Matt Burgess writes:

History tells us well-intentioned governments can prolong rather than resolve depressions with poor spending. In the United States, interventions in the economy in the 1930s, first by Herbert Hoover and then Franklin Roosevelt, almost certainly deepened the Great Depression. The Dow Jones did not recover to pre-Depression levels until the mid-1950s. In Australia, by contrast, the federal government led by Joe Lyons, constrained by high debt going into the Depression, focused on careful fiscal management. Australia had largely recovered by 1936.

NZ had one of the best recoveries from the GFC because it didn’t embark on poor quality spending, but targeted extra spending to where it could do the most good.

The new spending comes at a time when the normal checks and balances have been relaxed or discarded by this Government. Regulatory Impact Statements, a check on the quality of spending of most new spending proposals, were recently suspended. Concerns have been raised about the lack of transparency around Covid decisions.

The Government continues to push legislation through Parliament under urgency. Treasury remains underpowered after a decade of poor leadership. A lesson from the Christchurch earthquake recovery is that the surest way to delay a project was to fast-track spending and procurement processes. Good governance has value.

New spending and debt of more than $60,000 per household signals higher taxes in the future. That has the potential to affect investment decisions in the private sector today. There is a real risk that households and businesses could respond with higher savings and less investment, muting the overall impact of public spending on the recovery.

The only question with taxes will be how many new taxes, and how high.

Newshub have released their Reid Research poll. It is:

• Labour 56.5% (+14%)
• National 30.6% (-12.7%)
• Greens 5.5% (-0.1%)
• NZ First 2.7% (-0.9%)
• ACT 1.8% (nc)

It goes without saying that it is an awesomely good poll for Labour and pretty terrible for National.

It is not entirely surprising. I’m reminded of the Harold Macmillan quote “Events, dear boy, events” when asked what can blow a Government off course. But in this case it has blown the Opposition off course.

Obviously the Government (really the PM’s) handling of the Covid-19 pandemic has seen a huge boost for Labour. We have avoided the huge death rates from overseas and people credit the Government. Also the PM has had a near daily highly viewed press conference where the Opposition has been almost locked out from coverage.

So this poll would see a clear Labour majority Government with Greens, National and ACT in opposition and NZ First out of Parliament.

What will be interesting is to see how the polls move (if they do) as the focus moves more towards the economic response than the public health response.

But no one should fool themselves that this sort of gap would be easy to close by September.

Was listening to a Five Thirty Eight podcast on why Trump’s approval rating has risen, despite his incredibly muddled response to the Covid-19 crisis. Their conclusion was that when countries face a crisis, there is always a rush of support towards the government of the day as patriotism trumps politics. You saw this in the US after 9/11 and we are seeing it with the Covid-19 crisis. However Trump’s bounce is far less than in other countries.

In Australia Scott Morrison has gone from a -20% net approval rating in the February Newspoll to a +26% rating in the April Newspoll.

In the UK Boris Johnson has gone from a +6% rating in March Opinium to a +29% in April.

Even in the US, Donald Trump is seeing his approval rating increase, despite a pretty terrible actual response to the crisis. Gallup had him at -9% in January and at +4% in March. That’s a reasonable increase but of course dwarfed by NY Governor Andrew Cuomo who has gone from a net 0% approval in December 2019 to a huge +48% in March 2020.

In fact many US Governors have seen a huge spike in approval, as you can see here.

Many heads of governments are also getting good ratings specifically for their response to Covid-19. The percentage who approve of their response is Angela Merkel 75%, Boris Johnson 70%, Justin Trudeau 64%.

So even the most incompetent head of government tends to get an increase in their approval ratings during a crisis, while those who handle it competently get a massive increase.

There’s quite a bit of carping in NZ about Scott Morrison, but his net approval has shot up 46%.

So there should be no doubt that while the crisis is ongoing, incumbents do well in the polls. This is natural and expected. The more important question is how long does it last for.

Newshub reports:

The AM Show host Duncan Garner questioned Robertson on whether higher taxes could help pay for the spending. 

