Debate on Crown Entities, Public Organisations, and State Enterprises — Transit New Zealand

I am delighted to take a call about an organisation that I now think is appallingly dysfunctional and actually now needs to be completely overhauled by the new Minister, Annette King. I am, of course, referring to Transit New Zealand. I can back up my claim because of the number of huge volumes that Transit has released, starting with this plan in my hand, which came out at the end of July last year—about 9 months ago. Transit issued this huge, thick glossy document with tables, charts, and graphs, and stuck on the front of it a 10c sticker that states: “This document does not include the funding for the State highways from the extra $500 million from the Government announced last week.”

So Transit produced a huge document like that. The Government had put out a press release just the week before that said the Government had found $500 million extra for roading. I guess everyone was quite excited about that. The money just fell from the sky. There was no rigorous process. Dr Cullen announced that day that he had found $500 million and it was all going to roading. I guess I was quite pleased, as I thought the money was going to a good cause. And then the update came in August. Members will again remember this. It was another big, thick, glossy document with, again, a lot of charts and pictures, and some new time lines for a whole lot of projects.

Members of this House will understand that Transit sets the agenda with these State highway forecasts, and communities up and down the country pore over them with great aplomb and then say: “Excellent, so that’s where we are on the 10-year programme.” I think every member of this House would expect that if a 10-year plan were to change between July and the August update, projects would be moved maybe 3 or 6 months. There might be a bit of slippage. If a bridge was due to be started next April, the date might be moved to June. Everyone could live with that.

But what did the document do? It actually did very little, because between the August one and this big thick one—this is the mother of all documents, which Transit issued in February—was a complete reversal of a whole lot of stuff that had come out in the August document. Again, I say to the Minister in the chair, the Hon Harry Duynhoven, that it is fine if a community sees a 3-month slippage in the latest February update.

But I will give some examples, because there are some doozies. When the August update came out, the Taupō eastern arterial was scheduled to start in 2007-08. By my calculation that is next year, because we are in 2006. The Mayor of Taupō, the Taupō District Council, and a whole lot of the developers who were going to plan a whole lot of property around that said that 2007-08 for the Taupō eastern arterial was great. That was August. In February the document came out, and they must have spent some time going through and through it, but they could not find the project. Oh, no. The start date of the Taupō eastern arterial had not slipped by a few months; it had gone from the 10-year plan. It is not in the years out to 2015 in the latest plan.

We then saw some lovely sophistry from Mark Burton, the member for Taupo—the headline on the front page of his local newspaper stated: “MP: Bypass delay is not acceptable”. He is a Minister in the Government. We asked Transit when it came before the select committee for the financial review whether it had alerted the Minister of Transport that this is the document it would have to put out, based on the funding shortfall it had now identified, and what the Minister had said he would do about it. Rick van Barneveld told us that Transit had alerted the Minister of Transport in November last year that there was going to be this problem. It had discussed it with the Minister—and the Minister of Finance—right through to December. Transit executives then went away on the Christmas break and got no assurances from the Government at all that the problem would be fixed.

When all hell broke loose on the day that this report was released, the Acting Minister of Finance, Trevor Mallard, within 1 hour said: “Don’t worry. All that stuff that Transit has put out is not valid any more, because we will find the $685 million shortfall that was identified.”

I say to this Committee that is an appalling way to do business. Transit is dysfunctional and admits it. I want to quote from the log of an interview with the chief executive of Transit, Mr van Barneveld, by Sean Plunket. I think it is a classic. Sean Plunket said to Mr van Barneveld: “But surely you knew that the $685 million shortfall wouldn’t be tolerated?”. Mr van Barneveld said: “Well, no. We have to go on planning it because no Minister would give us an indication that they would plug the gap.” Yet the Minister said so an hour after the release of this document. But the doozy of this interview is that Mr van Barneveld said: “Well, I look forward to working with Transit’s board and the Minister to understand the certainty of funding and then to reflect that very quickly to the community in New Zealand who are concerned about the timing of our projects, so we can get on and do this quickly.”

I think that Sean Plunket felt like I did—I do not actually know what that means. So he asked: “You don’t sound like you think the Government’s assurance of money in the bank are here?”. Mr van Barneveld said: “I don’t think it’s appropriate for me to comment on that.” Sean Plunket then interrupted and said: “I think it’s entirely appropriate because it would seem that you’re the chief executive of Transit and you are responsible for putting out the sort of projections and draft plans that have caused so much controversy here, Mr Barneveld. So I am just wondering whether or not you can tell us if you have anything more from the Government that would back up their claims this morning that they are going to make good the shortfall of $685 million that caused the problem in the first place.” Mr van Barneveld, the chief executive of Transit, said—and this is a classic—“I’ve only heard that advice this morning as you did, on the radio.” Now how can Transit run a Government entity like the State highway roading business, when its board members know there is a $685 million shortfall?

