The image shows a large coin standing on its edge in the middle of a road. The background is a rural or semi-rural setting with trees and foliage on either side of the road. There is also a small bridge or overpass in the distance. The image has a black-and-white filter applied, except for the coin, which is in color, making it stand out prominently.
Image: Tina Tiller

PoliticsJune 18, 2024

We want nice things. We can’t afford them. Has Chris Bishop found an ‘edgy’ solution?

The image shows a large coin standing on its edge in the middle of a road. The background is a rural or semi-rural setting with trees and foliage on either side of the road. There is also a small bridge or overpass in the distance. The image has a black-and-white filter applied, except for the coin, which is in color, making it stand out prominently.
Image: Tina Tiller

A controversial policy announced on Friday has the potential to both revive and break some left-right divides.

The first term of this government has been unusually fractious, with protests and harsh words exchanged across a number of different fronts. In part that’s because on some issues – the appropriate deployment of te reo or oil and gas exploration – there are substantive differences between the position of the coalition and the beliefs of those in opposition.

In politics, it’s more common for there to be a greater degree of alignment on the goal, with the debate being over the path taken to get there. We’re rounding into one of the most profound versions of that now, an argument which began in earnest in the mid-80s and rages to this day: what should the government provide, and what should the private sector? In between, a question of degree: what should the core state do itself, versus what it should simply facilitate? 

What’s fascinating about this debate is the extent to which it breaks some of the assumptions about the left-right divide in politics. You have parties of the right arguing for windfall taxes, and parties of the left arguing against drivers paying to use roads. In the middle of a baleful winter, a political argument that avoids the culture war and scrambles political circuits carries a rare intrigue.

A controversial idea

It took flight on Friday, when infrastructure minister Chris Bishop gave a speech outlining a new approach to funding big projects like major roads and water pipes. It’s one he acknowledged as “edgy”, his code for “politically controversial”. The plan he laid out is just that: the most important part is that “every significant infrastructure project that seeks support from the Crown will consider opportunities for user-pays funding and private financing”.

What that means is that from now on, anything expensive the government wants built in New Zealand – whether fixing the existing or creating something new – should aspire to be privately funded through a public-private partnership (PPP). In this context, PPPs mean that something we might expect to be paid for by the state is instead funded through outside finance. Sometimes a business like Australia’s Plenary, other times an entity like the Super Fund, which then recoups its investment through tolls or an access fee, thus functioning like a giant concrete bond for the investor. The general idea is that once it has been repaid, it reverts to public ownership with free access.

In terms of how it will feel for voters, it means new “roads of national significance” will be tolled, new water pipes will be metered, and central cities will be subject to congestion charging. All are variations on user pays – an idea which is itself polarising. Some view it as meaning those who most benefit from infrastructure pay for it, others see it as breaking the principle of universal access to public services.

Chris Bishop (Photo: Hagen Hopkins/Getty Images)

We’ve been here before

To be clear, this idea is not new to New Zealand. The Auckland Harbour Bridge was originally tolled, from 1959 until 1984. Those travelling to Northland from Auckland already choose between paying for a fast motorway or driving the more circuitous state highway. There are two roads in fast-growing Tauranga that incur a fee for use. Water meters are already the norm in Auckland, and all roads are already subject to user pays through road user charges – soon to be expanded to EV drivers like Bishop, as he noted in his speech. 

Still, PPPs and user pays really are controversial. Many median voters have an allergic reaction to targeted fees, which is why National campaigned on repealing the Auckland fuel tax. It’s not just right-leaning parties. Last year, in response to an Act Party policy advocating for privately funded roads, the Greens’ Julie Anne Genter critiqued the policy as creating “roads exclusively for the well-off”. In 2021, both Labour and Greens-aligned councillors argued against the rollout of water meters in Wellington (a position each has since relaxed). 

On the face of it, this is a classic and simply expressed ideological divide. People and parties of the right champion the role of business and small government, so will look for ways to involve the former to shrink the latter. Parties of the left typically promote higher taxes to fund more universally accessible infrastructure and services.

Look more closely at this issue, and that divide starts to get messy, revealing differences between infrastructure and services like healthcare. When a driver pays to join a toll road, they leave space on a public road – thus improving the public option. In most cases, a new tolled road takes a different path, leaving the old public road for those who cannot afford or choose not to pay the toll. That old road has fewer drivers on it, therefore is less polluting through reduced congestion, and lower traffic volumes reduce maintenance costs. The deployment of water meters, meanwhile, encourages households to stop leaks and think harder about water usage, conserving what is sometimes a scarce resource.

