Underestimating public transport boost would be a 'nice problem' - Hipkins

Chris Hipkins.

Photo: Marika Khabazi / RNZ / Yiting Lin

Chris Hipkins has rejected a suggestion the Labour Party has blown its first election-year policy announcement.

He is standing by the estimated added cost of its public transport fare cap, saying the increased revenue from increased use will offset it.

It comes after two economists identified several apparent errors in Labour's working, showing the party appeared to underestimate the cost.

The opposition party last week estimated a net cost of $65 million a year for its promise to cap fares at $20 a week in Auckland, Wellington and Christchurch and $10 everywhere else.

But economists Sam Warburton and Brad Olsen say a more realistic figure would be somewhere between $91m and $112m.

Speaking to Morning Report, Hipkins said the economists made a "different set of assumptions" to Labour.

Hipkins acknowledged Labour started with a similar figure as the economists during their calculations, "but then we allowed for the additional revenue that comes from increased patronage".

"Even though we're capping fares, more people on buses means that they're paying up to the cap."

Hipkins was challenged on the calculations being based on old patronage and fare figures, and not accounting for the fuel excise tax.

Warburton told RNZ a "clean and reasonable" approach would be to disregard the increase in revenue altogether, assuming that it would be counterbalanced by the drop in fuel excise and RUCs and by the cost of providing additional services.

Hipkins responded by saying the economists had not accounted for the fuel excise changes either.

"Ayone who wants to pull out a crystal ball and try and predict what the price of fuel is going to be a year from no, good luck to them.

"If the economists are saying that they think this policy is going to be even more successful than we've costed it on, then that will be a nice problem to have."

Olsen and Warburton had suggested the miscalculations were not major, but unhelpful to the cause of the discussion.

Asked if the party had blown the launch of the policy, Hipkins said: "No, absolutely not."

"The difference between us and the economists is they don't think you should account for any additional revenue from it.

"We think they should count the additional revenue - more people on buses [and] trains means more people paying up to the cap."

Economist Brad Olsen.

Photo: LDR

Hipkins also acknowledged the extra revenue gained would not go directly to the government - it would go to councils - but maintained it was "absolutely legitimate" to count that money, "otherwise councils would gain a windfall gain".

He said the government would have to pay money to councils as part of the policy, but insisted the government would negotiate exactly how much that would be.

"You can calculate the extra revenue that the councils will get as a result of the policy, and your determination as a government as to how much you're willing to pay the councils."

National's attack

Hipkins was also asked about National finance spokesperson Nicola Willis claiming Labour was $18.2 billion short on funding for its policies.

At a press conference on Sunday, Willis challenged Hipkins and Labour finance spokesperson Barbara Edmonds to explain its spending plans and how it would pay for them.

Hipkins rejected the suggestion of a hole - "absolutely not" - saying Labour had not released its fiscal plan yet.

"Nicola Willis can't get her story straight. On the one hand, she says that Labor hasn't got any policy, and then on the other hand, she says that Labour's going to bring the world to an end."

One of the key questions from Willis had been about reinstating pay equity, which Treasury estimated at $10.9b over four years.

Hipkins said Labour had been very clear it did not think the government's cuts to pay equity were "fair or justified, and that we will reverse those law changes".

He would not say how Labour would pay for it.

"We have different choices to this government. Every Budget is about different choices."

Nicola Willis.

Photo: RNZ / Louis Dunham

Asked if Labour should have "filled the gap" prior to the Budget and explained its policies and costings, rather than allowing its opponents to set the narrative, Hipkins said National had not released its fiscal plan until "literally weeks before the last election".

"I don't think Nicola Willis is on any position to climb on a high horse about this."

Hipkins said his party had released the costing information it relied on for its public transport policy, and had now explained how Labour had gotten different numbers to the ones the economists had produced.

"Ultimately it doesn't matter how well-costed Labor's policies are going to be. Nicola Willis is still going to try and claim that numbers don't add up, because frankly, that's all she's got left.

"She can't exactly campaign on her own track record, can she?"

He said the government was transferring costs every day onto households and "every household in the country is paying the price of Nicola Willis's lack of action".

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