KEY POINTS:
A month ago, reading the Herald's account of the career of John Key, I was excited at the prospect of a confident investor taking charge of the economy. The excitement has gone.
Despite his stand on Winston Peters this week, Key in election mode is looking terminally timid.
Peters is a sideshow, exposed now as the impostor he has always been. On subjects that matter, Key is running away from the implications of his own positions.
When Maurice Williamson's mention of optional $5 road tolls made headlines on Monday morning, it was the Nats' first sign of spine. By lunchtime it was gone. Helen Clark had pretended an option was an obligation and National's boy leaders backed off.
Bill English was sent out to disown Williamson and Key was on the evening news declaring nobody would face a weekly toll of $50. How short-sighted was that? If their "public-private partnerships" for infrastructure have any economic worth they require road tolls and not necessarily at the $2 Key and English find politically safe (because Labour does).
To give the public any value from private investment they must impose charges that reflect the full cost of projects. But Monday's television clip probably ensures Key will have to keep his foolish commitment, meaning he can no longer responsibly promote public-private partnerships, especially as an answer to critics of his intention to increase public debt.
The point of inviting the private sector to invest in public works is to improve economic decisions, not to tap private finance. Governments, backed by compulsory taxation, can raise project money more cheaply than the private sector can.
Key has to come right out and explain that it is not the private sector's money we need, but its judgment. That is hard politics because it sounds like those running for office are not as smart as corporate decision-makers, which is not so. It is simply that the private sector is better at punishing miscalculations.
Key is uniquely well-placed to explain this because his personal investment credentials are known to be better than any political leader's in living memory. Yet even he, when spending public money, needs private partners who stand to suffer if the project is not worth the cost.
They need to estimate whether a desired road, bridge or tunnel could provide a competitive return over a reasonable period at a charge that motorists would be prepared to pay.
Hence the amount of the toll is crucial to the economics of the project; it must be set by a careful calculation of the costs and the likely consumer resistance, not by politicians worried about its impact on their popularity.
Road tolls will always be unpopular and people will not pay them unless free routes are clogged and the tollway is more convenient. The amount they are prepared to pay is a good measure of how much the road is really needed.
A few years ago Auckland's eastern highway proposal was pared back and finally abandoned because it would have needed a toll higher than a sufficient number of people were reckoned to be willing to pay. That tells me existing routes from the eastern suburbs are not seriously congested and the city does not really need it.
A good, resilient economy is not built on excessive infrastructure; it's a mesh of activities that absorb no more or less of the available resources than they can use to generate a competitive return.
No reliable test of economic value is possible if a project is mooted for political appeal and a user charge is set simply to reduce the taxpayer's bill. Take the Government Transport Agency's intention to put the Waterview section of Auckland's western ring road underground and charge at the tunnels, or the toll that will recover only half the cost of the northern motorway extension to Puhoi.
The agency seems to have decided $2 is about the maximum that can be charged before road users avoid paying. Your guess is as good as theirs. I suspect most people would pay more than $2 to avoid the Hibiscus Coast road, but even $2 may be too much for a Waterview tunnel.
The western ring link is of doubtful value as a connection for north and west Auckland to Mangere airport. And the only value of the tunnel is to reduce surface traffic through suburbs that include the Prime Minister's electorate.
The only basis on which private partners would contribute money to a project such as the Waterview tunnel is for a guaranteed return that would leave the public to cover the losses.
And that is exactly what will happen if John Key plans to combine public-private partnerships with low, politically safe, tolls.
Unless he finds his courage before election day he is going to lose those who know the meaning of efficiency and care for this economy.