The Provincial Growth Fund will have to allocate nearly $2 million a day if it’s to meet its goal of spending $1 billion by June 30, Thomas Coughlan reports.
It’s nearly been six months since Shane Jones’ formal elevation to the First Citizen of the Regions.
On February 23, he announced the first projects to receive funding from his $3 billion Provincial Growth Fund.
A little over six months later, Jones appeared before journalists at MBIE’s Wellington headquarters, saying the fund was looking for further applications – particularly from the private sector – to join the raft of economic development agencies and local government bodies that have already had funding approved.
The fund has come under scrutiny and not just for a recent application from Gloriavale.
It’s faced criticism for being a New Zealand First re-election slush fund, not just for its emphasis on the regions, but for one region in particular: Northland, home to Jones and his party leader Winston Peters.
The seat, which Peters held until last election, could be crucial to New Zealand First’s success in 2020 if their support dips below five percent.
Of the $126,645,600 allocated from the fund so far, nearly half – $60,608,000 has gone to Northland.
The projects range from the commonplace to the bizarre – port upgrades to high-speed gondolas.
Some raise eyebrows for different reasons. One of the most expensive projects is a $9 million roundabout in Waipapa, Northland, which has drawn attention for what some call an over-inflated price tag.
Other regions are far behind Northland. Taranaki has received $21,125,000, Otago $8,800,000, while Manawatu-Whanganui received $8,060,600.
The next-largest beneficiary, the Bay of Plenty, was given $6,861,625.
Hawkes Bay, Tairāwhiti (East Coast), the West Coast, and Southland each received less than $6 million each – 10 percent of what has been given to Northland.
With another $628 million left to allocate ($245 million from the fund will be used for the Government’s billion trees programme) it’s likely the other regions will catch up, but even so the Government will need to allocate nearly $2 million a day from the fund if it wants to meet its target of spending $1 billion by June 30.
So far, the fund has allocated roughly $1.4 million a day.
A key reason for the delay is the way funding is approved. Low spends only require the sign-off of officials, whereas projects of between $1 million and $20 million require ministerial approval.
Anything over $20 million requires the approval of Cabinet, which may explain why none have yet been approved.
The majority of projects so far have been small: 35 of the 60 projects to be approved are for spends of less than $1 million and while no project valued at $20 million or more has yet been approved, Newsroom understands there are several in the pipeline.
Big funding announcements are expected for the West Coast and Tairāwhiti to be made soon.
Those regions have sought $118 million and $197 million respectively from the fund, for a relatively small number of projects – so expect those announcements to be big.
Expect more road and rail projects. The fund can be used to finance transport infrastructure projects and Jones, also Associate Transport Minister made clear at the launch of the Government’s transport strategy that he expected councils would likely make bids for PGF funding for their projects.
And there are plenty more projects seeking funding. Figures released by Jones’ office show that 343 projects have sought over $1.5 billion in funding so far.
Future of the fund
For all the allegations of pork barrel politics, the fund has some unlikely defenders.
The IMF, which rarely demurs from calling out spurious government spending said the fund could help “relieve pressures on the major urban areas by encouraging movement of population to the regions”.
And there is some support in New Zealand too.
BERL deputy chief economist Hillmaré Schulze and Senior Economist Fiona Stokes were also supportive, saying the fund represented an opportunity to tackle New Zealand’s competitiveness problems.
In a briefing on the fund they said the extensive feasibility studies and business cases needed to access the $20 million plus funding layers held some applicants back.
The problem for Jones – and his cabinet colleagues, is extensive due diligence is all that separates the fund from accusations of pork barrelling and cronyism.
As Internal Affairs Minister Tracey Martin discovered this week when she had to announce the resignation of Pauline Kingi from the Wally Haumaha inquiry, New Zealand is a painfully small country, where people are well connected. Allocating $3 billion of funding to its regions without attracting accusations of doling out money to mates will be difficult – potentially impossible.
The unflappable Jones, who this week joked on the record about not going to parties where alcohol was not served, will likely wear it. The rest of the Government, starved of finance because of the Budget Responsibility Rules, might not find it so easy.