Top Shows

Contact ONE News

True cost of a public rail system

Published: 6:08PM Tuesday July 01, 2008 Source: ONE News/Newstalk ZB

Trains and ferries are officially owned by the public again, but questions are being raised about how much the deal will end up costing taxpayers.
KiwiRail was officially launched on Tuesday morning at the Wellington Railway Station. The government says having the rail back in public ownership will help achieve sustainability goals and work for the interests of New Zealand businesses and communities.

"With our rail system back in public ownership, we can make the strategic decisions and investments necessary for rail to play its full part in building a more sustainable New Zealand. Over time, we will be able to move more and more freight off our roads and onto rail. Rail will also play a bigger role in public transport in our major centres," Prime Minister Helen Clark says.

In the buy back the government gets 180 trains, 4,200 wagons, one ferry and a lease on two others. They also take on 2,300 staff. The final bill from Toll is likely to be more than a $1 billion when improvements to the track and the rolling stock are taken into account.

Major investment is required.

The newest of the trains in the fleet is about 30 years old and about half of New Zealand's 1800 rail bridges are nearing the end of their 100 year life span. Replacing the bridges alone could cost $500 million, so the total cost of getting rail back on track over the next few years will be about $1.5 billion.

In May the government announced it was buying back the rail network from Australian company Toll Holdings for $690 million. The exact make up of the company is yet to be determined but it will be run by a board, chaired by former National Prime Minister Jim Bolger.

Following the announcement in May the National Party said the government should have sorted out its issues with Toll Holdings, rather than buying the company's assets.

On Tuesday National was again slamming the decision to buy back the asset. Party leader John Key says the government has paid too much for the rail asset.

"The reason that the trains were painted red is so that they can be a constant reminder to the taxpayers of New Zealand that's the colour of the ink that will be flowing through the books post this purchase," Key says.

But he says a National-led government will keep the rail operation and make the best of the deal.

Key also wonders why the man who privatised the railways in 1993 has now been put in charge of the new operation.

Bolger was Prime Minister when the National government sold the rail network.

"My life is full of ironies - I mean we've been around this track before haven't we with Kiwi Bank," Bolger told reporters.

But he does agree the rail system should have been bought back. He says the government has decided that the best way to utilise the taxpayers' dollar is to own the enterprise and he agrees with that.

The trains were originally sold off under National 15 years ago for around $400 million and the rail network was privatised. Labour bought back the tracks in 2004 for just $1 and has been looking at buying back the rail operations since then.

And about that paint job, Finance Minister Michael Cullen says it is not red at all.

"It is an orangey colour for those of you who think there is some kind of branding exercise."

But with a price tag of around $1.5 billion there is still quite a sales job to go.