They published an appallingly hopeless document that has so many mistakes. My favourite—not the Taupō eastern arterial actually—is Kōpū Bridge, which was scheduled for 2008-09 at best, then slipped to 2010-11 and is now sitting at 2014-15 in the plan for the start of the project. Yet Rick van Barneveld said to Sean Plunket that he had only heard about it, as Sean Plunket had, on the radio that morning. Thank goodness that the chief executive of Transit was not having a shower when that news was on, because he would have carried on labouring under the impression that he had a $685 million shortfall.

I say to this Minister, and to the Minister of Finance, that in Thursday’s Budget, where everyone truly believes that the $685 million will be in there to make up the shortfall that was identified in this last round, that is not even getting us back to where we need to be. When the Government crows that it has fixed the gap and has taken the $685 million back and has plugged the hole, let me make it clear that that is not even starting to address the shortfall of those projects.

I move to Transit’s dysfunctional nature in another area, which is to do with its pseudo-economic development role. Transit says that there are two ways of dealing with roading. Either, when there is economic development and growth, we say that if that is the level of growth, we had better get on and build these roads to cope. Or we can take the Transit dog in the manger attitude—that is the level of economic growth we see happening in Warkworth, Taupō, or Queenstown and, in every case, we will race off to the court to block the project. Yes, the territorial local authority, the regional council, the community, and business want the project, and all the consents have been done for it to happen. Then the politicised body that Transit has become—with the president of the Labour Party, Mike Williams, and John Wright, a former Alliance MP—has now taken it totally under its wing to decide that it will determine where economic growth will occur.

That is not Transit’s role. I say that to Transit today. Its role is to provide the State highway network. At the select committee, Transit said that it did not want traffic flowing on to its roads. I say to Transit that they are not Transit’s roads. Those roads are owned by the people who pay petrol tax and road-user charges to fund the building of those roads. I have never seen a more dysfunctional body, which puts out document after document. Then, when we get to the doozy of them all, the Government says that it is all the National Party’s fault.

I thank Mr Williamson for his entertainment for the last little while, but I say to members that we should get some facts in the way of a wonderfully entertaining story. Firstly, in August 2005 there was the Transit 10-year forecast revision. This was a relatively new process that had not previously occurred in the National Government’s time. For many years, when National was in Government, we actually found out each year what projects were on. So we had the amazing spectacle of roads being begun but not the connecting roads to make them work, which were added in the following year.

In August 2005 the 10-year forecast showed that there were problems. Those problems revolved around two things. The first was the rapidly increasing cost of roading construction, due to a number of factors but most instructively the cost increases in oil, etc. The second was a reduction in the expected revenue increase, which resulted, in 2005, in a 10-year programme being put out and then in February 2006 a revised programme being put out. That programme showed that there were problems, and this is where the member has an element of truth—and every good story has to have an element of truth. What was quite clear was that the reduction—not actually a reduction, but a reduced increase—meant that there was about a $35 million shortfall to begin with. The increase was not as major as we had expected in roading revenues, and at the same time a very substantial increase in the costs of construction resulted in the fact that many projects could not begin. No one is more aware of this than myself, having been battered about by the New Plymouth District Council and others over the Bell Block bypass. What we had was a number of projects around the country that could not be begun because of existing projects. Unlike the previous Government we want to continue them in their entirety and actually get them completed. So those existing projects were not only proceeding very well but because we had a very good summer construction period, which was longer than usual, a lot more money than expected was being spent on constructing those major projects, particularly in Auckland but in other parts of the country, ahead of time. It was important to do that to try to make some gains.

So I say to the previous speaker, a former transport Minister, who incidentally is the second-longest-serving transport Minister during my lifetime, that if there is a problem with roading infrastructure, perhaps he should look in the mirror and take some of the blame for those problems himself. Certainly, successive Governments, until Labour came to power in 1999, did not do a lot of roading construction work, and certainly we had a problem with infrastructure not being kept up with, not just in roading but in all areas of the economy.

Labour has moved rapidly to fix that, and in fact some of the problems are due to the fact that we stretched the construction industry. The roading construction industry regularly brought to us problems over training, problems over the licences for operators of machines. We moved to address that. The Hon Mark Gosche, when he was Minister, was, I think, the first to move to address some of those issues, and the Hon Pete Hodgson and I moved to address the remainder in terms of drivers’ licences, training schemes for those driving road-making machinery, etc. Those were issues that we addressed to try to ease the constraints that the road construction industry had. So it is a bit rich for National, who did virtually nothing for years and years when it was in Government, to then come back and say, when we are building more roads than has been done in generations, that there is a huge problem and everything is disastrous. It is not.

Further, I say to the Hon Maurice Williamson that both Dr Cullen and Mr Parker, who was by that time the Minister—in February 2005—said that, yes, there was a shortfall and that that matter would be addressed. I take them at their word on that. I have every confidence that it will be, and I am sure that members of Parliament will see that those projects that people expect to be constructed in the time frames will get back on schedule or very much approaching it. Just to take my own favourite, the Bell Block bypass, I say to members that it was originally scheduled, in the very first 10-year plan, to be built in the years 2011 to 2013. That project has begun. Unfortunately, it was one of the ones that began early and then had to be stopped, because soon after it had begun a major archaeological site was found. We will see, I hope, progress on that in the very near future.

Report noted.

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