“No, this Budget is not about that. This Government has made clear that is not the direction we are going into. The election campaign is still to come. My focus has been squarely on making sure New Zealand responds, starts to recover and starts to rebuild. Those are questions for another day. We are focused on making sure we support New Zealanders through this.”

Pushed on whether he would rule them out, Robertson said: “The Labour Party’s tax policy will be released before the election.”

It is inevitable that Labour will hike up taxes if re-elected. They can’t pay for their spending without doing so. They’re not going to go into the election with any details of tax increases – instead they will try and get away with a blank cheque – where they say they’ll decide once the economic situation is clearer.

They’ve increased spending by $25 billion a year – and not just for one or two years – but basically permanently.

There is no way economic growth alone will close that gap and get us back into surplus. So after a couple of years of massive debt increases, Labour will turn around and say we need to hike up tax to pay for all this spending.

So what could happen to tax rates? Let’s assume $15 billion of their extra spending can be eventually funded by economic growth so they only put taxes up by $10 billion a year. What would that represent?

• The top tax rate going from 33% to 63%; or
• The bottom rate of 10.5% and 2nd bottom of 17.5% going to 25%; or
• GST going from 15% to 22.5%; or
• An asset or wealth tax of 0.7% on your assets

The idea that you could increase spending by 30% but not increase taxation is a fairy tale.

The death toll in the US from Covid-19 is now over 90,000. It seems inevitable it will exceed 100,000 and may even end up exceeding the total death toll for the US from WWI.

The death toll currently if 56% higher than the Vietnam War, 150% higher than the Korean War, 260% higher than the War of Independence, and 3000% higher than 9/11.

A typical flu season in the US kills between 12,000 and 60,000 so is definitely higher than that.

Hopefully it will peak soon. New York appears to have peaked but other states are still growing so we may get a lot of variation in terms of new deaths rather than a smooth bell curve. Most projections are around 120,000.

We’re giving taxpayers the opportunity to get to know their MPs beyond photo-ops and party-line speeches. In this episode, Islay Aitchison interviews Simon O’Connor MP.

You can subscribe to Taxpayer Talk via Apple Podcasts, Spotify, Google Podcasts and all good podcast apps.

Support the show (http://www.taxpayers.org.nz/donate)

Stuff reports:

Hobbiton is up in arms and lashing back against the $400 million tourism rescue package which its chief executive has labelled a “joke”.

Hobbiton chief executive Russell Alexander said the budgeted package was a disappointment and a joke, slamming the suggestion that consultants could assist tourist businesses reimagine themselves domestically.

“I mean what do they want us to do, turn the Shire into a mini-golf course?

“Hobbiton is a tour business, that’s what it does. If there were other opportunities we would have done them by now.”

The $400 million rescue package was announced on Thursday and Tourism Minister Kelvin Davis said the money would be used to “protect key tourism attractions and amenities”.

However, details on what these key attractions are and how they are measured were lacking.

Alexander was scathing towards the Minister of Tourism Kelvin Davis whom he says does not understand the tourist industry.

“He [Davis] has no idea and is missing in action,” Alexander said.

“The problem is we have a minister of Tourism who is talking at his industry not talking with or for his industry,”

The tourism industry needs a Minister who can perform.

Damien Grant writes:

The scale of the economic vandalism being unleashed on this country rivals that of Sir Robert Muldoon. This prime minister and her finance minister, in cahoots with a weak central bank governor, are destroying 36 years of prudent fiscal and monetary economic management.

They do not understand economics. They do not understand business. Even more frightening, they do not understand the importance of the institutional legacy they have inherited and are in the process of destroying.

This is an inexperienced government who have panicked at the economic fallout of their recent decisions. In order to avoid the inevitable and painful reallocation of resources required after a major economic shock they are not only destroying the Crown’s balance sheet – they are undermining the integrity of critical institutions and traditions.

An extra $85,000 of debt per household!