Tolled motorways crisscross Europe, often in countries with higher taxes and more left-leaning governments than ours. Those who value their time pay the toll, others meander on older roads. Increasingly, they are heading towards being priced dynamically, to nudge drivers into lower-emitting off-peak driving. This is also what is being proposed for congestion charging: those who want to enter central cities during peak hours will pay a greater fee. We accept this with variable parking charges, the thinking goes – why shouldn’t we do the same with our motorways and inner cities? 

A toll booth in Portugal, where 83% of highways are tolled (Photo: Horacio Villalobos/Corbis via Getty Images)

How to fund it

This was not the only political risk Bishop floated on Friday. He mentioned “value capture” five times, providing a handy definition by way of a lament. “Value capture means that those who gain benefit from public investment help pay for it. We really missed a trick with the City Rail Link in Auckland, where landowners in and around the new stations are getting windfall gains as a result of public investment in a transformational new public transport infrastructure.”

The idea that landowners who stand to gain most from fresh infrastructure investment should give up a proportion of that upside to the state is at best politically neutral, or even left-coded. It’s also not the only technique being assessed. “We’ll also be looking at land acquisition prior to the announcement of infrastructure investment intentions,” said Bishop. This was used under Labour around Auckland’s now-abandoned light rail project, and as transport minister, Labour’s David Parker left both value capture and tolls on the table to fund a second harbour crossing. 

Bishop is also housing minister, and his vision for private provision of public assets extends into that arena. His interest in financing community housing providers and concerns over Kāinga Ora can be read as favouring private over public provision – but the groups it benefits hardly present as ardent capitalists. 

Providers like Emerge and the Salvation Army believe they are better placed to provide housing with wraparound services than Kāinga Ora, which can struggle with its dual role of developer and landlord. Organisations like Community Finance and Simplicity Living say they can get warm, dry houses built more cheaply than the state, particularly if the government can facilitate access to cheaper capital. With limited funding and overwhelming need, many in the sector believe the most important thing to focus on is how cheaply an equivalent service can be provided. 

Simplicity Living’s proposed Hinaki Street development in Glen Innes, Auckland (Photo: Simplicity Living/Supplied)

Why so divisive?

Part of the reason all this causes so much unease is a mistrust based on bitter history. Many on the left have memories of state houses sold off without equivalent numbers being built under prior governments. They view housing the vulnerable as the state’s responsibility, one it should not shirk. Some on the right point to the abuse in state care inquiry as evidence that a well-intentioned government is no guarantee of good outcomes.

There is also a fear that investors will extract more than they’re due out of the pipes and roads they build. Opponents point to Transmission Gully, the costs and timeframe of which stretched markedly over its construction. It’s a public-private partnership that will cost the taxpayer over $100m a year for decades to come. The difference though is that all taxpayers fund that motorway, whereas only those who benefit from the new roads will bear the cost of them. On some level tolled roads are the wealthy paying an aggressively progressive tax – an early access fee which makes the asset free for all in the future.

Some of the other arguments against PPPs and user pays seem thin. The Greens’ transport spokesperson Julie-Anne Genter said that tolled roads “could see the charges to use highways skyrocket. In France, for example, public-private highways can cost the equivalent of $20-100 per journey.” This is true, though most of Europe’s roads are considerably cheaper – and a $100 toll would be something like the distance between Auckland and Wellington, which tourists and the wealthy might gladly pay. Another argument is that public transport should be prioritised – but congestion charging should naturally spur increased usage of that option.

It’s also worth underlining that the creation of a tolled road typically improves the quality of the free public option – it’s still there, only with less traffic. It seems like an upside-down world when the environmental party is complaining about the high cost of road usage, especially when the same party is in favour of congestion charging.

In some ways the biggest danger to this new approach is not the opposition, but the coalition’s own voters. They will love the idea of new roads, but hate the idea of having to pay to use them. It will be very tempting for NZ First to break ranks and denounce the idea at the first sign of a restive electorate.

Still, after a torrid six months, it’s a relief to pay attention to a coalition policy that represents a quandary for the left. Unlike the culture war issues that made the first six months so rancorous, this is one in which the left can argue the techniques and priorities, but will find it much harder to oppose the goals. Boring and technical matters involving billions of dollars – somehow refreshing after so much bad blood.

Keep going!