Transport officials’ verdict on Labour’s transport plans: ‘unaffordable and undeliverable’

Prime Minister Christopher Luxon went to his scene-setting State of the Nation speech armed with a damning figure.

Luxon said on coming into office, transport officials had warned him that the previous Government had left a $200 billion funding hole in its transport commitments by committing to build projects but not allocating sufficient funding towards them.

The transport papers behind that call have been revealed to the Herald, under the Official Information Act, albeit in heavily redacted form. The documents shed light on the former Government’s election-year binge of announcing expensive transport projects.

Just under half of the $200b gap comes from projects announced in 2023.

Labour pushed back on the figure after Luxon deployed it, noting that no Government has ever appropriated decades worth of transport spending at once and a pay-as-you go model of capital allocation is a fairly normal approach for funding big projects and has been used by governments of all colours.

Billions of dollars of capital spending is waiting in a budget line to be allocated in future Budgets.

However there is a question of degrees. The Herald had previously reported that officials warned Labour had not set aside enough money to fund all of its transport commitments in the future.

Labour is not the only one in trouble. Figures obtained by the Herald earlier this year showed National’s transport promises are likely to cost $24b more than it budgeted on the campaign.

The paper behind the $200b figure was delivered to ministers on November 28 last year and offered advice on “cost pressures in the land transport investment programme”.

“The previous Government signalled investments of over $280 billion in the land transport system,” the paper said.

“These investments include both new capital projects and investment in the ongoing maintenance and operation of the land transport system. Of the currently estimated $280 billion required to deliver these investments, only $80 billion has been appropriated.”

Officials warned that the $280b cost of that investment “far exceeds the funding available”.

They sought new Transport Minister Simeon Brown to note that Labour’s planned investment was “unaffordable and undeliverable”.

The Transport Minister at the time, David Parker, noted the documents were heavily redacted. He said that the projects would have eventually been funded. Projects like Auckland Light Rail would have had new funding streams attached to them, probably a mixture of Crown funding and dedicated tools like value capture.

“In respect of Auckland Light Rail, the funding for that was never finalised and the cost-benefit analysis was never finished [before the election], which could have included ideas about how it could have been funded,” he said.

Parker said his three-year draft Government Policy Statement (GPS), released last year, was “fully funded for that three-year period”, largely thanks to an increase in fuel taxes and road user charges.

“It is true that beyond the end of the three-year period there is a lot of uncertainty as to how the funding would be obtained... but beyond that three-year period, you have another GPS and you have to look again at how you bridge that gap,” he said.

Parker said the former Government had always said the additional Waitematā crossing project was a long-term project and the party had never claimed it was fully funded.

The officials estimated that in order to pay for the plan, revenue into the National Land Transport Fund (NLTF), which mainly comes from fuel taxes and road user charges, would need to increase by 17 per cent a year for the next five years until revenue into the fund doubled from $7.3b in 2021/22 to $15.6b in 2026/27. Fuel excise duty is currently charged at 70 cents a litre. If all of that increase came from fuel taxes, it would mean increasing that to $1.40 per litre. GST and ETS would add another 40 cents to that price.

Instead, the new Government’s GPS on land transport reckons revenue to the NLTF will be $7.2b that year.

The paper also warned of cost increases across the transport programme, with some programmes, like the Interisland Resilient Connection and Auckland Light Rail, more than doubling in cost.

The paper blamed material inflation and labour costs for these cost increases. Higher consenting costs, increased land costs, higher design standards, adding cycleways, increasing environmental values, different procurement and contracting models, and increasing overhead costs were also blamed.

The officials offered advice that the new Government may need to take to heart for its own transport plan. Documents obtained by the Herald showed the cost of this plan is $24b higher than what National promised on the campaign.

They said that while the forecast investment was mainly one-off capital projects, these projects would create “substantial” ongoing maintenance costs.

“For example, current forecasts indicate that the additional rail services associated with City Rail Link will increase the costs of maintenance and renewal on the Auckland metro by $100 million per annum,” officials said.

Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.