The past week has seen a procession of debates, reports and statistics releases which should (but probably won’t) define this year’s election.
Simply, they tell us that we cannot afford the future.
They will be met with resistance, denial and obfuscation.
But what yesterday’s release of the National Infrastructure Plan underlines is what participants at last week’s New Zealand Economic Forum talked about.
With a creaking infrastructure and ageing population, there will not be the money to pay for either New Zealand Super and new hospitals, electricity generation, and roads, without radical changes to both how we decide what we want and then how we fund it.
Inevitably, issues like new taxes, privatisation, public-private partnerships and user pays will have to be on the political agenda, along with substantial changes to New Zealand super.
The urgency of the situation was evident yesterday in a Stats NZ report, which showed the lowest growth rate for people aged under 15 since Stats began publishing figures in 1992.
But it was the release yesterday of the National Infrastructure Plan which crystallised the issues.
The 226-page plan is an exhaustive examination of the future for infrastructure.
It forecasts higher power prices and possibly much higher fuel taxes and road tolls to help pay for infrastructure, while it also forecasts a pullback from ambitions for land transport and, because of changing demographics, less emphasis on non-Maori education infrastructure.
The Commission forecasts that to meet transport, electricity, health and other needs, infrastructure investment will need to double to $40 billion by 2045.
“We have choices about how we fund and finance infrastructure investment,” the plan says.
“But New Zealanders will ultimately still have to pay.
“Households will meet some costs through taxes, rates, or user charges.
“Other costs will be met by businesses and passed on to local or international customers.”
The big ticket item will be transport.
Spending on roads and rail is currently at $7 billion a year but is expected to rise to $12 billion by 2030.
But further out, the sums become much bigger.
“The National Infrastructure Pipeline includes around 25 major road, rail, and rapid transit schemes with a combined value over $100 billion – equivalent to more than 20 years of normal land transport revenue,” the Commission says.
“Based on current estimates, delivering just the major roads programme in full over the next 20 years would cost $56 billion.
“Funding this entirely from petrol tax and road user charges would require a one-off 70% increase, equivalent to a 49-cent per litre increase in petrol tax.
“ Further revenues would be required for the Waitematā Harbour crossing and major rapid transit schemes.”
The Commission suggests a $9 one-way toll could be needed to fund the crossing.
(When the existing bridge opened in 1959, the toll was two shillings and six pence. Using the RBNZ Inflation calculator, which works out at $7.70 in current money.)
The report emphasises the level of political control that exists over transport funding decisions.
“Land transport investment is heavily influenced by the Government of the day’s objectives,” it says.
“The Minister of Transport determines funding ranges for expenditure categories through the government Policy Statement on Land Transport GPS-LT, based on advice from the Ministry of Transport but without independent oversight.
“In recent years, Governments have also directed specific projects for delivery, leading providers to spend more than user revenues allow.”
The Commission questions some of the roading plans in the infrastructure pipeline, in particular, National’s much-promoted “Roads of National Significance.”
“New Zealand’s major transport project pipeline has grown much faster than the funding available to deliver it,” the Commission says.
“This includes plans for 17 Roads of National Significance (RoNS), major rapid transit projects such as Auckland’s Northwestern Busway, and a new Waitematā Harbour Crossing.
“Taken together, these ambitions far exceed the revenue likely to be available over the coming
decades.
“Cost escalation compounds the problem.
“The RoNS projects are expected to cost significantly more per kilometre than earlier New Zealand motorway and expressway projects, and significantly more than the OECD average.
“Indicative target cost ranges published by NZTA suggest costs should ideally be much lower.
“The Northwestern Busway is expected to cost much more than previous New Zealand busways, potentially exceeding the per-kilometre cost of many underground rail projects overseas.”
The Commission says we should return to a system where users predominantly fund road projects.
“In general, the funding model should shift to a state where Crown loans and grants aren’t required for land transport,” it says.
“Investment should be made with greater independence.
“Our current transport spending ambitions present affordability challenges.
“To resolve these challenges, central government needs to be less prescriptive about how land transport funding should be allocated.
If transport is the big ticket item, the fastest rising expense sector is electricity.
Electricity usage is projected to increase by more than 60% by 2050 to meet emissions targets.
“Meeting this will require around $26 billion in capital investment above base-level requirements over the next 30 years – or around $835 million per year,” says the Commission.
To pay for this, it forecasts that by 2035-2040, electricity charges will increase by one per cent of the average household budget.
There is much more in the report, which details infrastructure needs on a sector-by-sector basis.
But hanging over it all is the question of how everything is going to be funded.
Infrastructure Minister Chris Bishop was almost defensive in his response to the publication of the plan.
“The Government has spent a lot of time in the last two years making a start on fixing the basics of our system, but there is a lot more to do,” he said.
“The Investment Management System has been strengthened, long-term investment plans are beginning to be developed, and Ministers are demanding higher quality information from agencies.
“We have launched a comprehensive programme of work to improve asset management in the public sector.
“On top of this, we have established National Infrastructure Funding and Financing to connect private capital with public projects, clarified roles and responsibilities across the system, published Funding and Financing Principles, updated guidance material for Public Private Partnerships and improved the quality and transparency of the National Infrastructure Pipeline.”
Nevertheless, his statement avoids addressing head-on the funding issues raised by the Commission.
Those with a vested interest in building infrastructure were not so shy.
Infrastructure New Zealand’s Chief Executive Nick Leggett cautioned against allowing fiscal constraints alone to define national ambition.
“There is an implicit sense in this plan that New Zealand must limit its aspirations because we are a small or relatively poor country,” he said.
“That mindset risks becoming self-fulfilling.
“Infrastructure is not simply a cost.
“It is an investment in prosperity, productivity and resilience.
“Over time, well-planned infrastructure enables higher incomes through growth, stronger public finances and better living standards.”
The Civil Contractors CEO, Aslan Pollard, said the plan echoed many of the concerns and solutions put forward by the contracting sector, “particularly around the need for true pipeline certainty, practical consenting, and robust, durable funding mechanisms.”
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