Debate on Crown Entities, Public Organisations, and State Enterprises — Building Industry Authority

This financial review of the Building Industry Authority impacts on thousands and thousands of New Zealanders who have been grossly neglected by this Government in its response to the huge crisis in respect of leaky homes. I note that Damien O’Connor is in the chair. The first problem for homeowners is the way in which this important portfolio has been passed around the Cabinet table like a hot potato. Can members believe that in just 5 years there have been six different Ministers for Building Issues? It is little wonder that we have the scale of mess—with thousands of homeowners living in rotting and decaying homes, with their health affected, and struggling to try to find a solution—when Labour treats this issue with such disdain that it is passed from pillar to post. We have had Mark Burton—[Interruption] Judith Tizard pipes up. Can Judith Tizard—who has hundreds of her constituents confronted with those awful problems—justify to me why we have had Mark Burton, George Hawkins, Lianne Dalziel, Margaret Wilson, John Tamihere, Chris Carter, and now Damien O’Connor on building issues?

Then there is the matter of just how poorly the Government is managing the problem. We see in this report that $6 million is being spent on lawyers by this Government in order to fight the owners of leaky homes. Here are desperate people who need the Government’s help and assistance—but what is the Government’s answer? It will spend $6 million on Queen’s Counsels in order to fight them and in trying to pretend that the Building Industry Authority has done nothing wrong. What sort of insult is that to the intelligence of New Zealanders and of those poor families affected?

Then we see that $100 million is being spent on the Weathertight Homes Resolution Service, but not one dollar of that is to be spent on a single home needing to be fixed. Instead, that $100 million the Government is spending on the weathertight homes bureaucracy is, according to the Government, to provide a quick and speedy resolution of the problem of rotting homes. Well, is that not interesting? That is what the Government said 3 years ago. Three years later, fewer than 10 percent of claims have been resolved. Does Damien O’Connor, the Minister in the chair, realise that with current progress the Weathertight Homes Resolution Service will take 20 years to process claims under that “fast, cost-effective solution” the Government rammed through Parliament in 10 days? That is simply insulting, and it is a tragedy for the families concerned.

I want also to draw the Minister’s attention to something that is truly shocking. A poor old homeowner, who had a rotting home that had been certified by an independent certifier, wrote to the Building Industry Authority in 2004, the year under review, and asked who the insurer was for the independent certifier. The authority wrote back and said that it could not tell the homeowner, because the information was commercially sensitive. Now, that is shocking! There is a Government that should be helping those families, but it is putting up bureaucratic barriers to the extent of even refusing to name the insurer. What does that mean? It means that the homeowner is not able to take legal action to try to get his or her home fixed, because the Government is hiding behind the excuse of commercial sensitivity in order to protect the insurance companies rather than the homeowner. I say that that is a farce.

How can members opposite even pretend, with that sort of debacle, that they have any compassion for the families affected by leaky homes? I saw in the New Zealand Herald last week the glaringly smiling photo of Chris Carter, and I simply said: “What a disgrace.”

That is one of the most outrageous speeches I have heard in this Chamber, from a member who thinks that the market will deliver to everyone—will give a solution to everyone, regardless—

💬 Hon Dr Nick Smith: I never said that.

Well, that member and his party say that, philosophically, on just about every issue in relation to the economy.

💬 Hon Dr Nick Smith: Do not.

Yes, they do. In fact, they said that through the 1990s, which is the very reason that this Government has had to step in and fix the big mess. Indeed, I accept the member’s point that it is a disastrous situation for a young family that has bought a home in good faith, and discovered that it is not just a leaky home but that they have a truly faulty, undervalued—or overvalued—disaster on their hands. How has that occurred? Many of those homes were built while Mr Smith was in Government.

💬 Hon Dr Nick Smith: This was built in 2001.

I tell the member that the regulations that governed the system right through the 1990s were set up by his Government on the basis that the market would deliver—that homeowners should know what they were buying: “let the buyer beware”. The problem was that that Government had insufficient safeguards to protect people who bought homes in good faith. That is why this Government has had to step in to what is a very significant issue, particularly in the Auckland area.

💬 Hon Dr Nick Smith: It’s not working.

It is working. We are working through the issue very, very carefully. We now have in place some regulations that govern the kinds of timber to be used in the process. We have to go through a very complex commercial situation to try to unravel a mess. The mess was laid down by the same blind ideology that that member and his party will take into the future—

💬 Hon Dr Nick Smith: George Hawkins!

It is not. I applaud the efforts of the Ministers in managing this difficult process. This Government has grappled with the issues, and has moved ahead and set up the new Department of Building and Housing, which will be responsible for all these issues. That member said: “Six different Ministers for building issues.” Well, the fact is we will now have one Minister overseeing the Department of Building and Housing, who will oversee all these responsibilities and issues. That has not occurred before, and it is the very reason that this situation has occurred.

