I'm going with the smokescreen to walk back promises
Is it possible for an outgoing government to leave fiscal "nasty surprises" for the incoming government to deal with?
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You may not want to read them about the $45 billion hole for intrastructure that the previous government was warned about by Treasury before the Election.... sorry, that's no smokescreen....
Labourβs transport plan was βunfundedβ and would increase emissions, Treasury warned
At the same time the former Labour Government was laying into the National party for announcing
a poorly costed Transport plan on the campaign trail, its own
officials were warning that Labourβs transport plan was substantially unfunded and undeliverable.
Treasury was so concerned that it recommended the ministers drop all new projects from one of the most significant parts of the plan.
Nevertheless, the former government proceeded.
Officials warned that the then governmentβs βStrategic Investment Programmeβ β a list of projects the government wanted built in the next ten years as part of its transport budget β would βadd to the already considerable list of unfunded investment proposalsβ the government had embarked upon like Auckland light rail. The combined list of new and old projects would require the Government to find $43 billion in funding over the next decade, officials said.
They also warned that an additional 100,000 workers would need to be found to deliver the new projects - a number roughly equivalent to the number of soldiers New Zealand sent to fight in the First World War. The current workforce is just 180,000 strong.
The advice, which was released to the
Herald under the Official Information Act, said officials reckoned $1.34b-1.44b would be needed just for βbusiness cases and pre-implementation worksβ for the projects in the next three years alone. Turn back the clock to
2016 and Labour reckoned $1.36b would be enough to design and build light rail between the Auckland CBD and Mt Roskill.
Treasury recommended the former Government dump all the projects from its plan until they could be staged in a way that made them more deliverable, and until officials could devise more up-to-date costings.
In the end, ministers okayed the use of central Government money to part-fund the plan which is generally paid for by fuel taxes and road user charges. However, the funding was only for the first three years of the 10-year plan, leaving a multi-billion dollar problem at the back of the programme, when these projects would need to move beyond business cases and then construction.
Treasuryβs Prefu forecasts said that only the Government had only committed $2.4b for the βpre-implementationβ phase of the plan, which was charged against future Budgets.
Prefu included a warning that funding had βonly been committed in principle for the first three yearsβ of the 10-year plan.
Once the first three years elapsed, a hypothetical Labour Government would likely have had to top up Waka Kotahi NZ Transport Agency with another grant if it wanted to continue building the roads. There is money set aside for such things in the Budget, but it is for hospitals, schools, and other infrastructure - Waka Kotahi is meant to fund transport infrastructure from its own pocket.
The projects in the Strategic Investment Programme included the funding of politically charged projects like
Warkworth to WhangΔrei, Cambridge to Piarere, and Tauranga to Tauriko highways, among other investments. Officials panned the inclusion of some of these projects to the plan saying they βdo not recommend that any... are progressed or funded at this timeβ.
The advice is a Treasury commentary for then Transport Minister David Parker on the former Governmentβs draft transport plan, known as a Government Policy Statement on Land Transport (GPS) - a direction from the Beehive to how Waka Kotahi should spend the billions of dollars it raises from fuel taxes and road user charges.
Treasury also warned the costings for the projects in Labourβs package had βlimited or no business case informationβ which could be used to cost the projects accurately.
Treasury said the package contained βvery preliminary cost estimates, not ordinarily suitable for final investment decisions, with a high likelihood of underestimationβ, meaning the package had a high risk of going over budget.
Parker defended the way the pan was funded, saying βas has been true of successive GPS, only the portion of costs of longer-term new builds that are expected to fall within the three years are funded in the GPSβ.
Hey also defended the Governmentβs decision to dip into central government coffers to fund what could not be paid for by fuel taxes and road user charges.
βThe last Government substantially increased funding via Crown injections (eg NZ Upgrade), the Provincial Growth Fund, the Auckland Regional Fuel Tax, post-cyclone capital injections, and increasing the funding available for the NLTF, including through increases to fuel excise duty/road user charges, as well as the extra borrowing enabled via Waka Kotahi,β Parker said.
Some of the projects on Labourβs βStrategic Investment Programmeβ are also in Nationalβs transport plan meaning they too may have to pick up the phone to some expensive transport consultants for business cases on their own projects - they will also have to contend with Treasuryβs warnings about the stretched construction workforce. Nationalβs own costings have come under scrutiny for being many years out of date, and for relying on nearly $10b in funding from private investment, which may or may not materialise.
Transport Minister Simeon Brown said the βformer Government left behind significant problems in the transport sector with a roading network which is falling apart, and a failure to start and complete any major projects over the past six years. Timeframes and budgets have also continued to blow outβ.
βNational campaigned on getting NZTA back to basics with a focus on building and maintaining our roading network,β Brown said, confirming National had started working on its rewrite of the GPS.
Officials also skewered the plan for the fact that these projects - if they were ever built - would increase carbon emissions.
An early version of the plan, put together by the then-Transport Minister Michael Wood after outrage at measures designed to make the transport programme more climate-friendly. That plan made climate change the βoverarchingβ priority of the transport system.
The new GPS dropped climate change as an overarching goal. Treasury officials warned this would βsend mixed signals to Waka Kotahi and local authorities and make it more difficult to reconcile transport investment decisions against the Governmentβs public commitment to achieve net zero emissions by 2050β³.
The most scathing criticism in the paper was reserved for delivery risks. The paper reckoned there government could deliver on the core $18b the plan, which was funded by fuel taxes and road user charges. These projects were fairly small scale, and included βmaintenance, road policing, and public transport subsidies, and new construction projects that are already underwayβ.
However, officials were concerned about the billions of dollars the projects the Government had loaded on top of the initial $18b plan.
βWe see substantial challenges delivering on all of the additionalβ¦ transport projects that are now being considered,β officials warned, adding that they reckoned an βadditional $43bβ over the next decade would be needed to fund the Governmentβs commitments - a top up of $4b a year to the roughly $6b a year spent on the NLTF.
By way of comparison, the whole Governmentβs net core debt before the Covid pandemic was just $58b.
Treasury warned the Government had already βsignalled many other unfunded transport projectsβ and that adding more unfunded projects to this list would add to βrisks around long-term credibilityβ.
Treasury said Labour had βaround $43bβ worth of transport projects that sat outside of Waka Kotahiβs regular funding, which had uncertain funding attached to them, listing Auckland Light Rail, WaitematΔ Harbour Connections, and Letβs Get Wellington Moving.
Officials said that announcing even more unfunded projects βcould result in the perception of unsustainable funding demands across the long-run pipeline that may also add to risks around long-term credibilityβ.
It warned actually building the projects would be βextremely challenging, requiring an additional 100,000 workers.
βWithout substantial increases in capacity and capability, the Government would struggle to deliver these investments on time and within budget,β officials said.
The paper concluded saying officials did not see the βcurrent list of proposed investments as a realistic level of ambitionβ.
Officials warned government would need to find billions in borrowing and 100,000 workers.
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