New Zealand, however, conceived the scheme to help relatively poor households adjust to the cost of the Government’s greenhouse gas emissions reduction targets.
The problem was that New Zealand imports new vehicles, it’s struggling to meet demand, and fuelling it would likely push up prices. Simultaneously, the scrappage money would almost undoubtedly have stoked inflation at the low end of the market by pushing the price of clunkers upwards toward the value of the Government incentive.
Good intentions were likely to be overshadowed by unintended consequences.
The Government was slow to get the scheme off the ground, but a spokesman for Waka Kotahi NZ Transport Agency, which was to implement the plan, said the agency has spent $1 million, including estimated wind-up costs.
The scheme’s demise freed up considerable funds of $583.6m - not cash, but projected debt already included in the Treasury’s fiscal forecasts - originally anticipated to be spent from the fiscal years 22/23 through 25/26, and counted against the Climate Emergency Response Fund (CERF).
That figure accounts for more than half of the $1 billion that Hipkins said would be “saved” and “reallocated” through his February and March rounds of stopped and delayed government programmes.
The balance of this figure appears to come from four other cancelled plans: Social Leasing, to provide vehicles to low income households; the Biofuels Mandate, which was to be implemented on April 1 2024 (delayed from April 2023); the TVNZ-RNZ merger; and the Income Insurance Scheme (delayed indefinitely rather than cancelled outright).
The total unspent cost earmarked for these binned initiatives, anticipated largely through contingencies created in Budget 2021 and 2022, is $1.009b. That figure (which is essentially projected debt) will be applied to a new set of initiatives announced on Thursday.
The scrap and replace scheme is an illustrative microcosm and apt namesake for the wider process that Hipkins and Finance Minister Grant Robertson are pursuing.
But what the ministers have not tallied, at least for public consumption, is that an additional $46m has already been sunk and lost into these scrapped policies.
So money has been saved, but only in the same way that you might save your belongings from a burning building that you’d set alight yourself. And efficiency - which means getting the most output for the least input - has been badly scorched.
Social leasing was another transport plan hatched in Budget 2022 (funded against the CERF) and aimed at helping poor households into low-emission vehicles. A spokesman for Waka Kotahi, which was to implement the plan, said it has spent $1.4m on the scheme, including estimated wind-up costs. It was slated to launch in April 2023. That leaves $18.6m available to reprioritise from the fiscal years 22/23 and 23/24.
The torpedoed biofuels mandate, most recently anticipated to come into effect on April 1 2024, has cost the Environmental Protection Authority $1.4m to provide policy and ensure readiness for the regulatory responsibility and enforcement the agency was to provide. A further $4.6m is available to be reprioritised from the fiscal years 23/24 and 24/25.
The scrapped TVNZ-RNZ merger has cost the Ministry of Culture and Heritage $19.6m; given that the merger is dead, the ministry’s claim that “aspects of the work will have future benefits” seems doubtful.
The sunk cost includes public consultation on a draft charter for a merged entity that won’t exist (the ministry says the consultation provided a much more informed view of what New Zealanders want from their public media). And it also yielded a piece of legislation, albeit one there is no plan to use. Funds remaining for reprioritisation total $365.1m across the fiscal years 22/23 to 25/26.
As the Herald reported earlier this month, the Accident Compensation Corporation (ACC) is on the hook for a total of $22.4m laid out to plan for and operate the now indefinitely delayed Income Insurance Scheme. The cost includes some 32 staff hired to roles that were disestablished earlier this year, redundancy payments, IT systems and payments for contract cancellations.
Some $800,000 of the money is funding ongoing policy work as the Government considers alternatives to the scheme, including simply expanding existing welfare provisions. Unspent budget appropriations and contingencies total $37.35m from fiscal years 22/23 through 25/26.
The process of scrappage reaches an unspent value of $1.509b when you add in the $500m in “better off” Three Waters-related funding for local councils that the Government cancelled in April, and there may be another round of scrapped policies tucked in with the Budget on Thursday.
Add in “underspends” from initiatives funded through the now-closed emergency contingency Covid Response and Recovery Fund (essentially the unused debt raised or anticipated for Covid-era initiatives) and the tally will, presumably, reach the $4b in savings and underspends Grant Robertson announced in a pre-Budget speech last week.
