It is more than a four-letter word exercise.
In 1986, the government commissioned a review of science policy chaired by ex-Governor General David Beattie. Among the agencies it interviewed was the Treasury, in the course of which Beattie asked whether it had a science plan. The Assistant Secretary of the Treasury spluttered; he was clearly unwilling to use that four-letter word, at least in polite company.
The short answer was that Treasury did not have a p**n for anything. The neo-liberals thought it was unnecessary, for the market had all the answers. Indeed, Treasury was closing down as much of New Zealand’s capacity to p**n as it could. Some of what was going on was not very good, but some was world quality. Treasury’s actions were not about improving the average quality; it was eliminating p**nning as an integral part of government decision making.
Of course you can’t hand over all the p**nning to the private sector. So when the public sector had to p**n it did it in an ad hoc limited way. For instance, following a 2004 amendment of the Public Finance Act, the Treasury has been required every four years to do a long-term 40-year projection of the fiscal position. This involves projecting the long-term growth rate of the economy which is done mechanically by positing a number. No attention is paid to what will be the future composition of economic activity. It assumes that the growth will happen and that the required businesses – critically, exports – will appear. After all, the market will provide.
It will, but not always in the way that may be expected. There is no compelling theory which says the market will always provide beneficially. Suppose the New Zealand economy cannot produce enough exports to pay for the imports to sustain an adequate standard of living. The market solution is that the mobile – typically the most qualified young – will leave for places where there are more opportunities (probably Australia). The market has provided. But the immobile left behind will be even worse off.
The main conclusion of the long-term fiscal projection is not greatly affected by getting the growth rate projection wrong. The aging population puts a substantial burden on the fiscal position under any plausible growth scenario; a major migratory outflow would just make it worse. Following its 2025 projection, the Treasury has chosen to highlight the conclusion very strongly although it has been evident in every one of the six statements since the first in 2006.
From the beginning a few lone voices tried to draw the public’s attention to the looming danger, but the ostriches ignored the issue. It took even the Treasury 19 years to go public. Isn’t that typical? We do not think about the future in a comprehensive way. When the crisis arrives, we are surprised it has happened, but fail to learn the lesson that we need to think systematically about the future – to p**n.
How many times have we have to suffer crises throughout the country about our fresh, storm and waste waters before we realised that we had a nationwide problem? To what extent do we see the problem as an example of a wider weakness in our governing system (which will not be resolved by yet another redisorganisation)?
Fundamentally, successful p**nning is about the process rather than the actual final figures – all future projections will prove wrong. What is important is systematically thinking through future issues. A good report shares that thinking, moving it – and the issues – into the public arena. (Alas many of the discussions which follow have not always been useful.)
It is with some relief that one reports of the recent release of the 2026 National Infrastructure Plan (oops, the ‘National Infrastructure P**n’) with its 30-year outlook. I initially thought this column should provide a critique of the plan – perhaps arguing it was more sizzle than sausage (platitudes rather than practicals), but I want to strike a more positive note. After all, p**nning is a reiterative process. You set it down and then realise that it is not quite right; that requires more detail, that something is overlooked. My bet is that the team which pulled it all together are already discussing their next steps (unless they are already being disbanded, which would be typical of the way we have managed such things over the last 40 years).
Instead, let me summarise some key issues. First, the report’s notion of infrastructure covers a diverse range of activities (with recent outlays as a share of GDP and an arrow indicating the direction by which the level is expected to change in the future):
Land transport (1.3% ↓)
Electricity & gas (0.8% ↑)
Water & waste (0.6% ↓)
Telecommunications (0.7% stable)
Education (1.0% ↓)
Hospitals (0.2% ↑)
Public administration & safety (0.9% ↓)
Social housing (0.3% stable)
Other public capital (0.2% stable).
Note that while most of the defined infrastructures are the responsibility of the (central and local) government, a quarter is commercially provided by the private (or quasi-private) sector. Electricity and gas and telecommunications are there because they are ‘network’ industries (as are land transport and waste) but airways and ports are a part of the transport network too
Network industries are not simple private sector market ones, as is illustrated by the government’s involvement in the LNG terminal and the broadband rollout. Perhaps there ought to be more p**nning in the energy sector, where there is more interdependency than is being allowed for in discussions on the LNG terminal at New Plymouth, the Lake Onslow pumped-storage hydroelectricity project, and the impact of renewables and battery storage.
Second, while most of the discussion is around a central forecast, there will be shocks from natural hazards (such as earthquakes and volcanoes) and from extreme weather (increasingly, because of climate change). There is some discussion in the report, but I would expect that there will be a separate one addressing them (p**nning involves reiterations). A major issue which we are only gingerly addressing – usually by ad hoc decisions when we are not deferring them – is the amount of risk which is to be borne by the private sector and that to be borne by the public sector. (If one is in a flood-prone building who pays when it is damaged?)
The boundaries in the report’s social infrastructure are puzzling. There is social housing; why omit the far bigger private sector? Education covers primary, secondary and tertiary, why not ECE? What is the report saying about private-sector hospitals? What if we had a government which intensified the outsourcing of healthcare even more than the current one? Good p**nning has to be prepared for policy changes.
Another issue is the funding of the future infrastructure. The report divides the funding between user-charges, rates and central government taxes. It is true that any borrowing will ultimately be serviced from these revenue sources but servicing of infrastructure debt can go long into the future. The report touches on borrowing; perhaps it avoids a comprehensive discussion because that is a Treasury concern. The public avoids the issue at its peril.
The report tends to favour moving away from funding public structure with general taxation towards user-charges. I am not uncomfortable with that shift, although there are technical and political issues. Water-meters are probably inevitable. I am more sceptical of comprehensive road-user charges being implemented in the medium future. A Minister of Transport promised them in the 1990s – nothing happened. Indeed, the first time I heard the subject discussed was in the 1960s and hardly anything has happened worldwide since – a few city centres excepted.
That is the problem with policy generally. We ignore looming challenges until there is a major crisis. We then panic. That is why we need systematic comprehensive planning – even if it means swearing in public.