Craig Stobo: Shovel-ready, but not work-ready

How about changing regulations now, to cut costs for businesses trying to hold on to staff? Photo / Michael Craig

COMMENT:

The Government announced this week that it will introduce a law change in June to enable the fast tracking of eligible development and infrastructure projects under the Resource Management Act (RMA).It appears to be an alternative consenting process to the existing RMA provisions and is time bound-it is intended to be repealed in two years' time.

The two objectives of this proposed law change outlined in the Minister of the Environment's press release are clear: "the new processes will get projects started sooner and people into jobs faster". But will they?

The proposed alternative process has the Minister determining which projects are eligible. This is then followed by resource consent applications processed by an Expert Consenting Panel-comprising an Environmental Court judge or senior lawyer as chair, and representatives from local Councils and iwi authorities. It is unfortunate that the Minister has stated that "once a project is referred to the Panel there is a high level of certainty the resource consent will be granted", which begs the question of the utility of the Panel at all.

The success of the process thus hinges on the concentration of decision-making vested with the Minister and what will be used as eligibility criteria. Minister David Parker's press release lists types of projects including roading, walking and cycling, rail, housing, sediment removal, wetland construction, flood management and landfill erosion prevention. Projects will be considered from central and local government, as well as NGOs and the private sector. No doubt, the Infrastructure Industry Reference Group will contribute many ideas.

But all we have got so far is simply the prospect of a list. Some criteria are suggested. Environmental safeguards will remain. Existing Treaty of Waitangi settlements will be upheld, as will sustainable management and existing RMA national direction. Apart from some works by government agencies which will be able to start "as of right" (which is preferentially presumptuous in itself), these criteria do look a lot like the existing RMA provisions.

So we have no comprehensive understanding yet of the Minister's new alternative eligibility criteria-either absolute or relative- which would enable the public to understand why some projects will be prioritised over others. And why some will be elevated to the proposed alternative consenting process and why some will remain within the existing RMA process.

Presumably the Minister will consider the opportunity cost of capital: the returns foregone by investing in one project and not another. And will seek advice from Te Tai Ohanga using the discount rates for public sector projects published in its Cost Benefit Analysis Primer. Treasury has set the discount rate (or cost of capital) for public sector infrastructure and special purpose buildings at 6 per cent. If the returns from these proposed projects exceed 6 per cent NZ Inc will have some comfort our scarce capital has been deployed wisely. If the returns are below 6 per cent, then the opposite.

It seems an appropriate time for the Government to consider financial capital in relation to the three other capitals within its Living Standards Framework as the overarching criteria for evaluation of these projects. The three other capitals are natural, social and human capital. Lets hope that the projects can contribute to increasing all four capitals and thereby our standard of living.

If the proposed alternative project has met the revealed criteria the projects will need to be financed and funded. If the Crown considers playing a lending role to the projects as well, then the cost to taxpayers is not the government's currently low borrowing costs but the discount rate discussed earlier. The discount rates published by the Crown's adviser, in effect, take into account the implicit taxpayer guarantee to support its borrowing.

Minister for the Environment, David Parker. Photo / Mark Mitchell

The second objective of the Minister is to get people into jobs faster. No one can disagree with the benefits of fast job creation -up-to a point. The issue facing public policy is the opportunity cost of that job creation using government sanctioned capital intensive infrastructure projects. Other solutions are not canvassed in the Minister's press release. We don't know the counterfactual of the existing pipeline of projects to gauge how much faster we can go. It may well be that projects with much lower capital intensity employ more people much faster. Or that more people are employed/retained by changes to regulatory settings that lower costs for existing businesses.

About 97 per cent of all businesses in NZ are small businesses employing less than 10 people. Existing businesses throughout the country are scrambling to find revenues and cashflows while doing their best to finance fixed costs and being kind by holding onto wage subsidised staff. Immediate dramatic timebound changes to regulatory settings will lower costs for existing businesses.

The importance of addressing the latter faster is increasing as we get to the end of the life of the current wage subsidy. Under employment law many employers have to start consulting staff in May if their subsidy ends in June and workers cannot be retained. The searing issue is therefore not job creation but job retention. A change in the RMA regime in June, the establishment of the Ministerial and Expert Consenting Panel process with the appropriately disclosed evaluation criteria and project selection rationale, the 25-50 day turnaround time for decisions by the Panel, and then the time to deploy resources for projects means we have to quickly adjust our job expectations from this Ministerial initiative. We simply won't be work-ready fast enough.

Lets open all businesses now, so they can start generating cashflow to help business owners retain what jobs we have. Lets dramatically change regulatory settings to lower costs for businesses for two years so they can afford to retain workers and provide them with skills. And lets get transparent about Ministerial shovel-ready projects: the criteria; the justification for the choice of prioritised projects; and their contribution to the four capitals which impact on New Zealander's living standards.

We do not want to be eventually lumbered with projects decided by Wellington that impose a life time of costs on the generation that are about to go job seeking. Stranded assets, a public debt burden and angry youth. Will that be some of our post-Covid economic legacies?

- Craig Stobo is chair of the Local Government Funding Agency and a professional company chair and director.