Responsibility has been in a whole lot of different areas of Government, and commercial law and the smart, wise boys in the building industry have ripped people off, particularly in the Auckland area, because the laws laid down by the previous National Government, based on the blind ideology that the market would deliver to everyone, were insufficient to protect those people into the future. So we have set up the Department of Building and Housing. There will be a Minister responsible. We have tightened regulations and improved the standards and the types of timber that can be used. I have every confidence that, while not offering a perfect solution—I do not think any honest Government would say that it could—it is a huge step forward to protect the consumers in this country and the people who buy homes in good faith.

If we ever—God help us—see a National Government on the Treasury benches again, this country can be assured that we will be back in the same commercial situation that would allow leaky homes and rorts to occur right throughout the economy, because the National Party believes the market will deliver to everyone. Well, I say to Nick Smith and the National Party that they should wake up, because that does not work. This Government has had to step into the issues in the building industry, take stock, grapple with a difficult issue, change the whole structure in Government, set up a new Department of Building and Housing, and do the things that are necessary to move this situation forward. I am happy to say that this Government has taken huge steps to make progress, and I am confident that we will move forward in the same way.

I have just been listening to the Minister doing exactly what this Government has always done and, it appears, what it will continue to do—blame everybody but the real part of the industry that brought this whole debacle into being, which is the Building Industry Authority. When will a Minister acknowledge that the authority had everything to do with this particular problem? We saw in the Weathertight Homes Resolution Service report that the Department of Building and Housing is looking at acceptable standards, and that the new standards will adopt internationally recognised best practices for weathertightness. That is great! That would make me feel great and full of confidence, if it were not for the fact that the same people who were in the Building Industry Authority are doing this.

The authority adopted new standards in 1995 and 1998, which led to the introduction of kiln-dried timber and monolithic cladding, the combination of which was catastrophic. Did the authority carry out any tests on those products to make sure that they were compatible? No, it just accepted the industry and manufacturers’ warranties and specifications as proof that the products were OK. Did the authority listen to the industry’s concerns? No, it just totally ignored them and carried on with the whole process. It totally ignored the industry’s concerns right throughout. Did the authority act to rectify its mistakes when the problem became obvious to everybody else except the authority and the Minister who was in charge of the authority at the time? No, it did not. The authority did nothing. In fact, it stuck its head in the sand, and totally ignored and denied that anything was happening—and the rotting homes problem continued for years on end.

It was interesting to hear Clayton Cosgrove in the House yesterday say that Labour, and he, had known for 10 years that this problem was developing. That is an admission that the Government knew about the problem and the Minister knew about the problem for at least 10 years before they acknowledged it. Clayton Cosgrove admitted that in this House yesterday. If members look at his Hansard they will see that he admitted that. So this Government had known about these problems all along.

This Government set up the Department of Building and Housing, which absorbed the Building Industry Authority. The authority created this environmental, economic, and health problem of monumental proportions, yet that same organisation—the department—is being protected and shielded by this Government. The Government has put up $4.5 million to protect the department from any legal—

💬 Hon Dr Nick Smith: No, $6 million.

It is now $6 million, is it?

💬 Dail Jones: What does New Zealand First think?

New Zealand First thinks it is an absolute disgrace, and we want the Department of Building and Housing to be reviewed and the Weathertight Homes Resolution Service to be reviewed and reformed, because it is not providing the service that it was meant to or that everybody expected of it, particularly in terms of the department’s treatment of it. The Weathertight Homes Resolution Service was the one way that homeowners had of achieving a successful resolution, but the department refuses to take part in the process. The conditions were set by the Department of Building and Housing, yet it holds all the ace cards. Firstly, it refused to participate in the Government’s Weathertight Homes Resolution Service, which was set up to be a speedy, flexible, and cost-effective resolution for those homeowners. Secondly, it uses every effort to remove itself from the legal process. As well, the Crown Law Office has stated that it will not pay a cent to anyone undergoing mediation, because it will carry this issue right on through to every appeal process that this country has available to it.

The Department and the Government have no intention of looking after the people of New Zealand who have that problem. It is a disgrace.

I believe that this issue—this leaky building scenario and the department we are looking at—is probably one of the most serious issues that the country is facing at the moment. I have seen Government members stand up time and time again in this debate and proclaim that the Government is showing leadership. Well, where is the leadership on this issue?

