The decision taken last December to cancel the contract for the two purpose-built Cook Strait ferries – without having a Plan B in mind, let alone in place - has been a calamity that’s going to haunt New Zealand for decades to come, long after the Luxon government has been consigned to the dustbin of history.

The contract we had signed with South Korea’s giant Hyandfai Mipo Dockyard had locked in the building cost for ferries large enough (a) to carry rail economically and (b) carry passengers in relative comfort. Crucially, the vessels would have been big and sturdy enough to handle the constant hammering from Cook Strait’s fierce weather conditions, for the next 30 years or so. The new ferries were due to start arriving in about 18 -24 months time.

Instead....the ministerial advisory group has recommended that we start again from scratch and arrange to build smaller boats that won’t be rail capable. This means that firms will be faced with the extra costs of the double handling of goods, and/or will have an incentive to put more goods onto trucks that will (a) generate more carbon emissions, and (b) cause further costs in road maintenance and (c) pose added safety risks to motorists who will now be forced to share the country’s roads with an ever-increasing number of large trucks, for decades to come.

Moreover, we will be starting out afresh to find foreign shipyards willing to take on a proven-to-be-unreliable client like New Zealand, in order to build smaller, less capable, less robust ships at an equal or even higher price, given the subsequent inflationary pressures. Besides, we will still need to pay for ferry terminal upgrades that were the actual source of the alleged cost “blowout” seized on as the excuse for the cancellation.

Furthermore, we will also have to pay a costly penalty fee for breaking the original contract, with all the related reputational risk to this country, at a time when we are looking for shipyards to build replacements for several of our naval vessels.

Overall, the cancellation decision made by Finance Minister Nicola Willis is going to end up costing as much - and probably more - once all of the ancillary costs are put on the tab. At no overall savings, Willis will have delayed the arrival – by the best part of five years - of what will be an inferior ferry service across our most important domestic trade and tourism route. The stupidity and incompetence surrounding the decision to cancel the ferries order has been breathtaking. Elsewhere, ministerial resignations have occurred over far less.

Lost in the traffic

National’s vision has been self-serving, and short term. The cancellation was driven by National’s “need” to finance its tax cuts election bribe. The ferries expenditure was an obstacle to fulfilling that purpose. In fact, the $3.2 billion cost figure for the entire package was largely driven by the need for new ferry terminals to replace the decrepit state of our current ferry buildings, and to provide the extra turnaround space required by the larger, more capable vessels.

Think about it though. That $3.2 billion was earmarked to purchase – for use over a 30-year timeframe – an Interislander ferry service that carries about $14-15 billion in freight every year, plus about 850,000 passengers and 250,000 cars. It was an investment well worth the price.

Besides, there are less important things that successive governments have been happy to sign off on. For example: is spending $3.2 billion to achieve a modern, fit-for-purpose, rail-capable ferry service between our main islands more important than devoting roughly the same amount of revenue to restoring a tax deduction for the sole benefit of the country’s property speculators? Most of us would probably feel the ferries were a significantly more important investment.

Boats and Planes

Take another example. While he was part of a previous coalition government, Winston Peters was proud as Punch to secure a $2.34 billion spending commitment to buy four new surveillance aircraft for the Defence Force, a figure that included relocating Number 5 Squadron from Whenuapai to Ohakea, and the purchase of a CAE flight simulator for training purposes.

However, that $2.34 billion package didn’t include the extra $250 million for building a new hangar to house the new planes, or the cost of resealing/extending the Ohakea runway, or the cost of data processing capacity to interpret the P-8s surveillance data, or the provision of adequate accommodation for the circa 250 personnel that comprised Number 5 squadron. Oh, and as of this time last year, our allies had begun buying a new version of that CAE flight simulator. To be interoperable, presumably, we will need the same upgrade.

What I’m getting at is that these ancillary (and ongoing) costs will have nearly doubled the original price tag for buying the new planes per se – yet no one has been screaming “cost blowout” and calling for contract cancellation. Back in December, Niciola Willis described the original Kiwirail ferries as a “ Ferrari” option that we couldn’t afford to indulge. Yet in a Stuff article in 2018, Winston Petrers’ former chief staff described the Poseidon P8s in these terms:

Don't get me wrong, the Poseidon [P-8]is the champagne standard.... in [the]Asia-Pacific.

