really got to work all that through.  We're trying to be as fair to people as we possibly can.  And, of course, the problem between September 4, February 22nd and right out to June has continued to get bigger, so it's been a challenge in that regard.  And some of those houses that are still orange were not in that category prior to the June event.

GUYON If we look at the 6000-odd houses that are going to get demolished, you're paying out on 2007 valuations, which for many people is a good deal because that was pretty much the peak of the property boom.  But the contentious issue is around where people have added equity, and I want to quote what you said in June.  You said, 'If people have, for example, put in a new bathroom or a new kitchen where there are no consenting issues, then clearly they will have receipts that will enable that expenditure to be considered in the end valuation.'  But it's only if they've actually added to the footprint size of their house, isn't it, so you actually were misleading them.

BROWNLEE I think I was somewhat wrong, but remember that in any calculation about increased valuation, you'd have some threshold for what would be ordinary improvement to meet the ongoing value anyway-

GUYON  So just to clarify that, you-  Sorry to interrupt, but you were wrong in that statement.

BROWNLEE I was wrong.  Yeah, I shouldn't have made that statement, because it's too hard in the end to live up to it.  And the point is I'm not spending my money; I'm spending the money that's paid for by the rest of New Zealand.  And when you look at the way the 2007 valuation has held up against what has been market valuation in subsequent years, it's a very very fair offer.

GUYON But for the person who has added that bathroom or kitchen that you've talked about, and it could've been $30,000, $40,000, unless they've added to the footprint of their home, that is money down the drain for them.

BROWNLEE Well, you've got to be quite harsh about this and say that as of the day the house was damaged, there was a huge loss to those people, and we're trying to preserve that on a very very broad scale.  And, you know, I'm sorry that in the heat of the moment, pressured, I said something that was not able to be delivered.
 
GUYON For the people who do have to relocate, obviously, there have been some estimates that those people might have to borrow between $100,000 and $200,000, with someone quoted in The Listener this week - a Christchurch resident.  He was estimating that the average person - they have to borrow that much to move.  Is that about realistic from what you're hearing?

BROWNLEE Look, it could be.  One of the things that is going to be essential is that we get a large amount of land available for people to consider moving into those areas - new areas - but you will get churn also.  You get a lot of people in undamaged areas who take an opportunity to go and buy a new house in a new subdivision.  So I don't think it's typical of what will happen, but it would be hard to imagine that if you're leaving a house that has virtually lost any chance of any capital gain, in fact, it has completely lost now, and going into a place that's on better land, built to a much higher standard, that there would be some increase in cost.

GUYON Is there a role for government here?  There have been some who are calling for the government to commandeer land on the outskirts of Christchurch and start its own building programme.  I mean, is that realistic, or is that just too heroic and too expensive for the government to get involved in?

BROWNLEE Well, if you consider where the local authorities were here prior to this event - they had an agreement called the Urban Development Strategy that looked at expansion into new areas in the greater Christchurch area.  If we can move some consenting process forward much more quickly, then we can get, you know, perhaps up to 16,000 new sections on the market or marketable, I should say, by the end of maybe 2013, but progressively, so we can move fairly quickly in that regard.

GUYON Do you think you can do that - you can speed up those consents and get that land available?

BROWNLEE Yes, I do, and I think the will is there from the local authorities as well as from the government.

GUYON Just looking at the amount of claims processed - I know it's close to 400,000.  I think 388,000 EQC claims was the figure that we were given this week.

BROWNLEE But they're claims that have been lodged, but each of those claims may subsequently have land, buildings or contents attached to them.  The total number of individual claims, individual assessments is up round 550,000.
 
GUYON And from the figures I've seen, possibly three and a half years if we took the average of 1500 a week.  Is that about the timeframe that we're talking about?

BROWNLEE Well, I think we're moving quicker than that at the moment, and EQC are-

GUYON How many are you doing a week at the moment?

BROWNLEE I can't give you exact numbers, but EQC have told me that they'll get all the contents issues sorted by September- sorry, by December, but before Christmas.  Then you have the land settlements.  Well, with the purchase of a lot of properties, a lot of that can go on the back burner, because that can be done over a longer period of time to settle with the government.  And that leaves the vast majority of the workforce available to do the built property, and they're out there day by day working through that.

GUYON So if not three and a half years, then-?

BROWNLEE Well, you're asking me for a timeline, and timelines, as I've learnt right from September 4, are very dangerous things to talk about when you're in a pretty dynamic environment.  And as things settle, then I think we'll see the sort of progress that people will want.  Look, no one's holding back here.  I would love to have a wand that just waved and fixed all this, but it doesn't exist, and we are dealing in an environment where we've had, you know, over 3000- 7350-odd earthquakes.  28 of those, or actually 29 of those now, over 5 on the Richter Scale, so it's a big, big seismic event still going on here.

GUYON We're in the middle of the CBD here.  I mean, it's completely wrecked.  Is it going to be a CBD again?

BROWNLEE Oh, yes, it will be.  I mean, I think right behind you is the statue of Robert Godley, or there used to be one there, the founder of Canterbury in 1850, so the post-European history of Canterbury is relatively short.  You know, it's been a place of living for Ngai Tahu for a very long time, and I'm convinced that we will see the city rebuilt.  You see all of the open space that's being created - there is some big opportunities that are going to come forward.
 
GUYON One of the things that seems to be holding back those opportunities, though, is insurance.  People can't get insurance for new builds - is that going to hamper the recovery?

