Fiddling the figures for old fashioned social democracy
Another day in the House, another attempt to get some straight answers out of the Labour Party as to why they won’t partially fund the electrification of the Auckland rail network.
Sorry if this bores some people but ARTA has to make a decision in the very near future to buy either electric or diesel powered rail units which will last for forty years. This decision will determine whether the city can have a serious mass transit system with all that implies for urban planning and a liveable city. This is a decisive moment in the history of Auckland but the Labour Party don’t give a damn so long as they get their roads.
5. JEANETTE FITZSIMONS (Co-Leader - Green) to the Minister of Finance: Is he satisfied with the Auckland Regional Transport Authority’s business case for the electrification of the Auckland passenger rail system; if not, why not?
Hon Dr MICHAEL CULLEN (Minister of Finance): A case has been put forward that sets out plans and justifications for electrification. There are still a significant number of issues surrounding that - in particular, the issue of funding.
That is, the case is sound and the most important outstanding issue is that we won’t provide partial funding because of our resolute opposition to Auckland getting decent public transport.
Jeanette Fitzsimons: Why does Land Transport New Zealand require the use of the Treasury discount rate of 10 percent to evaluate major passenger transport investment, while countries like the UK, the USA, Canada, and Australia use 3 to 6 percent, thus valuing future benefits more highly; …?
Hon Dr MICHAEL CULLEN: To some extent, discount rates are arbitrary, whichever ones are used… One could use a somewhat lower discount rate, but it would not make as big a difference to total cost-benefit ratios as the member might think.
Yet according to the ARTA business case it makes a huge difference to the benefit to cost ratio if you change the discount rate to reflect the true life of rail rather than some dumb Treasury discount rate.
Jeanette Fitzsimons: Does he agree that if we are attempting to move to a quality public transport system that is used by not just low-income people, it is appropriate to value the time saved by commuters who choose trains at the same rate as we value the time saved by car drivers commuting, in evaluating the benefits of public transport investments?
Hon Dr MICHAEL CULLEN: …But, of course, one of the essential differences is that if one is driving a car, one cannot be doing anything else; if one is in a train, one can. Therefore, the value of time lost when in a car is more than that lost when on a train.
So he’s saying, because you can be more productive on a train or a bus than in a car, then the Labour Party will fund roads ahead of public transport because road users are wasting more money sitting in traffic than public transport users are sitting on the bus/train. That is just stupid. Why not fund more public transport so people can get more done on the way to work.
Jeanette Fitzsimons: Does he agree that the economics of rail change if rail rolling stock is regarded as having a life of 40 years - which it does, in fact, have - rather than the 25 years that the Land Transport manual directs?
Hon Dr MICHAEL CULLEN: If rail rolling stock is to last 40 years, usually a great deal of work has to be done to it in the interim…. The point I am trying to make is that one can fiddle the figures as much as one likes to produce the answer one wants, but I do not think that is the best way of making rational decisions around these sorts of issues.
So the Labour Party has fiddled the figures to get the answer old fashioned social democrats want - that roads are funded at four or five times the rate of public transport funding because roads = progress. They did this by using unrealistic discount rates and by valuing public transport users time savings at a lower rate than road users.
Jeanette Fitzsimons: Why is he happy to fully fund State Highway 20 when the benefit-cost ratio is 1.2 and falling with the increase in construction costs, but not at this stage to even partially fund the Auckland rail electrification, with a benefit-cost ratio of between 1.5 and 2.34, if we use even a conservative discount rate of 7 percent, an assumed life of 40 years, and the same value for travel time saved; and when will he make a decision to electrify now?
Hon Dr MICHAEL CULLEN: Well, I am never going to make a decision to electrify now - I am quite sure of that. It would be a sheer physical impossibility to engage in that…
If you use realistic assumptions then the benefit to cost ratio for the electrification of the Auckland rail network is twice that of building SH20 in Auckland, but SH20 is a ROAD and roads=progress in an old fashioned social democratic paradigm. If Auckland is to be a liveable world class city then it needs a modern efficient mass transit system, and that means electric rail for starters.
If Labour doesn’t do this then they will be cursed by Aucklanders for generations.
March 28th, 2007 at 9:32 pm
Bloody brilliant. Go the Greens!
Transportation is an area where cut corners come back to bite you in the ass or, alternatively, good engineering choices show the vision and foresight of the decision makers for decades to come.
Electrification of trains is of course the best way- the fuel is near free, the life of the low-maintenance units is substantially longer; and of course they are much less polluting in terms of carbon dioxide and particulates.
The initial cost of construction may well be relatively higher; but that doesn’t seem to stop motorways being proposed and built.
If the government is really at all serious about sustainability, it must take long term ideas such as this into consideration and plan for the future. Otherwise they will simply be dooming the next 4 generations of Aucklanders to gridlock…
March 28th, 2007 at 9:52 pm
yeah this is brilliant. keep up the pressure.
as for “…discount rates are arbitrary, whichever ones are used… One could use a somewhat lower discount rate, but it would not make as big a difference to total cost-benefit ratios…”
what absolute tripe doctor. i’ve done a few cashflow analyses in my time. the sensitivity of results to differences in discount rates of parts of a percent are often huge - especially when a shorter discount period is adopted.
cheers
mike
March 28th, 2007 at 10:01 pm
If Labour doesn’t do this then they will be cursed by Aucklanders for generations.
