Jones reinvents the Ministry of Works
By Richard Harman (author)
The Government is about to reinvent the Ministry of Works.
They’re not talking about the grey Wellington department that once employed thousands of workers apocryphally always leaning on their shovels; the new National Infrastructure Commission (or whatever it ends up being called) will rebuild New Zealand on a scale we have not seen since the 1950s.
And just as Bob Semple .became the loquacious face of the original Ministry back in the 40s, the Commission has its face in the equally voluble Shane Jones complete with his high-viz vest and a big hat.
The reception he got at the national infrastructure conference on Friday when he announced the Commission showed that it is an idea that the infrastructure industry, believes whose time has come and in the process testified to his growing popularity in the “can do” part of the economy.
At the end of his speech, concluding with a crack at the Resource Management Act, he was joined on stage by a beaming Stephen Selwood, the CEO of Infrastructure NZ who have been lobbying for such a Commission for the past few years.
To be fair to National, they too had adopted the idea and supported it in their manifesto, and the makeup of the conference showed just how widespread support for the Commission is.
The delegate list included the usual construction and engineering firms but also local government, banks, lawyers, accounting firms and other lobby groups.
For example, Don Brash was there in is his capacity as chair of the Industrial and Commercial Bank of China which has already been involved in financing projects like Wellington's transmission gully and which its New Zealand CEO, Karen Hou, said they wanted more of.
It was little wonder the banks were there in such force; the Government's to-do list is massive.
Finance Minister Grant Robertson said they were committed to spending $42 billion on infrastructure over the next five years; $10 billion more than the previous Government.
But what was interesting the banks was Robertson’s confirmation that the Government would be calling on the private sector to help with the financing.
“We want to continue to marshal capital from the private sector,” he said.
“In particular we want to marshall capital that is out there in the world that wants to have a home in New Zealand with a reliable project with a reliable revenue stream.
“Treasury is leading the work on new models of financing which we will be working through with you.”
But Robertson believes he was ankle-tapped when he took over the Finance portfolio by the previous Government's failure to include many of the proposed infrastructure projects in the Budget’s forward capital projections.
“It was disconcerting for the Government on coming into office to discover the gaps in our knowledge of infrastructure but also what to do about meeting the challenges.
“Early on, Treasury notified us of the pressure on the Government’s investment pipeline.
"The capital allowances for Budgets 2015, 2016 and 1017 were oversubscribed by 313%; then 358% and then 448%.
“And Treasury told us its pipeline was only 50 – 60% accurate in terms of predicting capital required over the near term; the next 12 months.”
Robertson said the consequence of this was the budget system overly incentivised short-term thinking.
“The trade-offs Governments are forced to make each budget can mean not being able to give the construction industry or those doing business with government the certainty that some projects will go ahead in the near future.
Robertson said Treasury was looking how multi-year capital allowances could be brought in to give greater certainty over what capital investment was required and available over the medium to long-term.
And he is going to need that certainty.
There are some big projects in the pipeline.
The renewal of the three waters infrastructure which the Minister, Nanaia Mahuta, said was conservatively estimated to cost at least $2 billion is one.
Then there is the controversial $1.8 billion Auckland light rail project.
This was the subject of a session all of its own
Fergus Gammie, CEO of the NZ Transport Agency, defending the decision to build the light rail said one of the main reasons was that no more buses could be fitted into the Auckland CBD.
“So to deal with that issue, you need to have a system like light rail,” he said.
And two Australian speakers, Anthony Simmons. Principal Transport Planner at Aurecon and Nick Hudson, the Economic and Policy Director at infrastructure Partnerships, stressed the need to think of light rail as an urban regeneration tool.
Simmons said an example was the Gold Coast light rail where the Council had uncapped the height limits along the line and was no dealing with planning applications for towers of over 100 stories.
But Opposition Leader Simon Bridges, who rejected light rail when he was National's Transport Minister, remains unconvinced.
He listed a series of roading projects which had been approved by National (but Robertson would say unfunded) and said he was unsure whether any of the new projects like “trams” (light rail) would be “spade ready for quite a number of years.”
Nevertheless, he said, National wanted to be known as the infrastructure party.
And Auckland Council --- and the Government – would not have been so pleased to hear the lukewarm Australian enthusiasm for value capture by targeted rates to finance projects like light rail.
“By and large, in Australia, the vast majority of our infrastructure will come through taxpayer dollars or user charges,” said Hudson.
The need for the Government to provide funding was also an issue at a pane; discussion on the three waters
Panellists – including an ANZ bank executive – talked about the need to socialise some infrastructure expenditure and gave the example of toilets at the Punakaiki rocks which the local ratepayers could not afford but which were needed because of the hundreds of thousands of tourists who visited there each year.
It is these big issues, the project priorities and the ways to fund them which will be the main mission of the Infrastructure Commission.
Delegates had plenty of questions about how it might operate.
How independent would it be?
What would Treasury’s role be?
Even, would it be based in Auckland (a preferred option) or Wellington?
Jones stressed its independence.
“The agency will have every opportunity to lead the Crown's thinking, and I'm conscious that people who may want to work in that agency do not feel comfortable working in the classic bureaucracy,” said Jones.
"So it needs a quality of independence, robustness so that it attracts folk from the private sector as well as those form the public sector who know and understand the p[erils of being a good steward of public finance.”
Jones said he wanted the organisation to pull together a long-term pipeline of infrastructure needs by working collaboratively with Ministers and local government.
And he reminded the audience that politicians always believed they were there to create a brighter future.
“So there is always going to be a creative level of tension,” he said.
"And to the extent that the Crown is funding certain projects, you will never strip politicians completely of their need to make decisions.”
But Jones believes the commission will be about more than projects.
“Let’s ensure that this institution also takes the development of the people with it,” he said.
“Our procurement strategies, our investment strategies, have to overcome the challenge of bringing people in and sending them home.
“Let’s ensure that when you work with me to stand up this entity with a range of independent factors; with a range of functions you have confidence in and with the right blend of people, bear in mind that it is not only physical assets that I hope to leave behind as a consequence of this decision, but it is the legacy that will live on within our workforce for this generation and the next generation so that we can recover the spirit of earlier generations of Kiwis that built the Benmore dam.”
Bridges does not oppose Jones' creation, but the big question will be whether all the parties in Parliament allow it independence and take its recommendations seriously.
Then all they will have to do is find the money.