On Friday the Provincial Growth Fund went out the way it lived: with the opposition crying “slush fund” and Shane Jones celebrating in Northland.
An upgrade programme worth $96.5m for 351 marae across the country was announced in Kaikohe, much to the chagrin of people like National’s finance spokesman Paul Goldsmith who labelled the announcement “outrageous” for its proximity to the election.
While the PGF was never meant to make people like Goldsmith happy, it has had an impact on people like Northland-based ‘Happy Ferry’ skipper Jeff Crooks – he “always votes for Winston” – who ferries people between Russell and Paihia all day long.
“The infrastructure that you see here today [in Paihia] that’s all been done by the Provincial Growth Fund.
“Had that fund not been there the facilities would have been as they were – which is not that flash.”
Then he points to parts of the Paihia waterfront as the ferry takes off:
“There was only one jetty just here. This is new, this is new, that’s all new in there.
“So that fund has helped Northland no doubt about it.”
Northland has received the lion’s share of PGF money.
However, just a few streets over from the Russell pier where the Happy Ferry docks, restaurant owner Charlie Johnson says the PGF is one reason he won’t be voting for Jones in the crucial (for NZ First) electorate of Northland.
“Just promises. They don’t seem to come to fruition,” Johnson says.
“I voted for them [NZ First] quite a bit over the years, but I’m a bit disappointed by their performance of late and their attitude.
“They’re just self-serving it seems to me.”
For all the “slush fund” accusations the fund endured, it’s received just as much criticism for the money it didn’t spend.
From numbers and data reported at the end of July it’s clear why.
Taranaki, Southland and Canterbury received less than 15 percent of the funds they were approved for. Twenty projects approved for over $80m in funding haven’t received a single cent.
Every party in Parliament except NZ First has a problem with the way the PGF has been run.
National hints it is just a play for marginal rural seats, Labour thinks it should have been linked up to regional plans, ACT believes it should be scrapped in favour of extra council funding, and the Greens think PGF projects didn’t have strong enough environmental bottom-lines attached to them.
Local Government NZ President Stuart Crosby notes the PGF fulfilled one important function this parliamentary term: “It showed that government gave a damn about these communities”.
Crosby says some good local government projects were advanced through the PGF, but the fact this money was needed showed there was a much wider problem with the way councils were funded.
Local government simply didn’t have enough money for the projects needed.
And even if they could scrape together enough cash to pay for new assets in some cases, they didn’t have the funding to keep them operating.
“Councils and communities at times get these handouts which demonstrate that there is still a funding issue for local government and communities across New Zealand.
“We kind of call it the ‘Oliver Twist’ approach.”
Jobs, Jobs, Jobs
Northland and the Bay of Plenty are expected to see the biggest growth in jobs from the fund, with Northland expecting to gain 3231 jobs and the Bay of Plenty 3481.
Nationwide it is anticipated 15,062 jobs will be directly created by projects funded by the PGF. Dividing the approved funds with the expected jobs gives a figure of $401,489.97 per job.
In Northland the number of jobs created would be significant if all the expected jobs materialised and were taken up by people in the region.
When completed, the Northland PGF projects are expected to create 3231 jobs. At the 2018 Census, the unemployment rate there stood at 5.2 percent.
Using a crude, back-of-the-envelope calculation with 2018 numbers as a base, if the expected jobs from the PGF went to unemployed people, it would drop Northland’s 5.2 percent unemployment rate to 3.4 percent.
Not all of those jobs will be given to people within the region. Some of the delays in getting PGF money out there have been caused by a lack of capacity within the local economies within which this work was supposed to be done.
Crosby says there are two factors to consider when analysing the impact the PGF will have on jobs in a region: the first are the jobs directly created through construction, the second are the jobs created by the asset after it is built.
The last part can be hard to determine. Requests for PGF funds for business cases could lead to thousands of jobs being created eventually, but would employ few while the data is being analysed and drawn up.
In Palmerston North $40m was put towards design, consent and land purchases for the creation of a logistics hub built around rail and a long-planned regional freight ring road.
The hub will bring a log yard, a container terminal, warehousing for freight businesses, and KiwiRail’s operations and maintenance facilities, together in one place.
Palmerston North City Council chief executive Heather Shotter says the freight hub will bring complementary private sector investment into the region too.
“Here, [in Palmerston North] the PGF has made an important contribution to the first phase of the KiwiRail freight hub development project, in terms of design and land acquisition, and further Government investment will help deliver the full potential of the initiative.”
Crosby says estimating the effect complementary private sector investment could have in cases like these is difficult. Which could mean some of the PGF job numbers might even have been underestimated.
He gives the example of PGF funding for harbour development assistance to the alloy boat industry in Whakatāne where a large amount of employment would be created through businesses indirectly connected to the investment.
