I guess it’s all in a day’s work, but MartyG on The Standard misintrepeted my position on PPPs in this recent post.

1.  His opposition to PPPs appears to be as blindly ideologically based as National’s blind ideological support for them.  Labour’s policy before and since the last election has been based on providing the best value for New Zealand taxpayers, regardless of ideology. 

2.  The vital point of difference between National and Labour on this issue is that National is committed to the private sector first and foremost, while Labour is committed to providing infrastructure in the way that works best for New Zealanders.

3.  That is why Annette King, when she was Transport Minister, set up a working group to look at the effectiveness of PPPs, particularly in relation to large projects like Waterview. 

4.  Labour has yet to be convinced of the value of PPPs for any particular project, but we are willing to weigh up the evidence. When considering the (de)merits of a potential PPP project we would take a range of critical factors into account.  I mentioned two in my recent speech:

“The project scale must be right and the PPP benefits must outweigh any increase in cost of capital”

5  Marty G and I should agree that this sets a high hurdle, because the Crown can always borrow at lower (sovereign) interest rates.  The offsetting benefits would have to be very clear, large enough in net terms (after deducting overheads like the cost of tolling), and not available by other means (e.g. non-PPP contracting) to clearly outweigh this cost of capital disadvantage.  

6.  It is also obviously necessary that whoever is evaluating a potential PPP for the state has to have the expertise and resources to really test the proposal and establish rigorous accountability.  I have not changed my view that setting a $25 million threshold for compulsory consideration of PPPs by all government departments, as Bill English has done, is ridiculous and bound to lead to bad decisions.

7.  Labour also has a longstanding policy that there needs to be a non-toll alternative before any toll-based transport projects could be approved.   That was reinforced recently in our tighter rules around foreign direct investment in monopoly strategic infrastructure.

8. Labour is not soft on privatisation. Our opposition to private prisons and SOE sales underlines that.  My recent speech explicitly ruled out any dilution of any Crown equity in any state asset or existing subsidiary.  That bright line test restates our strong “no sale’” policy that provides ongoing strong differentiation form National.

Labour is committed to an active and strong state sector.  It takes seriously its responsibility to adopt policies and projects that deliver sustainable value to Kiws.  Clear thinking and evidence-based policy are even more important when funds are tight, if we are going to get this economy going again.