Thomas Coughlan: Infrastructure Commission asks Labour and National to do something unpopular

This was paid for by hiking fuel taxes and cutting the forecast budget for new state highways by 11%.

The cut was enormous because the budget for building state highways was so large. By the time NZTA got hold of the plan, it reckoned it would spend about $3.5 billion on new state highways between 2018 and 2021, down 18% from the three years before (but still, in dollar terms, more money than would be spent on maintaining such roads).

The cut was only part of the Government’s worries. The plan received some state funding for the rebuild from the Kaikōura earthquake but it was predominantly funded by road users through fuel taxes and road user charges.

In order to fund the plan, those charges, which are not indexed to inflation and therefore use their real value over time, needed to go up and they did by 3.5c a litre per year for three years.

The Government thought pivoting to local roads, rather than big highways, and investing in safety and maintenance was a good idea.

As Twyford said at the time: “The previous Government did not spend enough on road safety, and instead wasted funds on a few low-value motorway projects. This has created an imbalance in what is funded, with a few roads benefiting at the expense of other areas.”

Hiking taxes while cutting road spending went down badly. Very, very badly.

The state highway funding cut caused NZTA to re-examine its plan to build the next generation of roads of national significance, scaling them back to the point that the roads, which were meant to be new four-lane highways, were mostly turned into safety improvements to existing roads.

National’s then-transport spokesman Jami-Lee Ross toured the country jibing Labour for cancelling people’s roads until he was himself cancelled and replaced by Paul Goldsmith and later Chris Bishop, the MP who is now Transport Minister.

As Labour’s polling soured at the end of 2019 and economic forecasts worsened, the party pondered resurrecting those cancelled roads. It did so in 2020 under the NZ Upgrade Programme, which funded the work with $6.8b of borrowed money, not cash from road users.

Genter, a champion of the 2018 pro-maintenance model, was so outraged with the decision she published a dissenting opinion in The Spinoff.

As it turned out, Labour didn’t need to worry about its popularity, but it did need to worry about the NZ Upgrade Programme.

In a little over a year, the $6.8b cost of the roads nearly doubled, causing several of them to be cut in 2021 by the new Transport Minister, Michael Wood. It turns out most of the roads weren’t ready to be built and the political decision to accelerate them had caused them to blow out in cost. The cost of some of the roads is still rising; for example, the Ōtaki to north of Levin road is $2.1b and one blowout away from being three times its 2020 cost of $817 million.

Meanwhile, maintenance of existing roads became a problem for Labour, with National ruthlessly campaigning on the proliferation of potholes at the 2023 election.

As Labour put together its plan for the 2024 transport budget, it again considered how to make better, more efficient use of existing infrastructure.

But again, it got nervous. When the Herald revealed Wood was considering rules that would allow councils to put cycleways on roads when they were conducting planned maintenance, in some cases taking away carparks, the outrage was so intense Labour U-turned on the plan within 10 hours of the Herald story being published – faster than its 24-hour about-face on taxing KiwiSaver fees.

The eventual plan departed from the mainly user-pays ethos of the 2018 proposals and was propped up with Crown loans and grants. Outside of the plan, Labour was still working on other unfunded transport commitments such as the Auckland light rail line and a new Waitematā crossing, each of them estimated to cost well over $10b.

You’d think that with all this drama, the National opposition would think carefully about its own transport policy for the election.

You’d think wrong – very wrong.

The National plan, announced by Simeon Brown and Chris Bishop, committed to several expensive roads, including 17 new roads of national significance. Much like the NZ Upgrade Programme, the roads were re-costed well above what was promised on the campaign with the current estimate at $54b – for comparison, the last National Government left office with the Government’s total net debt at $60b. Officials reckon, on the current trajectory, a quarter of a trillion dollars could be needed over two decades to build it all.

Labour planned to hike fuel taxes to help pay for some of the projects, National reversed the hike, deepening the transport budget’s dependence on Crown funding.

While in 2018, road users shouldered the burden for new road building, NZTA now reckons the gap between what road users pay and what it is expected to fund could run into $6b a year by the end of the decade. That means every year the Treasury would need to send two Dunedin Hospitals’ worth of capital to NZTA to prop up the transport budget. Money that may be better spent on hospitals in, well, Dunedin and elsewhere.

The Infrastructure Commission’s Infrastructure Plan, the final version of which was tabled in Parliament today lays all this out.

Too much money is being spent on transport, not enough on hospitals; too much money is being spent on what it literally describes as “new and shiny” and not enough is being spent on looking after what we already have; roads no longer fund themselves, relying on money from the core Crown budget, and too many projects are hurried for presumably political purposes, causing their costs to inflate rapidly.

Everyone agrees with this. Bishop seems to be rolling the pitch for a strategic climb down from some of the roads of national significance, and Labour, burnt by the Ardern-Hipkins Government’s infatuation with mega-projects that never got built, seems poised to run on a more modest platform this election.

But all this was true in 2018, before the Infrastructure Commission even existed. Yet still the Government promised too much, allocated too little to fund it and accelerated the projects, which caused massive budget blowouts.

All of that’s a stain on the record of the last Labour Government. The parties of the current Government know it was a mess, having prosecuted the it ruthlessly in opposition, and yet when their time came, they repeated the same mistakes with much the same results.

Why? These expensive projects are exceedingly popular. Every government loves cutting a ribbon and no government minds passing the buck to its successor. Sadly now, we’ve got a gaping infrastructure deficit and a Treasury whose balance sheet is on track to collapse under the weight of hundreds of billions of passed bucks.

To fix it, both sides need to find some way of making boring maintenance (which the commission reckons should comprise 60c in every dollar of infrastructure spend) more attractive to voters and to tactically retreat from promising expensive mega projects.

There didn’t seem to be much hope for that on Tuesday, when, as Bishop archly noted, Labour and National began fighting over who had been the most and least bipartisan.

If there is hope that some of this advice might be heeded, it may come from the most unlikely and quite literally hope-less part of the country: Wellington.

Although there’s no polling on the subject, with the city’s own mega-projects such as the Town Hall rebuild and the Golden Mile groaning under the weight of cost blowouts, and deferred maintenance leading to wastewater being piped into the Cook Strait, the city’s mood appears to have soured on expensive mega-projects in favour of boring maintenance spending.

The city’s convention centre, Tākina, whose curvaceous brown design rather unfortunately resembles a breaking wave of wastewater, has become a symbol of the city’s misplaced priorities. The mood in the city seems to have be ready, finally, to embrace boring maintenance spend.

It’s an open question whether Labour and National can co-operatively call an end to their race to the bottom, and whether their junior partners would allow that to stand (experience with superannuation reform or the medium-density residential standards suggests this is doubtful).

It would be brave for these two parties, already historically unpopular, to risk a further erosion in their standing with the public.

But the alternative, as the commission outlined today, is very, very expensive.