The economic costs of crime

  • Judith Collins

Good afternoon and thank you for the kind invitation.

It is marvellous to be invited to join you today.

I would like to talk to you about the economic costs of crime.

Our justice system exists primarily to keep the public safe and to seek redress and closure for victims of crime.

But it is also about creating the certainty that is necessary for New Zealanders to achieve their potential, and for the country to achieve growth and a higher standard of living.

A couple of weeks ago I received a letter from a man who owns a hotel along one of the Four Avenues in Christchurch.

As you'll be aware, the Four Avenues have in recent years because the favourite stomping ground for the city's illegal street racers.

Many businesses and residents were at wits end about what to do about the onslaught of noise every Friday and Saturday night.

It created an environment in which this man's business could not perform as well as it otherwise might.

He was unable to use 25 percent of his rooms on any weekend because of the high levels of noise.

Some guests cut short their visits to go somewhere quieter.

Media reports of the problem drove down visitor numbers.

All of this impacted on his bottom line.

But the problem went further than that.

Many overseas visitors commented that the noise had diminished their enjoyment of their visit to Christchurch.

Our $9.3 billion a year tourism industry relies on each of those tourists having an enjoyable holiday, and speaking highly of New Zealand to other potential visitors.

Tourism is important for New Zealand's future economic growth.

It accounts for 16.4 percent of our total export earnings. One in every 10 New Zealanders works in the tourism industry.

Not only did the actions of illegal street racers in Central Christchurch impact on those who lived and worked nearby, but it had the potential to impact on the livelihoods of many hundreds of other New Zealanders.

Criminal behaviour is like a tax on the entire economy.

It reduces the competitiveness of our businesses, reallocates resources creating uncertainty and inefficiency and discourages domestic and foreign direct investment.

An economy with low crime is generally more productive, happier, more cohesive and healthier than one that has high levels of crime.

New Zealand spends a lot on its justice system. Each year Police, the Courts and Corrections cost the taxpayer around $3.5 billion in total.

The human cost for victims of crime is impossible to quantify.

For anyone who has been a victim of crime - particularly a violent crime - the human cost continues to be paid by victims and their families every day.

Each criminal act puts into motion a process that involves response and investigation by Police, hearings, trial and sentencing by the courts, and sentence management and rehabilitation by Corrections.

The cost of putting a murderer through this process is estimated to be $3.6 million.

For grievous bodily harm, the cost is an estimated $316, 700.

For a burglar it's $10,450.

For a car thief, $61,600.

The cost of keeping an offender in one of our prisons averages $91,000 a year.

The total cost of crime to the country, including other factors, such as health costs, loss of productivity and crime prevention costs, is considerably higher.

In 2003/2004 - the last year from which figures are available - the cost of crime in New Zealand was estimated to be $9.1 billion.

That's almost $11 billion in today's dollars - nearly the total amount the Government spends each year on education.

Of the $9.1 billion, the private sector incurred costs of $7 billion and the public sector $2.1 billion.

Offences against private property were the most common crimes, but offences against the person were more costly, accounting for 45 percent of the estimated total costs of crime.

As New Zealand emerges from the economic recession a major focus of the Government is to grow the economy and to raise the standard of living for all New Zealanders.

Clearly, a country can't reach its full potential if it has high rates of crime.

The state can't invest all its productive capital in the best amenities and services.

Its businesses can't operate at maximum efficiency, which means they are not as competitive as they could be.

There is less confidence, less certainty, less incentive to succeed.

This Government recognises what a burden crime can be as we aim to lift our incomes, attract foreign investment, stimulate business and innovation and plot a course for sustained economic growth.

Our law and order policy is a key part of our economic recovery package.

We signalled that we would be tough on crime not just because it was a popular message with the public, but because our future prosperity depended on us bringing crime under control.

The action taken by this government to reduce crime is, I believe, unprecedented.

We have come down hard on offenders, given Police new crime-fighting tools and are working to prevent crime from happening by tackling youth offending, gangs and the drivers of crime. 

We have introduced 15 new laws to toughen sentences, parole and bail for violent offenders, improve Police powers, crack down on gangs and methamphetamine and support crime victims. 

We are increasing the number of frontline Police officers by 600 by the end of next year.

Increasing the numbers of Police will not only make Police more visible and better able to respond to crime, but will be an opportunity to try new approaches to policing.

We've invested $72.4 million in our Fresh Start programme to turn young offenders away from crime. 

This will provide the Youth Court with new powers to place young offenders in 3000 new programme places,  including new military-style activity camps, mentoring courses, drug and alcohol rehabilitation, and outdoor activities. 

I would like to focus for a moment on possibly the most serious law and order issue facing this country.

