Is the PGF's potential being met?

With the Government now into the second half of its term, it is timely to ask whether one of its flagship policies, the Provincial Growth Fund, is measuring up to its promise - and to the electorate's expectations.

There is a narrative suggesting the PGF is primarily a vote-purchasing exercise. The narrative goes that the fund enables New Zealand First, especially Shane Jones, to loudly and generously allocate money to various regions with, presumably, the idea that those regions would then pledge their voting loyalty to New Zealand First.

Mr Jones himself is based in Northland, where Winston Peters also hails from, and it is there many believe the party has its best chance of winning an electorate seat. Without such a seat, New Zealand First would need to secure 5% of the party vote next year - a result certainly not guaranteed. The fact a significant portion of the fund has already gone to Northland does nothing to dispel that narrative.

While the vote-buying narrative can apply to myriad political promises from all parties, the money involved in this case is enormous. For our small country, raising $3 billion isn't easy.

For perspective, and drawing from data provided on the Treasury website, the $3 billion sum is roughly equivalent to all the income tax paid by the 1.5 million New Zealand taxpayers earning less than $30,000 annually.

That isn't to say allocating those tax dollars to regional investment is a bad idea. Markets tend to reward efficiency and scale over time, creating bigger and better-resourced entities which can out-compete smaller competitors. The same is true of cities - the market tends to draw people into the areas with the easiest access to income, facilities and services.

But for New Zealand, that can cause problems. Our biggest city is sprawled around two major harbours and 53 volcanoes. That makes efficient roading and public transport virtually impossible and housing more expensive than a comparably sized city on a more benign site. Wellington's location is no better.

Meanwhile, our country is long, rugged and prone to natural disasters, making the infrastructure required to connect and service it expensive. That expense is spread over a relatively small tax base, a large chunk of whom live in cities destined by location to always be costly. None of that is good for New Zealand's wealth.

There is value in cleverly spreading our population and wealth around our country. The question with the PGF is whether or not it is actually helping that happen. To date, that is difficult to answer, as much of the money appears allocated to spending - on bureaucracy and needs normally covered by other parts of the budget - not matching the fund's potential. Last week's $300 million allocation to regional rail may, for many, do nothing to alleviate those concerns.

The problem, then, is not with the PGF's potential, nor with its purpose. While it may or may not be true, for many the problem is whether the fund's implementation is adequate.

When children are asked what they'd do if they were prime minister, they usually respond with lofty ideas involving large spending. But the vast majority of New Zealand voters understand lofty ideas on lavish spending are easy. It is far harder to manage and govern the spending of that money while paying respect to the hard work and sacrifice taxpayers have invested to earn it.

That is what governance is about, and that is what New Zealanders want to see from the PGF. Most accept it has great potential, but will be unhappy if they aren't convinced that potential is being met.

It would benefit the regions, the country and those running the fund to ensure it is a success, and to communicate that success. They have not much more than a year left to do so.

Comments

A text book example of Pork Barrel politics.

So's the Americas' Cup.

The provinces had no pork and few barrels.

 

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