Infrastructure Minister Chris Bishop and Health Minister Shane Reti have pushed pause on the current plan for a new Dunedin Hospital, saying the project has gone over budget.

They said the Government is getting advice on two options for delivering the new hospital from within the existing $1.88 billion set aside for it. The project’s cost has escalated to an estimated $3b.

Bishop and Reti said that upgrades to other hospitals would be put at risk if the cost blow-outs at Dunedin were not addressed.

“The project had approved funding of $1.59b under the previous government. In March this year, Cabinet agreed to authorise a further $290m in capital funding due to cost pressures. The current appropriation is therefore $1.88b,” Bishop said.

“We now know that the New Dunedin Hospital, as currently designed, can’t be delivered within that appropriation. In fact, despite the project’s original 2017 cost estimates of $1.2b-$1.4b, it’s now possible it could approach $3b, which would make it one of the most expensive hospitals ever built in the southern hemisphere,” he said.

Bishop said earlier this year that Cabinet commissioned an investigation by Robert Rust, former chief executive of Health Infrastructure New South Wales, into the project.

Today, the Government released that report. It concluded the project is “not achievable within the budget” and said that business cases needed to be done for “associated programme workstreams”. Bishop said that proper business cases had not been done on hundreds of millions of dollars of the project.

The report recommended refreshing the Project Steering Group that governs the hospital rebuild, suggesting the Government look for appropriate expertise in both construction and future operation of the hospital”.

“There should be an independent Chair and an appropriate Senior Responsible Owner in Health New Zealand,” he said.

Bishop warned funding the blowout could come at the expense of other regions.

“This cost simply cannot be justified when hospitals around New Zealand are crying out for maintenance, upgrades and new facilities. Dr Reti and I are concerned that badly needed infrastructure upgrades to Whangārei, Nelson, Hawke’s Bay, Palmerston North and Tauranga hospitals may be put at risk if New Dunedin continues to go so far over budget,” Bishop said.

The local MP, Labour’s Rachael Brooking, said it was “outrageous to pit Dunedin against other parts of the country when it is this Government making choices to give more tax breaks to landlords [instead of paying for the hospital], that is their choice”.

She noted that Labour had begun paring back the project in Government by planning to build parts of the hospital that would not enter service on day one – decisions that were attacked by National at the time.

Labour’s Health Infrastructure Spokesperson Tracey McLellan said the new plan was a “sterling disappointment”.

“The project, which Labour began and funded, has been downgraded despite silver-tongued promises National made to get into Government.

“Labour’s fully costed project had the budget allocated to pay for it, was bigger, and had additional capacity for mental health and MRI facilities. National are potentially content with simply giving the old building a makeover,” McLellan said.

Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.