A different way of managing isolation

Dr Eric Crampton
23 July, 2020

The longer the Covid-19 pandemic rages abroad, the more important it will be to keep New Zealand’s borders safe.

Border safety cannot mean closing them since up to a million Kiwis live overseas and have a right to return. Over a half a million of those Kiwis live across the Tasman, many of whom will have no access to Australian social services as renewed lockdowns bring business closures and redundancies. Some will want to return to New Zealand.

Even if the Government decided never to admit another non-citizen, safely scaling up managed isolation matters and cost recovery through user fees will be rather important in enabling this.

Both National and Labour have suggested policies to charge returning Kiwis, with some differences about which group of people might enjoy fees-free entry. But both parties have proposed user fees as a fixed charge within the current system that also leaves the wider government responsible for finding managed isolation spaces for new arrivals – and consequent difficulties in ensuring that the number of spaces available matches the number of returnees.

There might be a better way.

Currently, the Government contracts with private accommodation facilities like hotels to use rooms either as managed isolation or as quarantine, then oversees the facilities to ensure safety protocols are followed. The government takes on all costs of renting and managing the facilities appropriately.

Instead of recovering the cost of managed isolation by charging returning Kiwis for their stay, the Government could instead provide them with vouchers set at a value level consistent with the cost of a stay at a basic managed isolation facility.

The upside of this option is that returning Kiwis would be free to top up the voucher amount to stay at facilities with more amenities, where available (the facilities can set their own rates).

Also, managed isolation facilities would remain under government management, just as they are now, and those ineligible for vouchers would need to pay the full cost of their own stay in isolation.

At first, this sounds like it would make no difference at all. If managed isolation costs the government $3000 per returning Kiwi, and the Government decides that (for example) half of returning Kiwis should bear the cost of their stay, then 100 returning Kiwis would cost the government $150,000 either way. Vouchers for fifty returnees would cost $150,000. Since the government pays $300,000 and then recoups $150,000 in user fees the net cost is the same.

But the voucher system would do a lot to enable scaling up.

Those wishing to come to New Zealand would need to book themselves into government-managed isolation facilities, and eligible Kiwis could apply their voucher to the full or partial cost of the stay. A booking at an approved managed isolation facility would also be a condition of boarding flights to New Zealand similarly to how travellers must provide a visa at airport check-in counters abroad.

With this switch to vouchers, the Government would no longer need to pick who comes in. Returning Kiwis eligible for the vouchers would make their own bookings, just like those without a voucher. In the same way that hotels and flights get more expensive during times of peak demand, prices to stay at managed isolation facilities could bend to demand as well. If prices rise high enough, other facilities may convert their rooms into isolation and quarantine spaces too – under the Government’s management and supervision.

Under this kind of shift, the Government would charge managed isolation facilities for the actual cost of providing the necessary supervision services, and the facility would wrap those charges into the final bill. Otherwise, if the Government shoulders those costs directly, it may be tempted to rule out rooms which can only be made safe at higher cost. Hotels and motels are specially designed and can require different levels of supervision to ensure safety. But some Kiwis in a hurry to return home would be happy to pay an extra cost if it meant more rooms quickly became available.

Scaling up managed isolation services like this would require the Government to start training workers in hygienic protocols. Unsafe practices in managed isolation in Australia led directly to renewed lockdowns in Victoria. New Zealand cannot afford another lockdown.

But any cost the Government incurs in that training would be more than covered by charging managed isolation facilities for the full cost, barring any amount the Government subsidises with the vouchers. Filling the staff roster at these locations may not be a problem since helping Kiwis return home is incredibly important work and many New Zealanders will soon be seeking employment as the Covid-19 wage subsidies wind down.

Enabling a safe scaling up of managed isolation would create even more opportunities.

In May, American economists estimated that half of the US workforce had shifted to remote work during their lockdowns. Many US tech workers would rightly see New Zealand as a safe haven, and could rapidly begin working remotely from Oamaru, Queenstown, Napier or any of New Zealand’s small towns that have fast internet.

By paying their own way through managed isolation, those expat workers could soon be revitalising communities which were previously dependent on tourism. And those choosing to locate in the bigger centres would help build connections into New Zealand’s own tech community. Far from stealing Kiwi jobs, they would continue to be paid by their current US employers – and spend their earnings here.

Safely scaling up managed isolation must be done. Too many Kiwis live abroad and have a right to return. Shifting to a voucher system for returning Kiwis could help enable that scaling up.

And if Covid-19 sticks around for at least the next year, building a larger and safer system will not only reduce the humanitarian burden of blocking Kiwis from returning home, it will also open up opportunities to help New Zealand ride out the economic consequences of the pandemic.

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