The battle over infrastructure

The heart of the policy argument over infrastructure is whether the country is haemorrhaging because too little has been spent on crucial projects to enable it to grow.

A deeply philosophical debate about the appropriateness of public private partnerships (PPPs) and the role of the state is at the core of the issue, which divides the parties.

The left sees PPPs as privatisation by stealth. The right sees them as the only medicine to stem a near-fatal blood loss in the country's key infrastructure.

As an indication of the seriousness of the division, Labour and National cannot even agree on what infrastructure is.

Business Roundtable executive director Roger Kerr pointed this out in an address last year to an infrastructure conference when looking at reducing barriers to infrastructure investment.

"Typically, infrastructure industries are taken to include roads, railways, electricity, water, gas, telecommunications, ports and airports," he said.

But the Government had a far broader definition, which failed to target key spending areas.

"The definition of infrastructure favoured by the Government, however, seems to be everything that the state takes responsibility for," he said.

Finance Minister Michael Cullen had listed prisons, defence force equipment, new hospitals and schools, recapitalising the national airline, installing new electricity generating capacity, upgrading the electricity transmission grid, road building and even saving rail as infrastructure, Kerr said.

"We need to tease out the differences between various types of infrastructure," he warned.

He went a step further, asking whether the Government should own infrastructure assets at all, citing electricity generation as a prime example of a sector where more privatisation was appropriate.

The "fundamentally flawed" Resource Management Act remained the main barrier to infrastructure spending, he said.

"The OECD has recommended the Government drop its ideological opposition to privatisation, focus on reform of roading management rather than on rail or public transport and address the problems of uncertainty, creeping regulation and the impact of the RMA," Kerr said.

The only real fix to the infrastructure problem was more PPPs and less government, he concluded.

But the Government says it has stemmed the bleeding on many infrastructure issues, particularly roading, hospitals and prisons. It claims the moral high ground on spending.

Associate Commerce Minister Judith Tizard points to the difference in road infrastructure spending.

"In 1999/2000 under the budget set by National, there were three large Auckland state highway projects under way with a combined value of $130.6 million. Under Labour, in 2004/05 there are $1.348 billion of major state highway projects either recently completed or under way during 2004/05."

Progress on the $500 million Waikato Expressway between Cambridge and Mercer and the start of work on the Orewa to Puhoi motorway, known as Alpurt, are among the areas Labour cites as evidence of major progress.

But roading has allowed Labour's critics to score more points than in many other infrastructure areas.

United Future leader Peter Dunne remains committed to Transmission Gully, the proposed 27km inland road north of Wellington, said to cost about $830 million to build. Many people expect the four-lane highway would be partly funded by a private investor and would be a toll road.

National has attacked the Government for not spending enough, citing a lack of resources for big roading and energy projects, which it says are the key economic growth drivers.

The cancellation of large deals such as Project Aqua have been cited by National's finance spokesman, John Key, who has scored points with the business sector with his desire to push infrastructural reform along faster through more use of PPP models.

He also wants to move quicker than the Government to substantially reform the RMA to fast-track big projects of national importance.

But National would first undertake a major review of infrastructure spending.

"We agree with the OECD that 95 per cent of Government expenditure hasn't been reviewed for 10 years," Key said.

He is also promising a closer look at the way Government departments deal with infrastructure issues.

"One of the significant challenges for addressing infrastructure - whether it involves the national electricity grid or developing water reservoirs for irrigation in the South Island - is co-ordination, or lack of it, across Government departments," Key said in an address on economic growth.

Although the Cabinet has an infrastructure committee, "it seems to be stuck in gridlock".

The policies

Labour: claims significant investment so far, particularly on roading, schools, hospitals and prisons, and plans to keep this up.

National: claims Government infrastructure spending is woeful, wants to ramp it up and work more closely with private industry to create more public private partnerships (PPPs).

United Future: wants to improve transport infrastructure, giving priority to areas where roading constraints are holding back economic growth and development.

NZ First: says improving transportation infrastructure is a focus under its business development policy.

Act: says lower tax, less regulation and less red tape would enable more infrastructure spending. Wants less government and more private involvement in the economy generally.