BROWNLEE I think the issue is the widespread availability of insurance, so insurers are sticking with their customers.  If they're going out of a damaged home, building a new home, they're sticking with them through that process, particularly where they've got the obligation on the rebuild.  You had Lloyds come into the city in the last couple of weeks offering a book on contract works insurance.  You expect them to stick with the building once it's built.  And so I think as we let the insurance world know more about the efforts we're making here to de-risk the future, then there'll be a greater interest in coming into the city.

GUYON OK, but are they actually prepared to offer insurance?  I mean, if we were-  If we were to say, 'Look, you know, I've got a new development here.  I want to rebuild here,' can those people actually get insurance?

BROWNLEE Well, it depends who's doing that development.  Some will be able to.  Others will find it harder.  If you've got an international company, for example, coming in to build some sort of complex in the city, they'll have a different insurance arrangement.  It's incredibly complex, and we are taking all the steps we can to let the reinsurance community particularly understand that everything we're doing here is about de-risking the future for earthquake damage and maintaining the economy here, which is equally important for insurance purposes.

GUYON But those business people, though, when they come to roll over their policies are finding that their excesses have gone out of control, that it's just too risky for them and too expensive for them.  Is there a role for government at all other than to convince the insurance companies that they should be playing ball here?

BROWNLEE Well, insurance is a risk-based business, and the risks change as we progress through this.  So what I'm saying is we'll make sure that they understand it's de-risked.  If you were saying is there a role for government, you're saying is there a role for New Zealand effectively to start self-insuring-

GUYON Yes.

BROWNLEE We're a very heavily insured country.  It's worked well for us.  We've got good models, we're reliable as a market, and I think we need to give it a little more time so that the general improved picture can be better understood.
 
GUYON How much time have we got, though?  I'll quote you an email - a gentleman - he didn't want to be named, but he said that he loved Christchurch, but he's not prepared to spend the last part of his life in poverty just because the New Zealand government and the Christchurch City Council are so short-sighted and won't listen.  He's talking about the risk of capital flight.  He's saying that he just can't wait that long.  I mean, why wouldn't an investor just pick up and go somewhere they could make more of an immediate return?

BROWNLEE It's an anonymous email you've got there, and I hear these sort of emotive things.  I'll go back to what I said before - we can't change the situation that we're living in.  Does that gentleman want to maintain value in the land that he's going to be left with even if he does take his insurance payment?  And my suggestion would be, yes, he does.  So we do have to go through a process that firstly assesses what's underneath it, and we know more about what's under this city now than almost any other city in the world.  For insurers, that creates certainty.  So I think at the moment, you cannot get a consent, or if you got a consent, you couldn't start building in here.  It's still a deconstruction zone.  So there is a balance point.  I think we're OK in that position.  We're well aware of the problem, and we do know that fixing the insurance side of it will underpin the recovery.  There's no question about that.  That's why we're taking the opportunity this week to go and talk to all these guys.

GUYON When we look at the rebuilding, obviously it's going to be a massive demand for skilled workers to rebuild the city - some putting the estimate at 30,000 extra skilled workers needed for the rebuild.  Have we or have you and the government been taking on extra people, taking on extra apprentice places to actually prepare for that?

BROWNLEE Well, at the start of this year, all of the apprenticeship places, or tertiary training places, I should say, available in the construction industry weren't filled.  So they're filling up fast, and we'll have to look at expanding that.  The Tertiary Education Minister's got a good programme going to keep that in mind.  But, you know, the really key part about that is we were told after February 22nd that we could've expected this city to depopulate by anything up to 20%.  It hasn't happened.  People have stayed here.  They do want to make their lives here.  And I anticipate that with the workforce coming in for the rebuild, we're going to see population growth here, and that can only be good for us in the long run.

GUYON  How many of those 30,000-odd, say, though, would have to come from overseas?

BROWNLEE A number will.  It's hard to put that number on, and 30,000 is a stab in the dark, like a lot of other things.  But, you know, there'd be nothing wrong with bringing in skilled people who can add to our economy.  The real point about that is, and it's hard sometimes in the middle of all this devastation and suffering that people are going through, to sort of pitch out 10 years, and what we do need to make sure is that the long-term economy for the city also has a growth profile to it so that new population that comes in, that increased population, all the young people who will flood into the city for training, do have a life here beyond the rebuild.

GUYON  OK, just about a minute or so left, so I just want to finish with the EQC.  That natural-disaster fund is pretty much down to zero now.  You're going to have to increase the insurance levy on the EQC payments - roughly capped at $69 now.  Is that going to be the major way that you rebuild the fund?  Or how are you going to rebuild that fund for the next natural disaster, whatever it may be?

BROWNLEE Well, I think the interesting thing is that- we've announced this week that the fund we've got will be spent, and that has some fiscal impact, but not to the same dollar-for-dollar level.  And you ask yourself, well, what would it have been like if we didn't have fund?  A much worse picture, so the model-
 
GUYON Sure, but I'm asking, yeah, sure, but-

BROWNLEE Yeah, let me answer-

GUYON I'm asking what now, though?  How do you rebuild it up?

BROWNLEE Yeah, well, the model has worked, but it does need to be tweaked in the future.  And there are those who say, 'Look, just put on a levy.'  Well, the government can put on a levy or a tax any time it likes.  The real question is how do you provide cover for that disaster type of situation, as we've had here, in a secure way going forward?  So it's not a simple answer.  We need to take our time to make sure that what we put in place in 2012 will endure and put us in a better position.

GUYON OK.

BROWNLEE What we did in 1993 has sort of helped, but there's some shortfalls in that.

GUYON OK, got to go.  Thanks very much, Minister, for your time.  We appreciate it.

BROWNLEE Thank you very much.
 


 

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