KEY POINTS:
Like much major party policy, Labour's and National's stance on funding infrastructure development are, at first blush, remarkably similar.
Both say they will issue infrastructure bonds and use public/private partnerships (PPPs) for large-scale developments, where appropriate.
But beyond their stated policies, it's probably safe to
assume that National is far more committed to private sector involvement than Labour.
While Labour points out that it changed the law to allow for PPPs and will consider them on a case-by-case basis, its record suggests it is not that keen.
Labour is considering a PPP structure for the Waterview tunnel, but it has previously demurred at employing the model, often citing the argument that government can borrow for such projects more cheaply than the private sector. The credit crunch has only extended that advantage.
However, the Council for Infrastructure Development, a vigorous PPP proponent, counters that by saying yes, the private sector pays more for funding, but that better reflects the risk involved.
"This is not the case in the public sector. Instead, taxpayers implicitly subsidise the cost of the project by bearing the risk of cost overruns, time delays or performance failures, which are not priced into the government borrowing rate."
Then again, there are examples overseas of PPPs going pear shaped and the taxpayer picking up the bill anyway.
The council's members include our largest construction companies and other businesses likely to benefit directly from greater private sector involvement in infrastructure development.
The council's arguments for PPPs make perfect sense if you assume the private sector is so much better than the state at planning, building and operating projects that not only can it complete a project to the standard required and in time, it can make a healthy profit while doing so. But the pursuit of profits on public infrastructure projects clearly presents pitfalls.
Australian economist Henry Ergas recently cautioned against their potential to whip up "frenzies of rent-seeking".
What may develop, he said, is "a political economy in which interest groups chasing large, highly concentrated benefits swamp the limited defences of the diffuse parties that will end up bearing the costs."
PPPs can potentially increase those risks.
"By taking outlays off balance sheet, PPPs reduce the visibility of the costs forced on taxpayers and consumers, making it more difficult for those costs to be controlled. That most of those costs are shifted into the future further reduces their visibility, as do the opaque risk-sharing and cost-recovery arrangements built into many PPP contracts."
New Zealand would clearly benefit from substantial, intelligently applied investment in infrastructure and hopefully, neither ideology nor self interest will prevent this from happening, or stop the taxpayer from being comfortable that they are not paying more than they have to.