Ele Ludemann: No one’s saving, all paying

Around 35,000 people marched in Dunedin on Saturday to protest the government’s announcement on the new hospital.

I wonder if any of them listened to Nicola Willis explaining the background in the urgent debate on the issue last week:

Hon NICOLA WILLIS (Minister of Finance): Members across this House agree that the people of Dunedin and its surrounding regions deserve and need a modern, fit for purpose set of hospital facilities. Now, that commitment to the people of Dunedin was first made in 2017, and when that commitment was made, the people of Dunedin had a right to expect that by now that hospital would have been delivered. In fact, in 2018—December of 2018—the Government of the time announced that the hospital would be built in two stages, with the outpatient and day surgery building fast tracked and the larger inpatient building due to be finished either five or six years after that.

But as we stand here today, in Dunedin, on the ill-chosen site for the Dunedin Hospital, there is steel in the ground but not enough progress. And we as an incoming Government have been faced with a significant set of challenges. Because the reality of Opposition is that you observe projects from the outside and you remain hopeful that the Government of the day has things under control. But what we found on assuming office was that the Dunedin Hospital project was anything but in control. In fact, one of the first major capital budget decisions we had to make for the health sector was to put aside an additional $300 million for the Dunedin Hospital. So I would ask members opposite to desist from the false claim that we have reduced funding for this project. In fact, one of our most significant decisions was to immediately increase funding for this project in recognition of the fact that the costs have blown out so significantly that it would be impossible to deliver it without that extra funding.

What we found was a project that has in fact been plagued with problems since, I think, the most ill-fated decision, which was made in 2018. And that was in May when the Government of the day announced that the new hospital would be built on the old Cadbury chocolate factory site and parts of the surrounding blocks. Now, I know that that decision at the time seemed magical, because, for the people of Dunedin, the sadness of seeing that site unoccupied would be met with a new hospital. But, actually, not much work was done to assess whether that was a good site for the new hospital, and what was found, and I reference here the advice we have received from experts, was that the extraordinary cost premiums associated with the land purchase, together with the demolition costs, contaminated ground, piling difficulty, flood-level risk, and an extremely constrained construction site flanked on three sides by State highways made it an extremely unattractive project for contractors and suppliers, which further drove up construction costs. And these numbers I find compelling, so I wish to share them with the House. Since the 2017 business case, the cost per square meter to build the hospital has tripled, from $10,000 per square meter to $30,000 per square meter.

So it is not our job in Government or my job today to lament where those poor decisions have led us. It is our job to get on and deliver a hospital for the people of Dunedin. And we have set about doing that in the most responsible manner in which we can. So, today, you have seen the Minister of Health and the Minister for Infrastructure go to Dunedin to be upfront with the people there about the choices that we face. We have released the Rust report, which has objectively analysed whether or not the Dunedin Hospital project can be delivered within budget. What that report makes clear is that even with the additional $300 million that this Government is committed to adding to the existing appropriation for this project, even with that, the project is highly unlikely to be delivered in budget.

So we do have a choice at that juncture. The choice that we have is that we can, on the one hand, carry on lifelessly ignorant to that fact, or we can take steps to get it back on track. We have chosen the latter course, and what we have presented are two options that we are considering in good faith and that we wish to know from the people of Dunedin that they know we are considering these two options. The first option is to revise the project specification in scope and within the existing structural envelope, and the second option is a staged development on the old hospital site, including a new clinical services building and refurbishing the existing ward tower.

Now, I have absolute clarity from members opposite that they think that there is no amount of money that would be too much for Dunedin Hospital. I put to you that that just can’t be the case, because, actually, when we make choices about the way we spend New Zealanders’ money, there are always opportunity costs and trade-offs. And the advice that we have received tells us that this project is on course to blow out millions and millions of dollars more. Now, those are millions of dollars that we wish to invest in health infrastructure. Mark my words, we will be investing more every year in health infrastructure across this country, because despite their rhetoric, the last Government wasn’t very good at getting new hospital buildings built. It wasn’t very good at actually redeveloping facilities or using money for good effect in the health system.

So what we are going to do is have to do work across our hospital system: in Whangārei, in Nelson, in Tauranga, in Invercargill, where there are suboptimal facilities, where upgrades are required. So the choice that we have to confront is whether it is, in that context, appropriate to let this project continue down its sad, sad path of cost blowout after cost blowout after cost blowout. And the choice that we have made is to be pragmatic and upfront with New Zealanders. That it’s time, actually, for us to take some sensible steps to control those costs.

I’m going to be very interested to see whether Ayesha Verrall will stand up and tell us that she is proud of the decision making that occurred over the past six years in relation to this project. Because what we have found is a pattern of actually completely inadequate planning occurring and a reluctance to confront emerging problems. What we have seen is that the last Government knew this project was going wildly off course and chose not to take steps to bring it back on track. It actively chose not to do that and instead, I believe, ultimately was pulling the wool over the eyes of both the people of Dunedin, but actually us as an Opposition, because we were not in a position to know how badly things were actually going in this project until we assumed office and were given the ability to look at all of the information about it.

One of the facts that has surprised me about it, which I can barely believe, is that the actual business case for the project was still being developed while the project was being built—I’d love to hear members opposite explain to me how that is good practice; that despite the years that had been spent on the project, there was still no clear plan for the pathology lab, no plan for the refurbishment of the existing facilities, no plan for the car parking. And all of that was estimated to cost hundreds of millions more but hadn’t been included in the overall plans.

What we see is a haphazardness. And I’ll tell you something that happens when you do that, which is that those who are building the project and are involved in the project, see you coming. They see you coming. They say this is a Government that can’t even put together a business case. It can’t even be clear about the time lines for this project or what its budget parameters are. So it gives them complete ability to continue down a path of excessive costs. It’s time, actually, that we were realistic, that we were clear that every project, no matter how important, still must face some budget constraints.

I want to finish these remarks by saying this: delivering people really good health facilities so that our nurses and doctors and health workers can operate in modern facilities that allow them to effectively and efficiently deliver services is an important challenge for New Zealand. Dunedin deserves good facilities, other parts of the country too. We will invest more money in this, but we’ll also deliver plans and budgets that work.

It would be surprising if many of those marching understand this, even if they do, they probably don’t care. They just want the hospital they were promised.

The promise was based on too little information, and Labour’s bad decisions – which include sacking the people who were already well through the planning process when they gained power in 2017, and choosing an unsuitable site.

It’s a mess of Labour’s making which this government has to deal with and for which we all – the people of the south who need the new hospital, and the rest of the tax paying country – will have to pay.

Saturday’s marchers carried banners and signs saying They Save We Pay but no-one will be saving and we’ll all be paying.

Ele Ludemann is a North Otago farmer and journalist, who blogs HERE - where this article was sourced.