Bernard Hickey: First shots in generational war

Owners of leaky homes who did their best to check for problems now face ruinously high costs. Photo / Martin Sykes

This column's comments last week on who should pay for New Zealand's leaky building disaster hit a nerve. The strength of the reaction betrays the depth of feeling building up now in the coming "Battle of the Generations".

The reaction to my comment that the burden should not be spread across all taxpayers was fairly evenly split between the landless and poor youth who are trying to save, and the landed and rich oldies who want to spend. This will be the first skirmish in what will become a tense struggle over who pays for what in the coming 20 to 30 years.

Should the retiring baby boomers and pensioners prepare for their own escalating health care, housing and pension costs now by increasing their savings? Or should the burden fall on those still working and paying taxes in the 2020s and 2030s?

We are now reaching the sharp and pointy end of the intergenerational wealth transfer debate. The bitterness of those locked out of home ownership by the property boom from 2002 to 2007 is palpable.

Their anger is building at John Key's apparent decision to bail out elderly owners of leaky homes while refusing to restrict pensions ahead of the looming retirement and health cost surge from the baby-boomer bulge. Key's decision not to impose taxes on windfall gains from the property boom has rubbed salt into the wound.

Owners of leaky homes who did their best to check for problems and who now face ruinously high costs to reclad or rebuild their homes are equally angry at the idea they should be left to fend for themselves. They believe the costs should be shared across the entire population because its governments were responsible for the lax regulations that allowed leaky homes to be built.

"The Building Act in the early 90s set this disaster on the road that it has taken," said John. "The Government needs to redress the situation, and unfortunately that means you and me as the taxpayers."

The core of the problem is around when these costs should be incurred and in what form. Should they be taken now by homeowners in the form of a capital loss on the sale? Or should the costs be deferred in the form of a government-guaranteed loan that is subsidised and may have to be paid for by future generations?

Younger voters are beginning to understand what these bailouts and deferrals and the continuation of free and generous health care and pensions mean.

"Baby boomers have had all the good times and we get stuck paying the bills in the form of education, pensions, housing, job security, screwing the environment and so on," said Vaughan.

Leaky buildings is the first of the battles. The next ones will be over the tax increases needed after 2015 to pay for higher pension and health care costs, followed by debate over these universal benefits themselves.

bernard.hickey@interest.co.nz