This year Treasury have failed. They are forecasting unemployment will rise to 8.6 per cent this financial year, based on the surge in government spending. It is currently 5.2 per cent. Even better, the fall in GDP is projected to be just 4.6 per cent.

Let’s look at some underlying realities.

According to the Ministry of Business, Innovation and Employment, tourism employs – directly or indirectly – 330,000 people and accounts for 5.8 per cent of our GDP.

International tourism was about 40 per cent of this total and we can safely assume that domestic tourism will fall dramatically. A 1 per cent rise in unemployment is roughly 28,000 jobs.

Job losses in the tourism sector alone will push us over the Treasury forecast.

During the GFC, building consents fell in half. We have over 180,000 people toiling in construction, more in support services.

If even a third of those currently employed in construction lose their jobs unemployment will surge past 10 per cent. If we manage to keep unemployment under 20 per cent, the level that some economists believe is the real rate in the United States today, I will be pleasantly surprised.

I agree that the economic forecasts seem far too optimistic.

A very good ad by ACT. The only quibble I have is they have been far too generous to Shane Jones in suggesting his jobs have only cost $3 million per job. I suspect the majority of those 1,000 jobs are business consultants writing business cases for why they should get even more money. Actual productive long-term jobs is probably well under 500 from his $3 billion.

Stuff reports:

National leader Simon Bridges has written to the Prime Minister asking her to lift the cap on people attending religious services, which is currently set at 10 under coronavirus Alert Level 2.

“New Zealanders find it inconsistent that you allow large numbers of people at bars, restaurants or sporting events but continue to deny more than 10 people gathering for religious services,” Bridges wrote.

The cap on gatherings has been politically contentious. Cinemas and restaurants are allowed to welcome up to 100 people, but they can take bookings for groups of no more than 10.

Funerals and tangi had initially had attendance capped at 10 people, but this has been relaxed to 50.

“It was right to increase the number of people who can attend funerals and tangi — it is right to do the same for our faith communities,” Bridges wrote.

“Religious institutions are in a better place than almost any other organisation that is allowed to host larger crowds, and are therefore able to ensure appropriate physical distancing and health precautions are taking place.”

Again stupidity to have different caps for different venues. The emphasis should be being able to host people safely, not an arbitrary cap of 10.

Stuff reports:

As many as 300 biker gang members and affiliates openly broke the coronavirus mass gatherings rules at a Matamata funeral, as several police watched on.

Lawrence Lynch was one of seven mourners at a funeral for his sister-in-law, who Stuff has agreed not to name, on Monday, where a roll call was taken to ensure they were adhering to mass gathering restrictions.

The following day, Lynch returned to Matamata Cemetery to put something on the grave site, only to be greeted by hoardes of mourners.

“Holy smokes – there’s all these bloody motorcycle gangs there. There’s about 200 or 300,” Lynch said.

So the law abiding Kiwi could only have seven at their funeral, while the gang had 300 turn up to their funeral – and of course suffer no consequences.

A fascinating story at Politik. The OIA papers revealed:

There was no overwhelming health reason why students from China could not have come to New Zealand universities this year. Instead, the Ministry of Health feared the students might create extra work if they were allowed in, and that appears to have been behind the decision to ban them.

So universities had seven quarantine or isolation facilities ready to go where foreign students could live for two weeks to ensure they didn’t have Covid. They also had 50 GPs and nurses lined up to manage them.

The officials said the health risk was “minimal” and 2,000 students could be allowed in.

So why didn’t it happen?

Basically the Immigration Service has no electronic system to check traveler eligibility – it has to be done manually by phone calls and could not cope with bulk exemptions.

So we have lost scores of millions of dollars of revenue from foreign students but due to a health risk, but because the bureaucracy used a manual system.

The sentencing notes for Mark Hayden are a terrifying and sad read.

Hayden was found guilty of vehicular manslaughter despite not being the driver of the car. His cousin (who also died) was the driver. But the facts make clear they were beyond reckless. It was almost inevitable they ended up killing someone.

