Tuesday, May 12, 2009

A strapped chicken

The government has today announced that it will be pursuing "more cost-effective options" for the Waterview Connection, ditching the previous plan for a tunnel. I guess they really don't think they'll be winning that by-election then. Those options seem to cost about half as much money - $1 to $1.4 billion, compared with $2.8 - $3.2 billion for the tunnel options. So how have they managed to produce a saving of over a billion dollars out of thin air in less than a week?

The usual way - by strapping the chicken. The estimates for tunnel options include finance costs, on the basis that the government will be funding the project directly and hence have to borrow the money. The new options however would be funded through the National Land Transport Fund - which is already funded and so doesn't involve borrowing. And that's all it takes - a simple bureaucratic change, and $550 million of costs disappear into thin air.

If it was that simple, why didn't the previous government do it earlier? For the obvious reason - there's only so much money in the NTLF, and its all already committed to other projects. Funding Waterview this way means that some of those other projects will have to be bumped, meaning that either those roads won't be built, or to the extent that they are actually important and necessary, the government will have to borrow to fund them instead. Either way, that means more costs, either from increased travel time and inconvenience elsewhere in the country, or from increased finance costs for those projects. But because they're not part of this particular project, the government can ignore them. And so it gets to pretend that it has produced a real saving, when all it has done is shuffle the costs around and pushed a bunch "off-balance sheet". Enron tricks again...

(And that's without even getting into whether National is properly costing the environment or not...)

But the most disgusting thing is how dependent this has been on the Mt Albert by-election. When National thinks it has a chance of winning the seat, it talks tunnel. When it becomes clear that it won't, it brings out the bulldozers to punish people for not voting for them. Which is what happens when you make your campaign strategist a Minister. Just another day in the Republicanization of the National Party...