[Sitting date: 23 May 2012. Volume:680;Page:2309. Text is incorporated into the Bound Volume.]
Dr RUSSEL NORMAN (Co-Leader—Green) to the
Minister of Finance: Have all the projects identified in the National Infrastructure Plan been assessed against Treasury’s
Better Business Cases for Capital Proposals guidelines to ensure they represent good value for money; if not, why not?
Hon BILL ENGLISH (Minister of Finance)
: First of all, the National Infrastructure Plan provides a snapshot of strategic opportunities that will help achieve goals for each major sector: transport, telecommunications, energy, water, and social services. It does not provide a complete list of current or potential infrastructure investments. But to answer the member’s question, the Government’s policy around the quality of capital investment cases was clarified in July 2010. It was not retrospective, so it applies to all departments and Crown entities from 2010 onwards, but it does not apply to projects where decisions were made before that.
Dr Russel Norman: Can the Minister tell the House what is the purpose of the Treasury guidelines
Better Business Cases for Capital Proposals?
Hon BILL ENGLISH: The purpose is to try to break the attitude in the public sector that capital is free stuff that drops out of the sky and has no particular cost attached to it, when actually it is scarce these days; you have to borrow it or take it off taxpayers. And it is also to get the public sector to understand that although it may be able to access it cheaply—say, through Government borrowing—the projects to which it is applying it are just as risky as if private capital was invested in a building that, for instance, has got to be earthquake-proofed or cannot be a leaky building. So it is to raise the awareness across the public sector of the importance of getting capital investment right. The Government invests billions of capital every year—billions and billions—and needs better processes to do it.
Dr Russel Norman: Given that the purpose of the guidelines is to ensure good-quality spending on capital infrastructure projects, has the $14 billion programme of roads of national significance been assessed according to Treasury’s
Better Business Cases for Capital Proposals guidelines?
Hon BILL ENGLISH: They will not have been assessed strictly according to the better business case guidelines, but I would hope that in the future that will be the case. What I can tell you, though, is that the assessment that has been done on the roads of national significance shows that they have significantly better economic benefits than, for instance, the central business district rail tunnel and other public transport projects, some of which are advocated by the Greens; others of which are put forward by city councils that cannot afford them and want the Government to pay for them.
Dr Russel Norman: Given the scale of the spending on the roads of national significance—$14 billion—and that many of the roads of national significance projects have not yet been initiated, will the Minister begin the process of assessing the roads of national significance against Treasury guidelines, given that he himself has said that he wants to eliminate low-quality spending and make sure that we have efficiency in capital spending by the Government and that these projects have not been assessed?
Hon BILL ENGLISH: The Government has made commitments to the roads of national significance, so they will be going ahead. But I might say to the member that in the transport area there is generally a more thorough approach to these issues than across the rest of the public sector, and the focus of the better capital guidelines is particularly on the large-scale social assets in housing, education, and health, where we believe there is scope for very significant improvements in capital decisions. Transport has been regarded as an area with stronger disciplines than most others.
Dr Russel Norman: Given that the roads of national significance projects have not been assessed against these guidelines, and the Minister’s statement that the transport sector takes a thorough approach to assessing the benefit-cost ratios in this issue, why was it that a number of the roads of national significance projects were approved before the business cases were actually completed?
Hon BILL ENGLISH: Well, the member will be aware that in 2008, and again in 2011, the National Party campaigning committed itself to a range of projects that it believes are in the long-term interests of improved infrastructure, getting it in place to accommodate the economic growth that New Zealand can achieve, and we intend to continue with that. As it happens, the benefit-cost ratios on those projects are all pretty good.
Dr Russel Norman: So is the Minister saying that these roads of national significance projects—$14 billion worth of spending—are being supported by the Government because they made political decisions in Opposition that these were good ideas, long before the business cases were ever completed and before Treasury’s better
business cases for capital proposal guidelines were used to assess them, so they are political roads of national significance, whether they make any economic sense at all?
Hon BILL ENGLISH: I can tell the member that we were not willing to let the traffic in Auckland park up until the middle of 2010 while we figured out a new set of business case guidelines. So the member is correct. The decisions about those projects were made before July 2010. We believe that they are sound projects. But I would suggest to the member that it would be helpful if he would apply the same rigour of analysis that he applies to roads, to rail projects, which on the face of it do not look to meet too many, if any, economic criteria.
Dr Russel Norman: Is it not the truth of the matter that the Government could maintain important public services and still return to a surplus if it was not digging a hole for itself by wasting billions on motorways that do not have a business case and were not tested against the Treasury guidelines, and by wasting billions on not fiscally neutral tax cuts and subsidies for polluters?
Hon BILL ENGLISH: The way the transport funding now works is essentially user-pays. That is, people who use the roads pay through their petrol tax and their road-user charges. That money goes into the dedicated transport fund. If we build more roads, they would have to pay more. If we build fewer roads, then conceivably they would pay less. In the long run, New Zealand needs this kind of infrastructure. Actually, I think there was general agreement across the parties by the mid-2000s that we were under-invested in roads, and, despite where the Greens would like to go, most Kiwis still have cars and most of them are going to insist on using those cars, and therefore we probably need roads.