Dunne: Ditch the lolly jar and start listening

The fundamental tensions that have dogged regional development policy are a subset of a much deeper unresolved problem - the challenging relationship between central government and local government, writes Peter Dunne. 

So far, the ever sinking Kiwibuild project has been the gift that has kept on giving as far as the National Opposition is concerned, and all the signs are that this is likely to continue to be the case for a while to come yet, despite what the Minister has so euphemistically described as a “recalibration”. 

The latest news that a group of Kiwibuild houses in Wanaka is not selling because they are considered too expensive to be affordable further underlines the omnishambles to the point of derision Kiwibuild is becoming. 

But even if it makes a nigh miraculous death bed recovery over the next little while, National has no real reason to be concerned since Kiwibuild is likely to pale into insignificance compared to the potential looming opportunities for mischief and muddle that is the Provincial Growth Fund.

Addressing regional development issues has been an ongoing problem for New Zealand Governments - probably ever since the abolition of Provincial Government in 1876 - and has always left itself open to the accusation of political pork barrelling from the centre. 

Seddon was notorious for linking promises of regional infrastructure to political support for his local candidates in upcoming elections. 

In more recent times, there was the fiasco of the proposed Nelson Cotton Mill during the term of the 1957-60 Nash Labour Government. That was followed by the 1972-75 Labour Government's support for the establishment of a major manufacturing industry, Matai Enterprises, on the West Coast, which eventually failed and went into liquidation. 

National's "Think Big" strategy, promoted in the late 1970s to create 410,000 jobs, was as much a regional development strategy as it was an energy self-sufficiency one, but it too went the way of the others, and, by the 1980s, was being dismantled by the Lange Labour Government.

The national interest test

The common point in all these cases has been that they have been determined and imposed from the centre - something that will be "good" for the regions, rather than as a consequence of listening to the regions about the infrastructure they want to let them do their business better. And even when the regions do decide to promote their interests more strongly, there has always been the risk of central government exercising a veto, if the venture is seen as inconsistent with the national interest.

Indeed, applying the national interest test in a positive way was the basis of my first encounter with Shane Jones in 1990.  Matiu Rata and he were behind Muriwhenua's proposal to establish a channel catfish farming industry. Muriwhenua had been formed to promote the mainly fishing interests of a number of northern tribes. 

I was Minister of Regional Development and Associate Minister for the Environment at the time, and had to inform them that the Government would not be permitting the proposal on national interest grounds because of the huge environmental risk catfish posed to the freshwater environment should they escape from their holding pens, and moreover, that the stock they had already imported had to be destroyed.

A more contentious case of central government intervention occurred a couple of years ago when the Hawkes Bay region proposed to market itself as GE free, and local fruitgrowers indicated they intended to use the "GE Free" label as a marketing tool for selling their fruit overseas. National Ministers quickly responded that any attempt to do so would be inconsistent with and detrimental to our "New Zealand Inc." approach to international marketing, and should the fruitgrowers proceed, the Government would legislate immediately to prevent their doing so.

Fertile ground for the Opposition to exploit

All these latent tensions remain within regional development policy. They have been exacerbated by the establishment of the Provincial Growth Fund, principally because of its $3 billion size, and the level of personal sway Shane Jones holds over the allocation of the funds. 

... expect National to increase the attention it pays to highlighting the shortcomings of the Provincial Growth Fund this year, and any little scandals it can unveil along the way. 

Over the years Treasury and the Audit Office have consistently expressed concern that funds allocated for regional development projects, large or small, be properly appropriated, and the expenditure managed in a way consistent with the way Crown generally manages its disbursements. They have been particularly concerned to ensure that such funds not take on the appearance of a "slush" fund, and that general value for money principles apply to their spending. 

The apparently cavalier way in which the Minister announces current funding decisions, and the lack of hard information available as to their value for money raise deep concerns that the Provincial Growth Fund is being operated in just the lazy way that Treasury and the Audit Office have long feared regional development funding is carried out. 

That alone creates fertile ground for National to exploit, but it has been a little cautious in doing so to date, because it does not want to be seen as anti-regional development, per se, something that would be grist to the mill of the self-proclaimed "champion of the provinces".

That is understandable, although the party's recent revelations that Provincial Growth Fund projects have so far created just 54 jobs, and that the actual uptake of funds announced by the Minister has been low, suggest that it may now be realising that, like Kiwibuild, the Provincial Growth Fund is turning into another example of a Government flagship policy that has been hopelessly oversold. Even better, if it can be painted as just a giant taxpayer fund to promote New Zealand First's election prospects. 

So, expect National to increase the attention it pays to highlighting the shortcomings of the Provincial Growth Fund this year, and any little scandals it can unveil along the way. 

It will be seeking to not only undermine the fund's credibility, and instil doubts in the public's mind about its future and worth should a National-led Government return to office at some point in the future, but also to further dent the reputation of the New Zealand First heir-apparent, and possible future Deputy Prime Minister, currently in charge of the Provincial Growth Fund. But at the same time, if it is prudent, National will be developing its own version of a better managed and more transparent Fund to put to voters next year. 

Meanwhile, the fundamental tensions that have dogged regional development policy for over a century remain. They are a subset of a much deeper unresolved problem - the relationship between central government and local government. 

Ever since the abolition of the Provincial Governments 143 years ago, there has been an unresolved struggle about what are central government responsibilities and obligations, and what are those best managed at the regional level. 

In a nation where activist central government has been the norm, not the exception, central governments have usually been very protective of their authority and have never been willing to share it too widely, lest their power of patronage is diminished. 

Successive major restructurings of local government to rein in their ambitions are testament to this. The tensions today between central and regional government on funding mechanisms, public transport and roading issues, and resource management, especially water management and supply are contemporary examples. 

Regional development, both at an individual business and local infrastructure level, fit neatly into this conundrum.

It will only be resolved when a central government realises that it needs to establish a genuine partnership with local government and regions, and allocate resources and respect local priorities accordingly.

The patronising, lolly-jar, 'the Minister knows best' approach the Provincial Growth Fund has exemplified so far is hardly the way to do that, and will ultimately exacerbate rather than reduce these tensions. 

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