In other words, nothing will change
respectfully
BJ
March 28th, 2007 at 10:06 pm
Labour is working hard on the next election. On current form it is National’s to lose. Cullen has so completely abrogated his responsibilities to the country that he is becoming a joke for me. A very bad joke, but the number of things he is doing so completely back-asswards is stunning. Dubya can top him, but he has a lot more to work with.
respectfully
BJ
March 28th, 2007 at 10:45 pm
Hey don’t knock my mate Cullen. He’s the best finance minister since Muldoon!
What I mean is, he is actually very good in classical terms, of 30 years ago… but he’s missed the paradigm shift completely, and he’s obviously a major obstacle to progress now.
I wonder if we should try to negotiate a transport package with National, starting now.
March 29th, 2007 at 12:49 am
Those answers reveal that Cullen has no real idea of the impact of discount rates on transport funding. mikeymike is exactly right when he underlines the importance of discount rates when short time frames are being used. The current LTNZ evaluation period of 25 years is short in transport terms.
Another outstandingly illogical comment from Cullen:
“But, of course, one of the essential differences is that if one is driving a car, one cannot be doing anything else; if one is in a train, one can. Therefore, the value of time lost when in a car is more than that lost when on a train.”
Let’s imagine a hypothetical situation where Person A is currently driving to work and it takes them one hour. Imagine that a rail project is proposed that will get them to work in 55 min. Another project is proposed to build a new road that will reduce their drive to 55min.
There are two possible outcomes:
1. Rail project is built and Person A gains 5 min of time and 55 minutes of time that can be used for other purposes.
2. Road project is built and Person A gains 5 min of time.
Under Cullen’s logic, the second outcome is better. Cullen’s inept answers are only confirming the ridiculously illogical set of economic assumptions that underline cost benefit analysis of transport projects in NZ.
March 29th, 2007 at 6:21 am
So will the Greens keep supporting the Labour party?
Seems like the Greens are coming to a cross road. The left wingers want to stay with Labour and pursue the s59 repeal, the environmentalist want to kick Labour into touch and get Cullen to spend the surplus on an already 30 years late, public transport upgrade for Auckland.
Sooner or later the Greens are going to have to choose.
I dont care to much if they build new roads as you need to keep the Auckland trasport flowing while the new rail infastructure is built. (10 Years at least).
The newly established road corridors can always be converted to public transport later. Or better still run the public transport on top or alongside the roadway. Such should be happening with the SH20 extension.
How shortsighted is Westfield when they have public transport skirting their flash new shoppping, entertainment and proffesional centre at Sylvia Park and they dont even put in a train station for the public. No wonder the tenants are not getting the turnover projected. Crap place to get to in a car.
March 29th, 2007 at 8:45 am
jeanette did well boring in on this issue…
and there is a new nuance in parliament these days…
questiontime is notorious for the ongoing heckling/barracking by the major parties..
heckling that used to be also thrown at the greens all the time..
that dosen’t happen any more..
all of jeanettes’ questions yesterday were heard in a respectful/quiet manner..
and the other greens are also being afforded the respect of having their words/ideas heard/listened to..
it’s encouraging..in a small way..
phil(whoar.co.nz)
March 29th, 2007 at 7:34 pm
Hi Phil good to see you’re back. Interesting observations.
Gerrit - I will make it my personal mission to ensure that the Greens do not support Labour in the next election. You do, however, misinterpret the diversity of people within the party.
Socialists and environmentalists do exist within the Party. That is true. It is these groups that are reflected in the principles of social justice of ecological sustainability.
However there is a third, oft neglected principle, of appropriate decision making. And it is exactly this principle that has the most to offer NZ society at the current time. I recommend that you Google the term “urban liberal” and find out what it means.
You’ll probably find that the term is something that “mainstream” New Zealanders, such as Dr. Brash, will hate. You’ll also find, however, that the term has nothing to do with socialists or environmentalists.
March 29th, 2007 at 9:53 pm
Sooner or later the Greens are going to have to choose.
Not during the current legislature. The fact is, with the current coalition alignment, the Greens are powerless — cut out because of Labour’s deal with the sunset centrist parties. On certain issues, Greens can get legislation passed, with Labour support, and vice versa. But they don’t need us for confidence and supply.
Now, theoretically Labour could change partners and make a new coalition with Greens and Maori Party. From a policy point of view that would be excellent. But they won’t do that because that would give a new lease of life to Winsome and Peters, whom Clark hopes to crowd out at the next election.
Now, logically, Labour will lose the next election anyway. In that perspective, do the Greens want to go back to being a voice in the wilderness, or are we prepared to consider cutting deals with National?
April 2nd, 2007 at 9:26 pm
Stu Donovan Says:
March 29th, 2007 at 7:34 pm
However there is a third, oft neglected principle, of appropriate decision making. And it is exactly this principle that has the most to offer NZ society at the current time.
——-
How does that principle relate to the Section 59 fiasco?. How can people make “appropriate decisions” while we are dished up obsfucation and rhetoric etc, and dodgy statistics.
I think that while the far right can’t deal with consumption and greed; the far left can’t deal with issues pertaining to population [DPB] (and have a lot of perceptions at variance with the people in between).
jh
[when will the Greens put out a (thourgh) Section 59 faq– with q’s from those opposed]