United Future
Larry Baldock

Baldock: Parliamentary speech on Tranz Rail buy-in

The deal struck by National in 1993 has, for a long time, been the subject of much concern.

If one was inclined to be kind, one could suggest that the Minister who negotiated the sale thought he was doing the right thing at the time and was getting a good return for the taxpayer.

However, hindsight over the past 10 years inclines me, along with the vast majority of New Zealanders, to conclude a rather different assumption.

The sale that can only be described as one based on mate’s rates has seen one of New Zealand’s important strategic assets privatised, pillaged, and brought to the brink of receivership.

Why the original deal did not include a Kiwi share arrangement similar to the one included in the sale of Telecom and Air New Zealand to protect the assets that are vital to New Zealand being able to compete economically in the world is a little hard to fathom.

The leasing of the rail corridor for $1 a year had to be called the deal of the century, upstaged only by the Government’s announcement last week to buy the rail network and associated infrastructure for $1.

United Future has long campaigned for the buying back of the rail corridor network in New Zealand. It should never have been given away in the first place, especially at such mate’s rates. In 1993, as a speaker said before, Tranz Rail Holdings brought New Zealand Rail for $328.3 million.

The main shareholder stripped out $220.9 million of equity in 1993, and a further $100 million in 1995, according to analyst estimates.

As I said, while United Future has always seen the importance of maintaining the strategic asset of our rail network, it has never made sense for the Government to buy it back at some cleverly contrived market value that involves millions of dollars of taxpayers’ money going into Tranz Rail’s bank, and therefore potentially into shareholders’ pockets instead of being invested in the infrastructure that has been left to run down over the past 10 years.

When the Auckland rail corridor was purchased in December 2001 for $81 million I think the New Zealand taxpayer would have seen a better return if the $81 million had instead been spent on upgrading the rail network in Auckland City.

While it is possible to share some sympathy for those New Zealand shareholders who bought into Tranz Rail at approximately $3.60 a share in February 2002, the best deal for New Zealand taxpayers and shareholders is one that makes sure that the long-term viability of our rail network is sustained.

The Government plan to buy into Tranz Rail offers the opportunity for the taxpayers to benefit from an increase in the share value of the company in the future, rather than the taxpayer helping a company improve its balance sheet so that only others can benefit from speculative investment.

I am not sure whether I heard the Leader of the Opposition speaker correctly when he said in his speech earlier, but I think I heard him say that his party would support subsidies for a private company. That has to be a turn round for the books.

The party whose mantra was that the Government should stay out of business has now suggested taxpayer subsidies to businesses. Rail has to be retained and maximised in this country in order to play its part in the overall transport strategy for both passenger and freight movement.

Certain freight is best transported by rail, and its potential needs to be further expanded, but only after careful investigation and critical economic analysis.

Some concerns have been reported with regard to the monopoly Tranz Rail will have over freight services and the desire by some to see more than one operator delivering freight services on the network.

While competition can of value, it is important that it is not allowed at the risk of compromising any safety standards. Most of the New Zealand rail network is a single track, and, unfortunately, like our State highway system, there are far too few passing lanes.

It may take a number of years of investment in the network before multiple users can be practically envisaged.

It is important at this time in Tranz Rail’s rather difficult history is that the current freight services are maintained and improved, and community passenger services enable to improve efficiency and services.

With regard to Tranz Rail’s exclusive use for freight, we trust that in the “use it or lose it” clauses that there will be sufficient teeth to give a clear signal that Tranz Rail must provide an efficient and cost-effective service for its freight customers.

United Future gives its support for the proposed deal for the reasons I have outlined, but I wish to conclude that we want to make it clear that our support should not be in any way interpreted to indicate that we believe, as I think the Green party does, that rail can be seen to solve our transport infrastructure problems on its own, and therefore replace our need for an efficient and safe national highway system.

We must be realistic. In today’s environment of cheap air travel and the limitations of our population size, the idea that New Zealanders will patronise passenger rail services between cities in droves, or at least in sufficient numbers to guarantee the commercial viability of these services, is overly optimistic at best, and down right stupid at worst.

There may be some opportunities where tourism routes are viable, but these will need close analysis.

Most New Zealanders would prefer a safe dual highway that they can drive upon and thus enjoy the individual freedom they have come to expect.

After having stepped in to retain this important strategic asset, United Future calls on the Government to now give priority both in legislation and in Budget allocation, to upgrade and to develop our national highway infrastructure.

It is now clear that the Government can find millions of dollars when it needs to address an emergency or a crisis of some sort.

We urge that the Government acknowledge that our current road transport infrastructure is already in crisis, and it desperately needs the attention not only of the legislation for alternative funding methods as offered in the Land Transport Management Bill currently before the select committee, but also the urgent investment of revenue raised from petrol excise tax and road-user charges on the State highway system of this country. We need our rail system to play its part.

The Government’s announcement and action will help to ensure that outcome.

New Zealanders now await a similar response towards the congested and unsafe sections of our highways so that the Government can no longer waste business revenue and taxpayer money by not showing the same courage and determination to fix that problem, as well.