Making the Provincial Growth Fund a risk worth taking

By Julian Wood February 26, 2019

The Provincial Growth Fund (PGF) represents a once in a generation opportunity to support a sustainable future for New Zealand’s regions—if done right. At the moment, our research shows that the Government is taking a big risk, and not doing what’s needed to ensure they’re doing it responsibly.

The cold hard fact is that every dollar spent on the Provincial Growth Fund is a dollar we can’t use for other areas of government expenditure, like health, education, and policing. The stakes are high. If we don’t spend that $3B well, the opportunity cost of spending on the PGF means the wastage doubles to a $6B loss to our society.

This isn’t an argument for stopping the PGF spend. The stakes for the regions are even higher. Doing nothing will increasingly mean that places outside and further away from our big cities will feel the effects of crumbling infrastructure, ageing populations, and the exodus of jobs and young people to the cites. In order to make sure the PGF isn’t an opportunity lost, our research suggest several ways that the Government needs to rethink their approach to spending $3B in the regions.

It is critical that the focus of the PGF moves past an obsession with growth

The first big area of concern is the potential for the Fund to be used for political wins, or to put it another way, we need to minimise the possibility for the fund to be used as a short-term slush fund. In an ideal world, the whole PGF spend should be decoupled from the three year election cycle and spending decisions made according to clear, explicit, and ranked goals and rules. Most importantly, money should only be given to new initiatives and innovations in the regions. Alongside this, all funding needs an expiration date to make sure we’re not creating dependencies on government funds.

In addition, it is critical that the focus of the PGF moves past an obsession with growth. Not all of our towns and regions will grow over the next generation, but every place needs an opportunity to improve for the communities who live there. Just as we assist our cities to grow and overcome the issues of growth, the PGF is a perfect opportunity to enable places to become smaller, better, and healthier. This need to transition is neither easy nor costless but has the capacity to make a place a far better place to live for those in the community. Let’s back our communities to transition to a sustainable future for the people who call those places home.

The evidence is clear: spending money to fund regional projects and growth is risky, but if done well it can pay off. With some significant improvements the PGF can bring about lasting, sustainable, positive change for communities in our regions. Failure to adjust however is likely to mean that the opportunity cost of the PGF is compounded by the PGF being an opportunity lost for our regions.

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