Government finally debunks Auckland funding myth

People in many parts of the country love to make claims that Auckland sucks up the majority of government spending to the detriment of their own regions. It is false and probably always has been but in the past details have been hard to come by to say with certainty.

Yesterday the government released information indicating how much money they spent in region for the first time. Personally I think this is a really positive step and something that should have happened a long time ago (this applies to previous governments too). I imagine the key reason why it hasn’t happened before is that it can be incredibly difficult to work out where some spending is actually going. For example many government departments are based in Wellington and so the spending happens there even though the outputs from that department will likely have impacts elsewhere. For this reason the authors of the report have come up with two ways of measuring government spending. The first known as the Expenditure Approach assigns expenditure to a region according to where money is spent. The second approach known as the Service Approach assigns expenditure according to the region for which a service is provided and therefore addresses one of the key issues with the first approach. Both are to measure though.

Steven Joyce is quite happy and claims it shows that money is spent evenly across the nation and by and large that is true, perhaps except for Auckland. Here is the high level break down of the results. Spending in this table includes both CAPEX and OPEX however other tables break those figures out separately and by the area of spending.

The service approach is probably the fairer of the two measures and suggests that Auckland receives about 2% less funding its share of population. As a total Auckland receives the second lowest amount of overall government spending per capita and around $1,000 less per person that the national average. Due to Auckland’s size that equates to over $1.4 billion a year and while that is across the all sectors, it would certainly pay for a few key projects.

Drilling down to the different funding categories transport and communications have been grouped together although the report notes transport makes 96% of the results. The CAPEX table (bottom) shows Auckland getting a substantial amount of current spending, a trend that has been seen a over recent years after years, probably decades of underinvestment. However I was surprised to see that Auckland’s percentage of OPEX was down quite a bit. Many of the rural regions have quite high OPEX per capita which likely reflects the need to maintain a lot of roads to serve small populations.

Looking at Auckland across all sectors the authors have highlighted the areas where the region receives above the national average per capita. You can see that it is only in defence that Auckland receives more OPEX spending than the national average however as a total we do get more CAPEX spending. This reflects that while it costs more to build stuff in Auckland, it tends to be more efficient to run due to service more people. For example one school with 2,000 students will be cheaper to run per capita than 10 schools 200 students.

The report also estimates expenditure in Auckland over the last 7 years.

All up an interesting report and hopefully it is something that is repeated every year or two. In my mind it certainly debunks the myths that the rest of the nation is missing out on funding due to Auckland sucking it all up. When combined with the fact Auckland is growing at a much faster rate than the rest of the country it does raise questions as to whether the amount of funding Auckland receives is at the right level but that is a much more complex question as giving Auckland more funding also means taking it away from somewhere else.

Next time someone claims Auckland is sucking up the countries spending, you can now point them to this report.

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