Basically they drank two bottles of vodka and dozens of people called the Police about their driving. The driver tried running other vehicles off the road.

When finally pulled over by Police they refused a breath test, abused the Police, tried to run the officer over and then took off. The car went across the centre line and killed the 72 year old driver, along with his cousin who was driving.

The driver, Stephen, was seven times the legal limit and Mark Hayden was five times the legal limit (four hours after the crash). Now Hayden wasn’t driving but he was clearly encouraging his cousin and just as reckless.

If he was the driver, a 25 month sentence would be ridiculously low. It still seems low considering he spent hours in a car with a drunk driver egging him on.

But when you read the notes he has never been in legal trouble before. He has three school age children. He is very remorseful and unlikely to reoffend. So maybe the end result is about right?

His initial sentence was 54 months but he got 10% off for his remorse, 20% for lack of prior offending and good previous character, 8% off for having to serve his sentence away from his family in Australia and 25% off for his guilty plea.

I really don’t know. The actions of him and his cousin were beyond reckless. Killing someone seemed almost inevitable and a family lost their father because of the two of them. But would having him serve longer achieve anything?

Stuff reports:

A controversial new coronavirus law has been hastily passed, despite coming under fire for allowing police to search homes without a warrant.

Despite widespread concern, the Government rushed though the powerful legislation for Alert Level 2, but legal experts say the new enforcement law is better for the public than the extreme emergency powers used under lockdown.

There are now calls for the Government to take the unusual step of returning the law to parliament, so it can again be scrutinised while it’s being used.

The law, which passed 63 – 57, had to be hurried through the House as it was required for the enforcement of Alert Level 2 restrictions such as social distancing – set to begin at 11.59pm on Wednesday.

Eight weeks ago the opposition offered to work with the Government to pass a special law for responding to Covid-19. The Government refused. Then suddenly on Tuesday they table a bill and ram it through all stages in just over 24 hours.

And the Greens sat there voting for it at every stage.

Chief Human Rights Commissioner Paul Hunt said he had “deep concern” about the lack of scrutiny and rushed process for the Bill. 

“For weeks the Government has known that we would be moving to alert level 2. It has not allowed enough time for careful public democratic consideration of this level 2 legislation. There has been no input from ordinary New Zealanders which is deeply regrettable,” Hunt said.

“This is a great failure of our democratic process. The new legislation, if passed in its current state, will result in sweeping police powers unseen in this country for many years.” 

If National had done what Labour and the Greens have just done, the Greens would be flying to Geneva to complain to the United Nations.

The Herald reports:

A distraught Invercargill mum was forced to kneel down in mud and kiss her son goodbye through an unzipped body bag after he died in the first week of lockdown.

Police held up a blanket so neighbours could not see Angela clutching onto her 18-year-old son Brody, with tears streaming down her face, not wanting to let go.

It would be the last time she saw her youngest child – because of level 4 Covid-19 restrictions, funerals were banned. …

On the morning of Saturday, March 28 – day three of lockdown – Warren found his son. He is suspected to have taken his own life.

“He was our world. We were very close. Finding him like that, that’s what I see when I go to bed at night,” Warren said.

Brody left a note but his parents haven’t been able to read it because police took it for forensic examination.

The teenager had two brothers – he was extremely close with both. His 23-year-old brother lives about 5km away and had to say goodbye to Brody via Facetime.

His 26-year-old brother lives in Wellington. “He’s just pretending like it hasn’t happened until he’s able to come down.”

Sharron Hanley, funeral director and owner of MacDonald and Weston, received a call from police that morning to transfer Brody to a funeral home.

She described the ordeal as the most horrendous she had ever seen in 20 years of work.

“I have never seen anything so horrible, it was really really awful and it’s just so wrong what this family have been through.” …

Again common sense out the window. Australia has allowed funerals, limiting them to ten people. Their public health outcomes have been as good or better than Australia’s. So hundreds of people have been denied a funeral in New Zealand because of our inflexible inhumane approach.

