Oh look – we are not alone in watching how the $3 billion PGF trough is being emptied

The Point of Order Trough Monitor isn’t alone in keeping an eye on Shane Jones and his coalition government colleagues as they dish out oodles of vote-nurturing dollars from the $3 billion Provincial Growth Fund.

Treasury officials, working within spitting distance of the Beehive (when the wind is in the right direction), do their scrutinising before PGF announcements are made.

It seems they don’t share Jones’ enthusiasm in all cases and can get a bit antsy about some proposals.

No matter.  In the upshot, it’s the government that decides how taxpayers’ money should be dispensed.

And governments aren’t obliged to heed the advice of Treasury number-crunchers or any other critique of PGF investments, grants or whatever.

A good example has provided fodder for headline writers in recent days, including this from Newshub:

Revealed: Government ignored Treasury advice on $9.9m Westland Milk Provincial Growth Fund loan

Newshub can reveal the Government has once again ignored official advice to fund a project through the Provincial Growth Fund (PGF), acting as a “lender of last resort”.

Treasury told the Government to defer a decision about lending to debt-laden Westland Milk Products, out of concerns about the appropriateness of the Government loaning money to private companies – especially after banks had turned it down.

But despite the advice, Regional Economic Development Minister Shane Jones and Finance Minister Grant Robertson pushed ahead and signed off on the $9.9 million loan.

Newshub references official documents which show that two months before the announcement, Treasury reminded ministers the PGF is designed to boost New Zealand’s regional economy and jobs.

In this case, privately owned Westland Milk Products would reap the benefits.

Treasury said because Westland Milk “will substantially internalise the benefits of the proposed PGF investment, there needs to be a clear articulation of why Westland is deserving of PGF investment, over and above other competing firms”.

The Treasury also raised concerns about the appropriateness of the loan: “We understand the reason Westland is seeking a loan from the PGF is they cannot get a loan from its bank on acceptable terms. In this case, the Crown would be acting as a lender of last resort.”

Newshub noted that Westland Milk Products, in its latest annual report, recorded a $254 million debt.

The banks were nervous about the project that will benefit from $9.9 million of PGF funding – a milk segregation development.  They reckoned it was too risky.

Never mind.  Jones is willing to take a punt.

Defending the decision to take that punt with our money, he railed against foreign-owned banks operating in New Zealand for letting the regions down and lacking the Government’s “wellness approach”.

“Banks have made money out of New Zealand recently by getting rid of people. I’m in the business of treating investment as growing jobs and growing the ability of people to create more wealth. That’s not what banks do,” he said at the time.

He also explained that the $9.9 million he brought to the party was an interest-bearing, repayable loan to enable Westland Milk Products to collect and process different types of milk products, such as A2 milk and colostrum.

In the same online report, Newshub reminded readers the Treasury had previously warned the Minister not to fund up to $11.5 million worth of projects in Gisborne – the Gisborne Airport revamp and a tourism project at Mt Titirangi.

In another Newshub report in recent days, we learn of economist Shamubeel Eaqub’s misgivings about the PGF.

An economist says the Government is using the Provincial Growth Fund (PGF) to boost its support, rather than regional economies.

“The whole purpose of the PGF so far has been to get good PR,” Shamubeel Eaqub told The AM Show on Thursday.

“We haven’t seen the big stuff yet. If you were in the Government, or particularly New Zealand First, you’d do all the big stuff in the last year ahead of the election. This is politics.”

Eaqub suggested the money could be doing a lot more if it was concentrated on a few key projects – like beefing up Northland’s transport links with Auckland.

“The transport and infrastructure links [are] really what’s going to unleash Northland.”

But that won’t happen, he says, because many people south of the Bombays don’t care about what happens in the north – and the Government knows this, so is reluctant to spend-up big in one region.

“That means a little bit sprinkled over everywhere, rather than big chunks of money on those few key projects that will really turn the dial,” says Mr Eaqub.

Those remarks reinforced the warning in a report from the Maxim Institute  against spending too much, too fast.

“We can’t afford to waste $3 billion that we could have spent on teachers’ salaries or hospital upgrades,” said CEO Alex Penk, brother of National MP Chris Penk.

“If we don’t want this to end up being remembered like Muldoon’s Think Big, the Government needs to make some changes while there’s still time.”

The report says the Government’s “big” thinking with the $3 billion PGF comes with too much risk.  It favours “smart” investments to generate the best outcomes for the regions.

Among its recommendations, the Maxim Institute says PGF initiatives over $10 million should have a monitoring strategy developed before funding is approved.

It further advises the fund’s focus should be on a region’s potential rather than its growth prospects.

Oh, and it has some thoughts about politicking.

Mr Penk said political urgencies also need to take a back seat to ensure taxpayer money is well spent.

Jones is reported to have welcomed this analysis but – no surprises here – disagreed the government should slow down with its rollout.

Regional New Zealand wasn’t interested in “policy séances or glossy reports”, he said.  It wants action.

But perhaps the money isn’t being spent as fast as the Maxim Institute analysts seem to think.

Let’s not forget Newshub early last month featured this report:

That’s when we learned the Government had spent only $26.6 million of its $3 billion fund, which had created – we were told – only 54 jobs.

The Government then did a full inventory of jobs created by the fund and said 560 had been created, including part-time jobs.

And Jones said projects were taking a while to get going due to a lot of red tape.

Taxpayer spending on red tape perhaps is serving a useful purpose in hobbling – or at least slowing down – our enthusiastic Minister for Regional Economic Development.

One thought on “Oh look – we are not alone in watching how the $3 billion PGF trough is being emptied

  1. I’d love to review the business case for the Westland proposal – ~$10m for raw materials handling – mmmm
    Why won’t the banks lend? What benefit to the bottom line? How many jobs?
    Use my money?
    This project undoubtedly has a stronger case than many the minister is distributing to which doesn’t say much for the “political animal’s” decision making nous.

    Like

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