Labour's shifting position on public-private partnerships

Labour's finance and investment spokesperson says the party's position on public-private partnerships has not changed, but admitted she has been communicating the position in different ways to different groups.

The government has accused the opposition of scaremongering and causing uncertainty over its plans for PPPs, but Barbara Edmonds says there has been no change, and that her speech to investors last week was about making clear Labour's "boundaries" around privatisation, as well as its stance on PPPs and other ways to enter into government contracts.

"Infrastructure is nuanced. And the way we had to make it clear, both in the speech and the comms that we've had afterwards, is saying no privatisation for those key assets, no to PPPs for those key assets," she told RNZ.

"We're aware, we don't have a Ministry of Works, so the government always contracts with the private sector to build things. But who finances it and funds it? That's a different question."

Edmonds reiterated if contracts were already entered into by the time it returns to government, Labour would honour them to prevent break fees or cuts to construction jobs, even if the projects were schools, hospitals, or prisons.

"If spades are in the ground, it's quite clear that the contract is progressed enough," she said.

Given Labour's stance against the use of private funds for schools, hospitals, or prisons, letting the building of such projects go ahead was seen as a compromise or softening of its position, but Edmonds insists that is not the case.

"So we just wanted to be make sure at the summit to say 'we understand how important continuity and certainty for you is.' We're going to continue those contracts, but we're not going to proactively prioritise or actively enter into PPPs for those different types of assets."

What Edmonds told investors

Edmonds' attendance at the summit was designed to show potential investors there was a bipartisan commitment not to throw projects out when governments change hands.

She had already contributed to the government's PPP Framework, writing in the foreword that Labour supported PPPs as a procurement method "when they maintain some form of public ownership/control of critical infrastructure and align with Labour values of fairness and cooperation."

In the build-up to Edmonds' speech, Labour wanted reassurances that the government was not going to "hock off" assets to the companies in the room, who between them controlled $6 trillion in funds and assets.

It also made it clear it did not support the private ownership of core public infrastructure.

On Thursday, Labour leader Chris Hipkins extended that to their construction as well.

"A bottom line for us is things like hospitals, schools, prisons for example, the bottom line is we don't support the private sector building and operating those things - those are public institutions," he said.

By that point, the government had already announced to the summit it was seeking to deliver the redevelopment of Christchurch Men's Prison through a 25-year PPP, with Corrections retaining responsibility for operations and custodial management.

Taking to the stage on Friday, Edmonds told attendees that Labour would not stop work that was "working, contracted or underway," but told them where Labour would step in.

She said Labour did not support "any step" towards the private ownership or operation of public hospitals, schools, prisons, or critical infrastructure.

"These are essential public services, and people expect their government to safeguard them for the benefit of all New Zealanders long into the future. The reason why investing in New Zealand has been seen as a privilege is because successive governments agreed that there are some things too important to New Zealanders to sell off," she said.

"Our land, our hospitals, our schools, and infrastructure are not just assets to be traded. They are the foundation of our communities and economy and must remain in public hands."

Except, selling off public assets is not on the table (at least not yet - National has hinted it will campaign on asset sales at the next election) and all PPP projects entered into by central government are publicly owned.

The Finance Minister said Labour was confused, as the summit was about investment opportunities in the infrastructure pipeline, not about private investment in existing public assets.

"They seem completely confused between 'what is privatisation' versus 'what's the way that the government can partner with the private sector to deliver better infrastructure for New Zealanders?'" Nicola Willis said.

"I think this sort of scaremongering politics doesn't really have a place in serious policy debate. I'm all about different ideas for achieving things, but let's keep it factual, and let's give New Zealanders the courtesy of trusting them to be intelligent enough to know the difference between partnership and privatisation."

Not just operation, but financing too

Speaking to media straight after her speech, Edmonds took a harder line, setting out exactly where Labour's boundary was.

She said Labour was ruling out both capital expenditure and operating expenditure, where hospitals, schools, prisons, and other critical infrastructure were concerned.

In other words, the private financing and building of those projects, not just their operation.

Labour's argument against PPPs in such projects is the government should have a "duty of care" to them.

On other PPPs, such as transport projects, Edmonds would not rule anything in or out.

Instead, she said Labour would look at the risk profiles, the affordability, how they were structured, and their funding and financing.

She said it was up to the government to keep Labour informed of the risks and benefits if they wanted bipartisanship.

The bipartisanship appears to be cracking.

"I think that Labour has been caught out saying one thing out of one side of their mouth, trying to look sensible in a business and economic audience, and then saying another thing out the other side of the mouth to appeal to people's deepest fears about the motivations of government," Willis said.

"And actually, you can't run policy that way. You have to be consistent."

'It's the same position'

But Edmonds does not believe she has been saying two different things.

Instead, she says it has been communicated in different ways to different groups, in that foreign investors may not have understood the "nuance" of the New Zealand systems and processes.

"It's the position we've held historically. You look right back to some of the previous infrastructure documents, it's the same position. It's the same position that I communicated in early February of last year, which is on public record.

"So, we haven't changed our position, but also people haven't asked us some of those more specific questions, so we're responding to the questions that are asked, and also the different communication platforms that we have to communicate our message to."

She says the private sector will always be needed to build, and believes the confusion has stemmed from a misunderstanding Labour was ruling out private construction completely.

"We've always contracted with the private sector since the Ministry of Works closed. It's the funding side where we do not agree. We believe that should be something that the government funds, and because there are different value sets when it comes to those assets, because we don't believe you should be making a profit off schools, and hospitals, and prisons."

Edmonds said the feedback from investors had been good, though they had come up to her to seek certainty.

"When I made those comments, they were certain, 'OK so it just doesn't apply to these assets.' And then in private conversations, they're like 'are you sure you don't? You know, we can build with models overseas where we build and you operate it' but I said 'no, it doesn't align with our values. It's a no for the financing side of it.'"

Other funding and financing tools

Since the introduction of PPPs in 2009, eight have been delivered: two roads, three prisons, and three 'rounds' of schools (eleven schools in total).

Labour did not procure any during its time in government from 2017 to 2023, but managed those started by the previous government, such as Transmission Gully.

It has often criticised the experience of managing those PPPs while in government (though it did set up an expansion programme in 2021-22 to deal with school roll growth).

While Edmonds is open to them on things like transport projects, she does not believe they are the solution for everything.

In the cases of Roads of National Significance, where they will likely end up being tolled, Edmonds said there needed to be an alternative free route.

While a lot of attention at the summit had been on PPPs, Edmonds said there were other funding and financing tools available, such as infrastructure, government, or green bonds and equities.

She also touted the benefits of an alliance model (such as that used to build the Waterview Tunnel) as a financing option, in which risks and rewards are equally shared by all parties.

Willis agreed that alliances could make sense for some projects, and the government was also leaving the door open for unsolicited proposals from would-be investors.

"We're not going to rush anything here. Our test is what is the public value we are creating, and how do we get the best deal for Kiwis?" she said.

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