Stuff reports:

The Government’s flagship infrastructure project has been put “on hold” while it fights the Covid-19 pandemic, but there are some doubts it will ever get going again.

Transport Minister Phil Twyford said decisions on Auckland’s light rail project “are on hold while the Government’s full focus is on fighting Covid-19”.

During the election campaign, Labour had promised to have the first stage of the Auckland light rail scheme built by 2021.

But after a long and protracted process, the Government has yet to decide who will build the scheme, let alone begin construction.

It’s worse than that. They haven’t even decided a route.

We’ve well over halfway to their promise of having built 13 kms by December 2021 and they have failed to progress it at all.

A brutal column by Stuff Political Editor Luke Malpass on NZME’s clumsy attempt to force Nine to sell Stuff to them cheap. Extracts:

Let’s recap: after years of on-again off-again negotiations, Nine terminated talks with NZME last week over the price it was prepared to pay for Stuff (publisher of this website), and the approach to the political and regulatory battle that would have to be fought for the merger to go ahead.

NZME then inexplicably announced to the NZX on Monday morning that it was indeed buying Stuff for $1 and wanted an expedited Commerce Commission process — and a law change by the Government — to force the sale through by May 31. This took Nine, Stuff and the Government by surprise. NZME, like a desperate ex, appeared not to understand, or accept, that it had been broken up with.

Ouch.

Everyone has their price, but as a result of Monday’s amateurish shenanigans it is understood that Nine’s attitude is now that it will sell its Kiwi arm to anyone but NZME.

Double ouch.

NZME’s strategy, in turn, appears to have been to talk down Stuff and create enough uncertainty around the company’s future to bid down its value and create the impression in the minds of the public, advertisers and within the Government that the country’s most read news website is somehow circling the drain.

No wonder Nine is pissed. It is almost an act of commercial vandalism to announce you are buying Stuff for $1, as that is saying basically it is of no value and no one should buy it.

In the meantime, Stuff will troop onwards, Nine will try to wrap up a sale as soon as possible, and NZME will likely remain desperate and dateless in the chill winds of the NZX.

Triple ouch.

Radio NZ also reports that NZME is now taking Nine to court.

Media company NZME has applied to the High Court for an interim injunction against Nine Entertainment in Australia  – the owner of NZME’s main market rival Stuff. 

It is seeking to enforce an exclusivity arrangement and prevent Nine from negotiating with any other possible buyer. 

Are they deluded? What part of willing seller, willing buyer do they not understand? Do they think this will make it more likely they will get to buy Stuff?

Ben Thomas sums it up well.

Stuff reports:

A young butcher has died suddenly, less than a week after his shop went into liquidation.

Roy Green, 38, and his wife Amanda had owned Pukekohe Mad Butcher, in south Auckland, for five years.

Green was well-known in the Franklin community and supported various sporting and charitable organisations.

He and his staff had featured in several Stuff stories, most recently for their support in donating meat for the Franklin County News Smiles for Christmas appeal.

Sounds like a great guy whose death is a real loss. 38 is so very young, and especially sad for his kid or kids.

In a video with TVNZ during alert level 4, Green said many stores like his were struggling.

“We’re just struggling big time, we need to sell meat to actually make any money,” Green said.

“And at the moment we’re not selling meat, so we’re not making any money.

“The money I do have in the bank is all going to outgoings at the moment, it’s just a tough struggle.

The shop had been turning over $92,000 per week prior to the lockdown but was making no money in level 4, TVNZ reported.

“The stress at the moment we’re under trying to pay everyone is ridiculous.

“I’ve spent nights awake in bed.

“Some nights I’ve sat there crying, wondering what I’m going to do next. It’s just not fair.”

We need to be careful not to jump to conclusions. If people kill themselves (as appears to have happened here) there is rarely one binary factor. There are normally multiple factors. That is why it is so hard to predict and prevent.

Also the liquidation of the business may not be purely due to Covid-19, even though obviously it was at a minimum a contributing factor.

