Williamson Maurice: Financial Review Debate — In Committee 
Williamson Maurice: Financial Review Debate — In Committee 
[Volume:630;Page:2447] 
Hon MAURICE WILLIAMSON (National—Pakuranga) 
: 
 I tell the Committee that tonight I intend to focus specifically on the issue of funding for roads. I want to use a couple of Government pieces of advice to see whether I can convince the Minister—and I am not try to be smart-alecky rude or nasty—that in fact road funding needs to be put onto a more consistent ongoing basis with some longevity that the industry can work towards. 
Dr Michael Cullen makes the claim that at present the Government with its couple of one-off announcements for Wellington and with the announcements for Auckland Waikato—yet to come I think—and Tauranga and the Bay of Plenty is currently spending about all the petrol tax at any rate. I think he is right and I will try to be as fair and balanced as I can. The National Party has for some time believed that in order to provide some certainty for the contracting industry we should take all of the petrol tax that is collected: approximately $1200 million rather than approximately half a million dollars with the other half a million dollars being put into the consolidated account. 
Those are just rough numbers but there is a difference. If Dr Michael Cullen is right in saying the Government currently spends about $1200 million on roading which is money from the consolidated account why is there a need for the change if the amount of money is the same? The reason is that it provides some certainty for the industry and for road-building contractors in the future. They will know as the money is collected that it will go towards the National Land Transport Programme and work its way through to the National Land Transport Fund so it can be spent. All that money will be required over the coming years and I think the Minister is very aware of that in terms of an infrastructure deficit that has accumulated over decades. I am very happy to openly admit now there is an infrastructure deficit—and I know my colleague Tau Henare has admitted that on his radio show—so I will say again that I think we have underfunded roading in this country for decades. 
If one looks at the figures one sees they show that back in the 1980s there was a massive funding drop. When the new Labour Government came in in 1984 the funding dropped from about 1.3 percent of GDP down to under 1 percent and it has stayed there. But anywhere else in the OECD the average has been about 1.3 percent. For those countries we would aspire to be like such as Australia and certainly its eastern states—New South Wales and Victoria—the percentage is about 1.5 to 1.6 or in fact 1.8 when one adds private sector spending to the percentage. So even if we were to move all the petrol tax over and according to Dr Cullen we are spending a similar amount to that right now it will not be enough and extra money will need to be spent. 
In the two 5-minute calls that I will take I want to draw attention to some advice that I think Ministers in this Government should be very wary of with regard to how the current amount of money—and it is not enough—is being spent. The first issue I want to refer to is a Treasury report marked “In confidence” and dated 28 June 2005 so it certainly comes into the period we are considering. The report is to the Minister of Finance and I am happy to table the report or give a copy to members if they would like to see it. This is not the National Party’s view but that of Treasury analysts who state in section 20 of the report on page 8: “Insufficient infrastructure may constrain productivity growth. Treasury’s report on New Zealand economic growth argues that infrastructure is a facilitator of economic activity. If investment in infrastructure fails to respond to a growing economy then bottlenecks result.” We agree with that. I think no one here in this Committee except maybe the Greens would fail to agree with that. 
The report goes on to state: “A recent internal Treasury project examines the questions of whether from a national welfare perspective expenditure on roads is sufficient.” The report then gets to be really interesting: “Transfund conducts comprehensive cost-benefit analysis of potential projects and generally rejects projects that have rates of return less than 55 to 60 percent.” I repeat: “and generally rejects projects that have rates of return less than 55 to 60 percent.” The report goes on to state: “The methods Transfund uses to conduct the cost-benefit analysis appear to be sound”—so that is good news; they appear to be sound—“and may in fact be underestimating the return from proposed projects.” Again that is something really worthwhile to focus on. They appear to be sound methodologies but they may actually be underestimating the value of these roads. The report then states: “This suggests substantial road infrastructure underinvestment.” 