It has the potential to be a chain around the ankles of future generations of New Zealanders.

I'm talking about organised crime.

New Zealand has always had criminal gangs.

However, the emergence of methamphetamine and the enormous profits that can be made from it have transformed gangs into ruthless, multi-national and multi-billion-dollar businesses.

Organised crime is responsible for much of the methamphetamine on our streets, and which causes so much misery in our communities.

The Police estimate that the combined profit from methamphetamine and

cannabis sales alone is between $1.4 billion and $2.2 billion per year.

It's a safe assumption that many of the profits and transactions within that figure do not generate tax revenue for the state.

Illicit drug use in 2005-06 was estimated to cause $1.31 billion in social harm, which is the cost of enforcement, healthcare and loss of productivity resulting from drug use.

Methamphetamine addicts report committing property crimes averaging $1840 a month and drug-dealing of $5100 a month to feed their habit. 

Not only is organised crime responsible for much of the crime in the community, but with such large amounts of money being made there is an increased risk of corruption.

We are incredibly fortunate that our Police service and justice system is one of the least corrupted, if not the least corrupted, in the world.

New Zealand is ranked 1st out of 179 countries in Transparency International's Corruption Perceptions Index.

When Police, officials and politicians choose to be on the payroll of criminals, the very foundation of our society is undermined.

That is something we cannot allow to take root.

Our future economic growth will depend on New Zealand being seen as a clean and safe place to invest and do business.

Few things create uncertainty in investors like instability, crime and corruption.

Papua New Guinea, for example, has much to recommend it geographically as an enterprise hub.

However, corruption and levels of crime described as "endemic" by the Asian Development Bank have deterred many multi-national companies from establishing operations there or investing heavily in existing businesses.

In contrast, Singapore, which has a low tolerance of crime and corruption, has built one of the world's fastest growing economies and highest standards of living.

Here in New Zealand we are squeezing organised crime from both ends.

We're making it harder for them to commit crime by giving Police more powers to monitor and intercept gangs.

We're also making it harder for gangs to profit from their crimes by giving Police the power to seize their assets.

A total of $19.7 million worth of assets is now in the custody of the Official Assignee awaiting further orders.

Assets seized include cash and bank accounts, residential and commercial properties, lifestyle blocks, farms, cars, motorcycles and boats.

The strong message we are sending is that crime shouldn't pay.

It's not just street crime and organised crime that we're focusing on.

It's also white collar crime.

The Serious Fraud Office was once this country's premier lead law enforcement agency for investigating and prosecuting serious and complex financial crime.

However, it suffered years of political neglect under the last Government.

At a time when there was a pressing need to boost oversight of the financial services industry, the previous Government signalled its intentions to actually disband the SFO.

There are still too many cowboys out there for our liking. They erode the confidence of New Zealanders in investing in our productive industries.

We think it is important to retain and rebuild the SFO.

Recently the new SFO CEO Adam Feeley embarked on a restructuring programme to ensure the office is well positioned to tackle the threat from sophisticated white collar criminals.

The SFO also has an important role to play in maintaining New Zealand's reputation as a safe place to invest and do business.

The office will have strong support from this Government as it rebuilds its capabilities.

The SFO has some challenging goals for the next three years.

I'm expecting that the SFO will work closely with receivers, the business community, professional organisations and others who have an interest in a corruption free New Zealand.

It will also be crucial that the SFO works more effectively with other regulators to ensure a speedier, united response to cases of suspected fraud.

Perhaps most importantly, it will be expected to set clear priorities based around their impact on the public and the New Zealand economy.

I think we would all agree that creating benefits for the economy should not be the prime motivating factor in the formulation of any Government's law and order policy.

Public safety is, and will always be, the main reason our justice system exists.

Indeed, without the security and structure it creates, the economy would not be able to function with any degree of efficiency or certainty.

While there is little doubt high levels of crime are a constraint to economic growth, promoting growth must necessarily be a secondary goal for the justice system.

I do, however, believe that these objectives are not mutually exclusive.

Strategies that deliver safer communities can also significantly reduce the cost burden on New Zealanders and on the state.

The illegal street race problem in Christchurch is an example of how good legislation and good law enforcement can lower the costs and economic impact of crime.

Last year we passed a law that will allow the cars of repeat street-racing offenders to be confiscated and crushed.

The hotel owner I mentioned earlier in this speech wrote to me because, at last,  certainty had been restored to his business.

He wrote:

"I can go home and sleep in peace with knowledge my reception people are not going to be met in the morning with disgruntled domestic and international guests who just didn't get a minute's sleep as a result of the Boy Racer community".

In a similar vein, reducing crime will create the certainty for New Zealand to achieve growth, raise our standard of living and build a better, safer future for us all.

Thank you.