The unfortunate part with the leaky homes situation is that the time bomb is ticking. The Government has a responsibility, and it is even classified here—the cost of litigation. The report states that the authority is one of a number of defendants in law suits. So the Government has a responsibility to look at this issue. But the problem that people with a leaky home have is that as every day goes past the situation gets worse. We have families living in Auckland, and no doubt in other parts of the country, who are living in homes that would now be dangerous. I have heard of people who have walked into their living room and a hole in the floor has just opened up and the floor has collapsed because it has been absolutely rotten. Young children have gone out on to a terrace and it has collapsed.

A Government that shows leadership on this issue needs to pick up the responsibility. Yes, the issues of resolving this problem are no doubt long and complex. But there is a very simple solution to this. The Government immediately needs to make available to people an interest-free loan so that the homes can immediately begin to be rectified, and then the process and the discussion with councils can take place on who is responsible for what. Do not forget that we have said that new standards have been put in place. Well, let me assure members that the standards, as good as they may be, are absolutely as useless as the previous standards if the inspections are not done and the new regulations are not checked.

As a qualified carpenter and joiner I assure members that the majority of the problems in the leaky homes situation are not because of the materials, but because of the standard of workmanship put into those homes. Any timber in a home will eventually rot if water is flowing through it. Therefore, when there are no satisfactory flashings around windows and doors to prevent water from flowing into a home—[Interruption] Dail Jones can bleat away as a lawyer. They are the ones who are responsible for making all these laws and regulations that are put into place. But, when the rubber hits the road the bottom line is that people have to rectify their homes. Rules and regulations will never make a home watertight. There has to be good workmanship, as well.

United Future believes that the Government has a responsibility to begin fixing these homes immediately. A time bomb will be going off. The longer this problem is left the more expensive the houses will be to repair. Many families bought their homes in good faith. Councils, or the correct authorities, had checked them. They have issued codes of compliance, yet in many cases those homes and houses did not comply with the very regulations they were supposed to be built under.

I believe that watertightness is one of the most significant issues we need to deal with, and it is not the time right now to apportion blame. It is time right now to find a satisfactory method whereby people who have problems with their homes can start to rectify the defects and get them fixed and under way. Yes, there is then a process to follow on in finding who is responsible and where the money will come from. But from my perspective, if the Government is serious about getting New Zealanders into home ownership, if it is serious about the social consequences of people having a good home to live in, then it must deal with this most significant issue—this watertightness of homes—immediately. The Government should provide a pathway for those New Zealanders, instead of delegating responsibility and shifting the blame here and there, which really is not helping the very people who are crying out for help.

Those people have stretched themselves to buy their homes and now they are being told they will have litigation cases to attend to and they will have to go to court. Where will they get the money from? In many cases it may cost them $60,000 or $70,000 to go to court to get a decision to shift the blame, or a portion of blame, whereas it may cost only $50,000 or $60,000 to actually repair their house. Who is to say that they will win their court case, and even then they still will not have a repaired home? We need to make sure that the work will be done. I encourage the Government and other parties to get together and say that we need to get finance available to those people so that they can begin the repair process.

New Zealand First regards this issue of weathertight homes so seriously that out of the four calls we are entitled to in this debate of 3 hours, we are taking two on this issue. This is the most important issue facing Auckland at the moment, and other areas as well. In my view it is more important to Auckland than the transport situation, which has greatly improved in recent times. This is a terribly, terribly serious situation. Of course, we have just heard from a United Future member who said that he does not agree with the Government on this particular issue, but he will vote with the Government when it comes to a vote, because his party is supporting the Government in supply. So there is a bit of a double standard taking place there for United Future.

This issue has now reached a situation whereby a court case in Auckland today is so complicated that there are be two plaintiffs and 27 defendants or third parties in the one set of proceedings, and that is excluding the local authority. There can be 29 parties in one proceeding, and that is an utter disgrace. It is as if families are living in devastation akin to a tsunami. Now if a tsunami had been declared in Auckland, this Government would have stepped in and done something. But this Government is failing to do anything at all. It is all very well setting up a committee, but that is not what really matters. This problem goes back to the early 1990s, when Carter Holt Harvey conned the Building Industry Authority into approving non-boric treated timber generally for timber framing, in particular for exterior framing and bottom plates. The authority should have known that, inevitably, defective or inadequate workmanship would allow moisture through monolithic cladding and cause rot.

I disagree entirely with the United Future member. If there is a bad set of specifications and a bad set of materials no good workman can fix the problem, because it is intrinsically defective. That is the problem United Future and this Government cannot understand. The National Government was warned of the problem. The Labour Government was warned of the problem. Indeed, George Hawkins was written to about the problem, but, as usual, he took no responsibility. He did not even bother to read the letter, which indicated there would be a problem.