But what we can take from this is a reminder that losing your business, losing your job etc does take a real toll, well beyond the financial.

A guest post by Jacob Lerner:

In 1975, a young civil servant, Paul Fitzgerald, sued the incoming Prime Minister, Robert Muldoon. The case, Fitzgerald v Muldoon, was a signal moment for administrative law in New Zealand. It held that a centuries-old English law – section 1 of the Bill of Rights 1688 – meant that Muldoon’s purported unilateral direction, that payments to the New Zealand Superannuation Corporation (NZSC) by employers should cease, was illegal. Chief Justice Wild held that Muldoon’s direction effectively attempted to suspend the Act of Parliament governing contributions to NZSC, a power which no member of the executive branch of government has. The case has ongoing relevance in its restrictions on executive overreach in NZ, and in underlining the power of judicial action when such overreach does occur.

Unfortunately, we now find ourselves in disconcertingly similar times. The Prime Minister and Cabinet told all NZers that from 11:59pm on Wednesday, 25 March 2020, they legally had to “stay home to save lives”. We were in a Level 4 lockdown, a previously non-existent concept that suddenly entered our national consciousness.  We have been instructed about staying in our bubbles, and about not venturing out except for essential reasons. In short, we have been, for nearly all intents and purposes, confined to our homes.

That is all well and good. I, like many other NZers, understood the merits of Alert Level 4, or at least trusted our public health officials enough to accept that it was a good idea. And it has been a policy triumph in response to an enormous problem; in that respect, we are the envy of the world. However, much like Robert Muldoon demanding that super payments should cease, the Prime Minister appears to have lacked the legal basis to have demanded that NZers conform with Alert Level 4. Equally, other means of ensuring a valid legal basis for Alert Level 4 were not used. That abrogation of the Rule of Law should concern everyone.

Insufficiency and legality

The legal issues are quite clear. The first order – made by Dr Ashley Bloomfield under s 70(1)(m) of the Health Act 1956 on the day Level 4 took effect – closed all premises and forbade “congrega[tion] in outdoor places of amusement or recreation”. Assuming that order itself is legal (and that is very questionable, as Professors Andrew Geddis and Claudia Geiringer have eruditely noted), it still did not empower the Prime Minister to make the directions to New Zealanders that she did. The order did not mention “bubbles”, receiving visitors, or even what were acceptable reasons to leave home. In short, it did not provide the necessary legal framework for the Prime Minister’s demand of New Zealanders to “stay home, save lives”.

This gap was later rectified on 3 April, with another order from Dr Bloomfield, this time under s 70(1)(f) of the Health Act 1956. This order does require New Zealanders to stay at home, but there are very real questions about whether it was within the scope of the Health Act, at all. The Director-General of Health’s powers are not unfettered – they are defined by the Health Act – and he cannot make orders that go beyond the scope of his powers. Such orders are unenforceable (and are what is known as ultra vires, literally “beyond the powers”). I will not canvas those issues here, but the article by Profs Geddis and Geiringer clearly sets out the flaws in the two orders.

A missed opportunity

What is arguably more concerning, however, is that the Cabinet had the opportunity to conform more closely with the Rule of Law while still protecting public health, but did not. There are extraordinary powers granted under sections 14 and 15 of the Epidemic Preparedness Act 2006, which allow for the amendment of any enactment (an Act or regulations) in New Zealand, while an epidemic notice is in force, without the consent of Parliament. Specifically, section 14 sets out a process for the Minister and Director-General of Health to amend any enactment, administered by the Ministry of Health (as the Health Act is) “necessary to enable the effective management of the … disease”. Indeed, similar powers were used with regard to other matters, such as allowing remote witnessing of documents (under section 15, which governs non-health related matters).

