John Roughan: Small firms lack good insulation

A few weeks ago I bought some underfloor insulation for the house not much caring what incentives were going to be in the Budget.

The only incentive I needed had arrived from Antarctica.

Two days after the Budget the installer returned to put in some final brackets and I said I guessed his business must be booming on the subsidy just announced.

Like hell, he replied. It had completely ruined his cash flow. Of the 28 orders on his books before that Thursday, all but two had cancelled.

The rest were going to wait for the Government's grant next month and most of them, he reckoned, were waiting in vain; the job they wanted would not be nearly enough to qualify.

I don't know how he knows what scale of work will be required. A press release from Energy Minister Gerry Brownlee didn't mention any minimum. That and many other details have yet to be announced.

But there was no doubting the difficulties already done to the small installer's business. He sat down on a step and said he'd had to lay off an assistant that morning, a fellow with a 10-month-old baby.

If that man has become an unemployment statistic it will no doubt be blamed on the recession, not on the scheme that Bill English presented as a "stimulus to the building industry that will provide green jobs to help cushion the effects of recession".

It is rare to see the havoc caused on the ground by decisions made on high. Policy makers with noble intentions march into functioning markets as innocently as elephants, unaware of the delicate habitats of small business below.

The home insulation sector, scores of small contractors to a few wholesale suppliers, is about to be taken over by a Government agency, the Energy Efficiency and Conservation Authority, which has been allocated $323 million over the next four years to parcel out through approved providers.

"Eeca", as the authority is already known to my insulation man, prefers firms large enough to meet its Maori employment quota among other criteria he mentioned.

He described an industry thrown into disarray and said he would find someone to say so publicly, but hasn't. Half a dozen insulation firms contacted by the Weekend Herald last week all said they were busy. Two were planning to take on staff.

They were among the 33 approved providers of the government scheme. The authority is taking applications from others but a spokeswoman said it would be September before more may be approved.

I hope my installer survives; he appears to have done a decent job. But it plainly wouldn't be wise to name him. Gerry Brownlee was brutal with someone who sounded less than rapt with the scheme on National Radio.

A generation of politicians who came into Parliament in the 1980s were imbued with unusual sensitivity to the damage governments can do with clumsy interventions, no matter how good their intentions.

From some fine Treasury analysis, previously confidential to the Muldoon cabinet, they had learned that Government influence was not limited to the industries concerned; it had come to distort the entire economy, reducing the return on national investment overall.

That generation of politicians has passed now. Michael Cullen and Helen Clark were practically the last of them. Both of them, despite their rhetoric at times, were in no hurry to renationalise the economy.

They rescued Air New Zealand only to prevent its collapse and repossessed the railways when it was faced with having to subsidise their maintenance. The economic perils of public investment in the railways were to be seen this week when National's Transport Minister, Steven Joyce, was on TV merrily turning the first sod of a rail siding for Ports of Auckland Ltd's container terminal at Wiri.

The project had required $6 million of additional capital from KiwiRail's new shareholders - us.

Not far away, but well out of camera shot and unmentioned in the television coverage, there is already an "inland port", well served by rail as well as road, at Southdown. It is owned by the Port of Tauranga Ltd. It was financed by shareholders like me with no help from taxpayers and it is the spearhead of the Tauranga port's competition with Ports of Auckland.

The economy needs that contest to be won fairly and reliably by the more efficient export artery. It makes no sense to favour Auckland's port with public money.

Joyce says the Government does not want to queer that contest but it has an obligation as owner of KiwiRail to provide capital for investment in the company's interest.

We are in dangerous times. Recession tempts governments to spend on anything that might be called infrastructure regardless of whether it tramples on private enterprise as large as a port or as small as an insulator.