Now, we have these extensive, lengthy court proceedings that will go on forever. The time surely has come when we as members of Parliament must accept responsibility, and I make that point in particular to Russell Fairbrother and the Minister, who tried to make an effort in his speech. New Zealand First says we all have to accept responsibility. I was not here in 1991, or whenever, but even those who were here surely must accept responsibility. We must all accept responsibility. We cannot have a situation where Prendos says it is about $10 billion to fix, and someone else says it is about $5 billion. The people concerned are living a nightmare day and night, and have been for years and years.

Section 91 of the Building Act, which covers the Building Industry Authority, makes it clear that it was the Building Industry Authority’s problem. Who is behind the Building Industry Authority? Inevitably it is this Parliament. New Zealand First made the point in this House in 2002 that everyone must get a proper report, and get a clear assessment of the loss and the damage—which must be known by now—and that the Government must consider footing the bill. But the problem will never be finalised, because, of course, the problem can occur in cases that we do not even know about today. Really this Parliament has to say that it is the Building Industry Authority’s problem, that Parliament is behind the authority, and we must accept that.

Lawyers are confidently predicting that, at least in relation to the untreated timber issue, the Court of Appeal and the Supreme Court will hold that the Building Act did impose a duty of care, and negligence in respect of the approval of non-boric treated timber, and that ultimately the courts will hold the Building Industry Authority negligent and in breach of that duty of care. That is going to happen in the Supreme Court one day. I say to the Government, why wait for 5 or 10 years? Why put up money for lawyers to keep defending these proceedings and delaying the whole thing? This debate today is about the $6 million this Government has put up to defend all these cases. That is all we are debating today. Six million bucks is being paid to Government lawyers, but, of course, what about the lawyers for the other side? As I say, in this case, 29 parties are involved, excluding the local authorities. [Interruption] Mr Fairbrother can laugh and joke about it. It is a big issue in Auckland; it may not be an issue in Napier. This is a big issue for Aucklanders, and New Zealand First says that Parliament has to accept that it is an issue, and that we have to front the costs.

It is correct that the old Building Industry Authority should share some responsibility, but not all the responsibility, for the weathertightness issue. The speakers before me have neglected to observe that under the Building Act 2004 the Building Industry Authority became disestablished as a stand-alone authority and was brought under the new Department of Building and Housing. That makes clear, of course, a line of authority, and that line of authority is important as we discuss the current Building Industry Authority and the situation of weathertightness. And it is apposite not to leave out the cry for tax cuts, because the old Building Industry Authority represented the policy of “fewer taxes, let the market decide, let anarchy rule, let the consumer suffer, and let the devil take the hindmost”.

Those who bothered to listen to the submissions during the weathertightness inquiry and those who bothered to read the careful report of the Government Administration Committee on that inquiry, which took place a year or two ago and which gave rise to the Building Act 2004 and to the re-establishment of the Building Industry Authority as part of the Department of Building and Housing, would have discovered that in the mesh of responsibilities under the 1991 Act, the ultimate responsibility for the working of that Act fell not on the Building Industry Authority—which was an advisory body, not an enforcement body—but on the territorial authorities. I recall that was in section 28 of the 1991 Act. Territorial authorities had reposed in them the enforcement responsibilities—that is, they were the co-parent in the old Building Act—for establishing a safe regime for building houses and homes for people in this country.

What we have in the anarchy of the marketplace, which is controlled by tax cuts, is a situation whereby everybody looks after themselves and tries to evade responsibilities. Of course, it is easy to sheet responsibility home to the Government today for the failure of Governments over 14 years, before this Government addressed the issue. It is easy for people to say they will point the finger at this Government.

But let us go back to the old Building Act to see what that structure was and how it failed. It failed dismally, and many good citizens are paying the price today of that failure. However, let us not spread alarm by blaming the materials and the building industry, or by making people lose confidence in the houses they presently have and in the houses that are being constructed. The number of homes that failed the test of weathertightness is relatively small compared with the number of houses that were built in the period. Sure, the failures are spectacular and the losses for individuals are huge, but there are many competent builders out there who did a good job.

Of course, the competency of builders was hindered by another tax-cut measure: that of abolishing the apprenticeship scheme. In the anarchy that resulted from that—

💬 Hon Dr Nick Smith: It was never abolished. Absolute rubbish!

Even Nick Smith could have become a builder. All he would have needed to set himself up as a builder was a ute, a dog, and a radio. But if people do not have the skills, they cannot interpret the plans, tell the designer where the plans are defective, or know which materials should be used for internal or dry spaces. They do not have the skills to know which materials should not be used where they will get wet.

The problems in this whole scenario are those of the abandonment of responsibility, and of leaving it to the imperial, politically correct, social engineering thing called “the marketplace”. Those who bang on about social engineering forget that the ultimate weapon of social engineering is tax cuts.