So....how come NZDF gets funding for its “champagne standard” aircraft with no questions asked, but when ordinary travellers, tourists and New Zealand firms want to benefit from the same amount of money being spent on acquiring vessels fit for service on our most vital domestic trade and tourism link, that gets huffily refused as a “Ferrari” extravagance.

Footnote One: So will the smaller ships envisaged be expected to meet the same environmental goals as the cancelled ferries? Not a chance. It is almost poignant now to re-read Kiwirail’s original press statement from December 2020 :

Once built, the two new ferries will be more efficient and support KiwiRail’s goal to reduce carbon emissions by 30 per cent by 2030 and be carbon neutral by 2050. The new ferries will be designed to use different energy sources through their life if these are available in New Zealand, and at day one will provide for battery operations when docking and plug into local power supply at each port.

We can expect none of that climate change mitigation nonsense from the National Party.

Footnote Two: Finally on that point of the NZDF comparison, it is not as if the then Chief of Staff, Air Marshal Kevin Short could make a convincing case for spending all that money on the P-8s :

“There are plenty of aircraft out there that have range and endurance and sensors, but not many have the response, the response being at some stage just the mere threat of being able to carry weapons and do something that is aggressive, so that allows us to operate at the high end of the spectrum that our friends and allies want us to do...For me, it’s like you buy a system and everyone understands the basis of that system, and it automatically gives them confidence about what you can do – the P-8 is a bit like that.”

Right. So we lashed out and spent circa $3 billion on four P-8s partly to impress and re-assure our friends about our ability to “operate at the high end of the spectrum” while making our enemies worry that we “might do something aggressive” by dint of owning something that conveys “the mere threat of being able to carry weapons.”

Yep, conveying that illusion to an imaginary enemy seems a far more worthwhile investment than spending $3 billion on purchasing a modern and reliable ferry service robust enough to run for decades, across Cook Strait.

That’s the real lesson here. When governments tell the public “We can’t afford X” what they’re really saying is “the government would derive more political advantages if we spent it on Y.” It’s always a choice - and the ferries cancellation is a truly disastrous one. It is a choice that should haunt Nicola Willis in the same way that the “Mother of All Budgets” blighted the career of Ruth Richardson, another National Party Finance Minister whose confidence fatally exceeded her ability.

The (political) life you save may be your own

Much as he brags about what a great economic manager he is, Christopher Luxon has bought himself out of his self-created cancer drugs jam in the old-fashioned way...by dipping (already!) into the limited $2.4 million of contingency funds the Budget aside (less than a month ago!)for a rainy day.

Yes, its great that Pharmac will now be able to afford a wider range of life-saving drugs and 26 new treatments, no matter how clumsily the government arrived at this outcome. Yet those drugs will have to be prescribed by an oncologist – and since they’re powerful drugs for very serious conditions, they tend to have major side effects that will need to be monitored, regardless of whether they’re administered intravenously, or orally.

Yet so far, it is unclear whether adequate funds and staff resources have been set aside for the added consulting, administering and monitoring procedures that the new treatments will entail. If sufficient specialist and nursing resources have not been factored into the fundiing equation, this new regime of cancer treatments will culminate in bottlenecks and in fatal delays in accessing the treatments.

Not that Luxon of course, would be likely to step up and accept any responsibility for that outcome. Not his problem, by then.

Footnote: Evidently, nothing can stop Luxon or Nicola Willis from whining about the “fiscal cliff” of Pharmac funding they inherited from Labour. Otago University cancer medicine professor Christopher Jackson has rubbished that argument:

Willis said they had no money after Labour left a "fiscal cliff". She argued that Labour only funded Pharmac in four-year blocks and they had to restore baseline funding. I find that argument unconvincing, as funding Pharmac in blocks is politics as usual - Jonathan Coleman did the same in the 2016 Budget and Helen Clark's government did the same before that. It's no secret that it's funded this way, and it's a typical political trick of announcing "new" funding for Pharmac when it's really just continuing existing commitments.

Fiscal cliff? More like making a mountain out of a molehill.

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