“It allows the alloy boat industry to build bigger boats rather than just recreational boats – and that has an ongoing employment opportunity.
“[Then there’s] all the suppliers, all the subcontractors, the engine suppliers, electricians, all those other subcontractors.
“That’s why it’s often hard to measure the complete employment opportunities that a stimulus amount of money might have.”
Behind the job numbers
National Party spokesman for regional economic development Michael Woodhouse says one reason the job numbers were likely inaccurate was because the PGF hadn’t actually been tracking them properly when the fund was set up.
“The initial jobs for PGF funding did not even have the fundamental question of ‘How many jobs are you going to create?’.
“It [the PGF] hasn’t achieved the intended goals of sustainable job growth – which has been one of the most disappointing aspects of the fund – because they can’t even tell us how many jobs have been created.”
As several media outlets reported, in the end Jones simply got the Provincial Development Unit (PDU) to ring around PGF recipients and ask them how many jobs they expected to create.
An Auditor-General report into the fund also found there was a lack of clarity as to what counted as a “job” for the purposes of the PGF’s goals.
This reached the public realm in July with a press release which touted the PGF as having exceeded its goals with the creation of 12,936 jobs.
Only problem was 6531 of those jobs (50 percent) had already been disestablished when the release was sent out.
The politics
Woodhouse sees the PGF as more an attempt to shovel money into rural regions which were either marginal seats or held by National.
“The electorates that have received the highest amounts of money are marginal and mostly National-held electorates, so the likes of East Coast, Northland, Tarawhiti.
“I can’t get past the possibility that they are political expediencies for NZ First and the Labour Party.”
Not surprisingly, National wants to scrap the PGF if they get into power.
Contracts signed will be honoured, but they intend to go through the other projects line by line and discard the ones they view as wasteful.
They hope to deal with the issue of regional economic development through individual portfolios like transport instead.
“What we won’t do is wrap it in a bow and give it a fancy name the way NZ First did for political ends.”
“Our approach to regional development is that it works best when the regions themselves come up with a plan that is best for them, and then seek government support for it.
“It doesn’t work well, when Wellington comes to them and goes, we are your saviour, here it is, because very often there’s a mismatch with what they truly need.”
Labour wants to get rid of the PGF too, although it has called its own planned initiative an evolution of the concept.
“A future government needs to look at as to is there a quicker way to get decisions made … but hey, there are financial disciplines that constitutionally we’ve got to follow.”
Regional economic development spokesman Phil Twyford says the PGF was always a “one-term fund”.
Twyford wants a new Regional Strategic Partnership Fund. The PDU will remain in place, but will work with economic development agencies in each region to come up with an economic development plan and then identify where central government funding might be needed.
“This could see region-wide strategies in particular areas such as advanced manufacturing in Canterbury, agritech in the Hawkes Bay and Bay of Plenty, and tourism in Queenstown.”
ACT leader David Seymour also wants to get rid of the PGF and replace it with a 30-year infrastructure plan to be agreed between councils and government which would include a commitment from government on funding.
“Central government has most of the revenue. Local government pays planning ability for infrastructure.
“And we get these impasses where basically local government does the planning and won’t allow central government to do stuff on their patch.”
Green Party co-leader Marama Davidson says there need to be strong environmental bottom lines to ensure one-off funds like the PGF don’t cause more harm than good.
She says the PGF invested in some good projects including wind power on Stewart Island, predator-free conservation programmes and the re-opening of the Napier-Wairoa rail line.
“We think something like the PGF can continue to have a role in Aotearoa, but we’d like to see it more directed to investing in things that not only create jobs, but also reduce carbon emissions and protect nature.
Jones too is critical of the PGF, but his criticisms focus on the slow pace at which it has rolled out.
“It is a sluggish process and the fact that it’s taken longer than anyone would have liked is something that a future government needs to look at as to is there a quicker way to get decisions made .. but hey, there are financial disciplines that constitutionally we’ve got to follow.”
While disappointed with how long it’s taken for bureaucrats to get money out the door, he openly confesses to have gotten his way over the bureaucracy on one thing: the PGF celebrations.
He says nobody does funding announcements this way. Take a look at tourism announcements and others. Agencies like Callaghan Innovation simply write to the applicant and tell them they’ve been successful.
“I’ve tried to blend community spirit, commercial excitement, and – where necessary – cultural input,” Jones says.
“And I always was upfront with Grant Robertson, the Prime Minister, and Winston Peters that this was how I was going to do it.”
Charts and data compiled by Farah Hancock
PGF sector funds by region
Use the dropdown menu at the top of the chart to select different sectors. The classification of ‘Other’ includes a variety of projects, all together these account for $73.6m of funds, with three synthetic race course accounting for $27.75m of the total. A Predator Free 2050 project is also included, with $15m in funding approved.
