7  Conclusion

This paper has reviewed arguments about the definition of a taking, “the act by which a government assumes or assigns control over all or part of a property right held by a private party”, the protections required against such action, and the role of compensation in such protection. The underlying issue is the crucial issue of security of property rights, in terms of both basic constitutional principles, and the vital role of such rights in providing incentives for investment in and use of the underlying property. Providing security requires clear consistent rules under which regulators can modify those rights in the public interest.

A strict focus on efficiency involves identifying an appropriate standard, and assessing the social costs and benefits of the taking, and of failure to compensate. These assessments carry high information burdens and require judgements on perceptions of a property right and expectations of how rights will change over time. A more case-by-case approach has similar problems in the difficulty of (1) determining when government action ceased being part of an acceptable (constitutionally, legally, or publicly) process for redefinition of property rights,[46] and (2) determining if compensation was appropriate/efficient.

More practically, we can consider the common approach to takings that has evolved here and overseas. First, this accepts that appropriation of physical property (particularly land) must be compensated, unless it is part of generic taxation or overarching changes to rights structures. Second, it defines other property rights as similar enough to physical property or tied to individual ownership, or as so essential for incentive purposes, that equivalent rules should apply eg, tradable fishing quotas. Finally, it leaves other property right regulation to generic non-compensated regulatory processes. This appears to be a “bright line” approach; ie, Government has set an arbitrary rule where easier monitoring and enforcement offset reduced economic efficiency.

Options for New Zealand appear to be either (1) the status quo, or (2) the status quo plus some combination of (A) further tightening of the general regulatory quality regime, (B) more restrictions on takings powers, and (C) extended compensation provisions.

The latter omnibus option provides scope for improvement in protections, while allowing for mitigation of the risks of change – including the changes on incentives of those involved in takings processes. There is likely to be scope for further restricting the ability of government to carry out takings where non-essential or adopting more rigorous regimes for improving the quality of new and existing regulation, without introducing excessive cost or delay in policy making. The latter would complement any restrictions on takings by countering a tendency for regulators to look for other tools to achieve their original objectives, rather than re-evaluating those objectives.

These options 2 (B) and 2 (C) are not, however, quick and easy solutions (nothing in this area is) but require a significant political and administrative commitment. Whether a practical solution also includes a greater role for compensation, ie, option 2(C) requires further consideration, but cannot be completely rejected at this stage.

Whatever change ultimately occurs, if any, needs to recognise the crucial nature of public acceptance of the outcome within a framework of constitutionality and the rule of law. Property rights are heavily dependent on perceptions and highly vulnerable to uncertainty.

Evolution of rights does occur, but the manner in which it does so is crucial to the ongoing legitimacy of the resulting pattern of property rights at any particular point of time. Changes that are too sudden, too large or too unfair (inevitably subjective concepts) can affect that legitimacy.