Kate MacNamara: Provincial Growth - fund of the long black cloud

New Zealand First's Shane Jones makes PGF announcement in Whangarei. Photo / Tania Whyte

OPINION

The Auditor-General’s review of the final $640 million spent through the Provincial Growth Fund has sealed that particular kitty’s poor reputation as a large sack of public money paid out in the shadow of a long, dark cloud.

The overarching question that the AG extracts from the gloom is this: what value for public money has actually been achieved? The dismal answer Parliament’s watchdog on government spending supplies is that we do not know enough to be sure we’ve achieved any of the Government’s lofty aims.

The fund was originally $3 billion, and it was among the terms of New Zealand First in agreeing to form a coalition government with Labour in the wake of the 2017 election.

The $640m was repurposed from the PGF in 2020 in light of the Covid-19 pandemic, and additional objectives were attached to the money.

The money, in the form of grants, loans, equity and other forms of investment, was paid out to entities ranging from not-for-profits and charities to individuals and private businesses.

The damning assessment of the AG this week is that Parliament, and the New Zealand public it represents, “cannot yet have confidence” that the investments made through this reset will “ultimately represent good value for money”.

While the Government did have objectives for the fund’s investments, the AG said he didn’t find sufficient evidence that applications were adequately assessed against these objectives.

The AG also reported “no evidence” of either clear reporting or of regular monitoring of how well the PGF reset “was achieving its objectives or how its overall success or value for money could be determined”. Neither did the AG see evidence of planning for, or commitment to, an evaluation of the reset’s outcomes.

The processes of the scheme, it seems, were not fit for purpose. And the upshot is that while the Government told the public that the fund would do things like create jobs that led to sustainable economic growth, prioritise construction activity that could be under way within six months, and help New Zealand meet climate change commitments, there’s little evidence that any of this has happened or is happening.

Among the more extraordinary claims made about the regional development funding more generally is on the Ministry of Business, Innovation and Employment’s website. The PGF’s aim, the site says, is to lift productivity in the provinces (Christchurch, Auckland and Wellington were excluded from the funding).

Productivity in New Zealand of course is a long festering sore point: low and slipping relative to our OECD peers. And there has been absolutely nothing, in even the most rose-coloured evaluation of the PGF, to suggest it’s done any such lifting.

But the Government’s criteria for funding, it seems, were just the ephemeral trappings of aspiration. Asked about the report on his weekly slot on Newstalk ZB on Tuesday morning, Prime Minister Chris Hipkins told Mike Hosking he sees evidence “on a near daily basis”, in his visits to the regions, that Provincial Growth Fund projects “are making a real difference in local communities”.

The problem is that the AG’s questions are more precise than whether the funds have bought some nice and even needed things. They concern the effective and efficient use of public money.

And lest we be too distracted by the purity of good intentions, it bears remembering that the last AG report on the PGF, released in 2020, highlighted that politicians (Labour and New Zealand First) controlled, in a highly irregular fashion, some $70m of the fund.

All of the funding required ministerial sign-off, but this particular sum was set aside by the Cabinet, $30m for “manifesto commitments to the regions” and a further $40m for “emerging priorities”.

In spending the money Regional Economic Development Ministers (namely Shane Jones, Grant Robertson, David Parker and Phil Twyford) received information about prospective applicants from officials, but extraordinarily, no recommendation for a decision.

Given the separate decision-making for this money, divorced from official advice, the AG referred to it as a “fund within a fund”. Its processes, entirely reliant on the whim of politicians, were distinctly slushy.

It’s also worth mentioning just how many of the PGF’s good intentions have accrued to Northland. The most recent figures (for the entire $3b fund) show that a spectacular $657m was spent in that thinly populated region, more than $300m more than the region with the second highest funding, the Bay of Plenty, which received $347.5m.

Northland, it happens, is also an electoral focal point for NZ First. Campaigning for the Northland seat, unsuccessfully, in the last election, NZ First’s Shane Jones, then Minister of Regional Economic Development with responsibility for the fund, frequently touted local Provincial Growth Fund investments. And, with the ring of a wrestling promoter, Jones continues to style himself the “Force of the North”.