These powers are known as “Henry VIII powers”, as they allow members of the Executive Branch to override the Legislature, and as such tend to be used sparingly, and are often regarded with suspicion. However, this is one instance where the use of such powers – at least to ensure that the Director-General’s orders were legal – could have been warranted. The fact that they were not used, in spite of obvious legal uncertainty as to the very validity of unprecedently restrictive orders, demonstrates an apathy for the Rule of Law which is ill-suited to the highest levels of government. There is, simply, no excuse for this kind of administrative inaction.

Crown Law Advice

Moreover, the Attorney-General’s refusal to release the legal advice he (and others) received relating to the legality of the orders is similarly concerning. He does so on the basis of a claim of legal professional privilege. This claim is dubious at best. Instead, it is likely the Attorney-General has impliedly waived this privilege. The Cabinet Manual, at 4.68(b), notes that “Partial disclosure of the actual legal advice received, or reference to the content of the legal advice, however, may result in waiver of privilege.” The Cabinet Manual goes on to suggest that even acknowledging that advice has been received and acted on may constitute an implied waiver of privilege.

In this case, on 8 May, the Attorney-General said: “Crown Law’s advice was, and is, there is no gap in enforcement power”. On that basis, he appears to have waived privilege and ought to release the legal advice forthwith. His insistence that he does not have to do so – indeed, going so far as to refer Simon Bridges to the Privileges Committee of Parliament for attempting to force the release of the advice – is misconceived and damaging to the vital process of parliamentary scrutiny.

Back to Muldoon

Not so long ago, a claim that the Muldoon and Ardern governments acted similarly in their disdain for the Rule of Law might have seemed unjustified. Unfortunately, such a claim seems to be far more apt now. The Ardern government has been no defender of the Rule of Law recently, and it is vital that the matters addressed above – the insufficiency of the first order, the questionable legality of both orders, the lack of attempt to rectify the situation and the refusal to release Crown Law’s advice – be thoroughly scrutinised, both in the judiciary and in parliament. Whatever your stance on the Ardern government, or on lockdowns, the Rule of Law is simply too important to put to one side.

Tim Hazledine writes:

Those numbers, multiplied by one thousand, are in fact the cost and benefit numbers of Auckland’s railway tunnel project – the City Rail Link (CRL) – which will give ten thousand commuters to the city’s central business district a somewhat faster journey to work.

Those faster journeys were estimated to be worth (on a present value basis) about $2 billion, and the construction cost was originally estimated (guessed, really) to be about $2 billion. Then, last April, with $700 million spent and not a lot to show for it, the cost envelope was revised to $4.4 billion, with no guaranteed finish date. And there was no outcry. People, especially politicians, seem to suffer from what I call ‘Big Number Blankness’: they lose their critical facilities when confronted with figures so far from their personal experience.

Last week, CRL management warned us that, because of Covid-19, costs would indeed rise, with no numbers given, but the promise – or threat – that a “red pencil” will be drawn around the budget at the end of this year. No mention of the possibility that Covid-19 will reduce the benefits of the rail link, through more people continuing to work at home rather than commute.

Adding in some substantial costs missing from the official calculations, the costs of disruption to business and citizens during the build, and the cost of the huge subsidy on the price of rail tickets, it seems sadly reasonable to predict that we now have a $5 billion+ monster on our hands. Even with more sunk costs incurred since last year, we are looking, in the best scenario, at having to fork out another $4 billion to finish a possibly $2 billion value project. How dumb is that!

The $2 billion of benefits are probably now also suspect as public transport use will be down for many years to come.

The costs of the rail tunnel are supposed to be shared 50:50 between Auckland ratepayers and NZ taxpayers. I have calculated that a person in my financial situation – for example, me – will have to cough up much more than $10,000 in rates and taxes to meet my share of the bill. I can think of heaps of better uses for my money.

This is why I think generally we should only fund projects with a BCR well in excess of 1. Because costs always end up more than originally estimated.

What I would do for transport projects is:

• BCR of 2 or higher – NZTA can automatically fund with no approval from Ministers
• BCR of 1.5 – 2 – NZTA can fund if Ministers approve
• BCR of under 1.5: Cabinet has to find wider reasons to fund such as resilience for a natural disaster