The government wants to build a new hospital in Dunedin, but at $3 billion, it says the current plans are unaffordable. As it turns out, affordability is in the eye of the beholder.

Chris Bishop and Shane Reti looked sombre as they told reporters gathered on Castle St that the government had been forced to scale back plans for a new hospital in Dunedin. The city needs the facility, they admitted, but cost blowouts had made it impossible for them to construct it as currently planned. Its budget, once $1.88 billion, had risen to as much as $3 billion. “This cost simply cannot be justified when hospitals around New Zealand are crying out for maintenance, upgrades and new facilities,” said Bishop. “Dr Reti and I are concerned that badly needed infrastructure upgrades to Whangarei, Nelson, Hawke’s Bay, Palmerston North and Tauranga hospitals may be put at risk if New Dunedin continues to go so far over budget.” 

This announcement would appear to be at odds with Reti’s statements last July, when he guaranteed National would build the hospital with all the operating theatres and radiology services planned before the troubled project was last scaled back due to cost overruns.

But that promise was made before he knew providing lifesaving medical facilities for the South Island’s second-largest city would be so expensive. $3 billion for a hospital is unaffordable.

When it comes to government spending though, it’s different strokes for different roads. Some expenses that seem impossible in one portfolio are little more than chump change in another.

For instance, though $3 billion is a lot in health, it is an affordable price tag for the East-West Link, which was dubbed the world’s most expensive road after it was billed at $1.8 billion, or $327 million per kilometre, back in 2017, before large recent escalations in construction costs. 

The Petone to Grenada highway, a motorway next to another motorway, will cost $2 billion. It is affordable because it is enabling housing that is already being built next to the old motorway.

A Wellington mega-tunnel could cost $10 billion. It is a “really attractive option”.

The comprehensive nationwide cycleway programme set out in the last National Land Transport Programme would cost $910 million. That is patently unaffordable and has been halved.

Four-laning State Highway 1 from Warkworth to Whangārei could take up 10% of all government infrastructure spending for the next 25 years. That is a rock-solid government commitment, as laid out in the National-New Zealand First coalition agreement.

This all may seem a little bit steep to some people, particularly those seeking medical treatment in Dunedin. But you have to consider these things in context. A hospital will only provide care to the sick. The Northland Expressway will deliver a smoother journey for 15,000 to 18,000 cars a day, which is up to a tenth of the number that currently cross the Harbour Bridge.

The iRex ferries and wharf upgrades would have cost $3 billion. That was unaffordable. 

Cancelling the iRex ferry upgrades will incur $300 million in break fees and $424 million in sunk costs. That is affordable.

The new ferries we get after paying those fees could cost $3 billion. That will be affordable.

Removing $5 copayment fees on prescriptions, making public transport free for children and half-price for under 25s, and indexing benefits to wages rather than inflation would cost roughly $1.6 billion combined over the next three to four years and as such is obviously unaffordable.

Restoring interest deductibility for landlords will cost $2.9 billion. That is affordable, and necessary to remove a distortion in the tax system. Removing depreciation on commercial buildings is also a tax distortion, but reinstating it would cost $2.3 billion and is unaffordable.

A recent Treasury report estimates it would cost $3 billion per year to meet the country’s child poverty reduction target. That’s exactly what it would cost to build a brand new hospital in Dunedin, or almost a third of the bill for a tunnel that will get MPs from the airport to parliament for one of their 84 sitting days per year. You can probably guess what the response has been.