That comes from Treasury not the National Party and I remind the Minister that we are not having a smack at him. The Treasury report states: “New Zealand seems to be passing up road investments that would earn a very high return”. I will repeat some of that because it is good: “New Zealand seems to be passing up road investments that would earn a very high return (certainly much higher than the return earned by marginal investments in the private sector). Insufficient road investment may be a bottleneck constraining overall productivity although we don’t know just how big the problem is or how much the aggregated productivity would be if these constraints were eliminated.” I say that every member of this House should read that report because I think that nails it in a nutshell from one side. 
I will tell the Minister why I am concerned about the one-offs and the bits and pieces—we will fund this and we will give a bit to that so Wellington will get a chunk of this and then it will get that and we will do the Waikato next and we have done the Bay of Plenty and so on. It is because the incoming Treasury briefing to the Minister of Finance is almost the complete antithesis of what I have just read out. On page 16 it states: “Any further investment in the short term is likely to result in cost escalation rather than improved transport outcomes. … Since 2004 there has been a move away from the benefit-cost approach for determining funding priorities as a consequence of the New Zealand Transport Strategy”—so that the New Zealand land transport strategy that was brought in a few years ago has a consequence and we have moved away from that approach—“as well as a number of regional transport packages. There is a danger that this had led to some projects that have relatively low BCRs”—benefit-cost ratios—“being funded.” So there is the Treasury warning. 
Hon Mark Gosche 
: It may be underfunding. 
Hon MAURICE WILLIAMSON 
: Mr Gosche can get all excited over there on the Government benches if he wants. 
Hon Mark Gosche 
: They are the roads you did not build. 
Hon MAURICE WILLIAMSON 
: But let me tell members that that is the Treasury briefing of 2005. 
Mr Gosche has gone back to saying those are the roads that we did not build. Let us get something clear about the time frames. The National Party went out of office last century. Labour has been the Government ever since and to keep going on about it all being National’s fault belies the argument about how quickly one could actually build the roads. In Melbourne for example the ConnectEast road—a 39 kilometre 3-lane either way roading project is to be built by the private sector in 3 years flat. So if in fact it was all our fault and the problem goes back into the 1990s—and let us go with that—who has been the Government for the last 6½ years heading on to 7 years? 
David Bennett 
: Nobody knows. 
Hon MAURICE WILLIAMSON 
: That is a good answer: “Nobody knows.” One can keep going back into history saying it is all National’s fault for only so long. I know that is the trick of a new Government and is probably even the trick of a Government that is just moving into its second term. But by the time a Government is starting into its third term the public says: “Hang on.” 
This Treasury document states—and again I say it is not a National Party document although it is in a lovely blue colour and I commend Treasury for sticking with true-blue colours; that is great—“There is a danger this has led to some projects that have relatively low BCRs being funded. We would recommend that all land transport funding should be based on a rigorous nationally consistent and transparent allocation framework rather than targeted to specific regions or modes.” 
I tell the Minister that in reviewing the whole issue of transport and road funding we should look at both of those articles from the Treasury because both of them are right. One we are significantly underfunding roading. Not only will the amount of money that comes from the petrol tax be required but so will a big chunk more. Two it is unlikely that that money will come from Government coffers—very unlikely. It would probably be unlikely to come from Government coffers if National was in Government. So the money will have to come either from debt or private sector funding and every member of this Committee knows that. Yet where are the private sector road ventures in this country? There is not a mutter or a murmur of such ventures—not one. 
I will not hear the argument that no private sector road venture is economic here. I have heard that argument before. In Britain the Labour Government ran that argument. It said there was no room for private roads in Britain. Two weeks ago I drove up and down on the M6 toll road in Birmingham. It is a fantastic 27-mile long road that Tony Blair—Tau Henare’s friend—and the Labour Government built. They said it had worked out so well that they had the appetite to build a whole lot more private roading. But that does not happen here.