Rail buy-back condemned as 'reckless'

National won't sell Toll's rail and ferry business if it wins the election but says the buy-back decision is reckless given pressures households are facing.

National think the purchase will end up costing many hundreds of millions more once rolling stock costs were added to the $665m purchase price.

However, one of the country's biggest rail customers MainFreight has welcomed the announcement and pledged to up its own investment if services improve.

Finance Minister Michael Cullen this morning said the Government had bought back the rail and ferry business for $665 million.

The Crown has been in negotiations with Toll over a buyback for several months.

It comes against a backdrop of wrangling over Toll's access agreement to the rail tracks, which are already owned by the Crown, with the Government saying it has been failing to pay its fair share.

MainFreight chief executive Don Braid said the sale would give some certainty.

"There has been a problem with the debate and aggravation between Ontrack and Toll over access fees and I guess the seas were somewhat clouded as to how much infrastructure was being invested in by Toll," he told NZPA.

"Certainly we've seen a deterioration in services over the last couple of years as there's a lack of investment in infrastructure in New Zealand and this announcement may well see that infrastructure being improved which would be good for all of us."

Mr Braid said the company had a "substantial spend" with rail in the country and would boost its investment if services improved.

He would not say by how much; "You'll see it's a substantial amount".

The National Party opposed the purchase but recently announced it would sell no state assets. Previously deputy leader Bill English said it would consider selling it but that has been ruled out.

The Government renationalised the rail infrastructure arm of rail, Ontrack, in 2003.

Progressive Party leader Jim Anderton and NZ First deputy leader Peter Brown welcomed the decision with both parties saying rail should never have been sold.

"The asset sales of the eighties and nineties were mostly a disaster for New Zealand and the conga line of apologists for asset sales should now be apologising for getting so much so wrong," Mr Anderton said.

He believed public ownership meant rail would be improved and made successful.

Mr Brown said the move was in New Zealand's best interests.

"The return of this business to the rightful owners – the taxpayers – will result in improved service, innovation and strong investment in a vital part of the country's infrastructure."

Richard Prebble, a former Labour Cabinet Minister before moving on to lead the ACT Party, was a key player in the decision to sell off rail. He said the purchase would be far more expensive than people realised.

"It's going to be the most expensive purchase that the taxpayer's ever had to fund," he said.

"We've got 100 years experience that the Government cannot run a railway."

Mr Prebble said when he was Transport Minister in 1984 rail was losing about $1m a day. He estimated that would be about $3m in today's dollars.

He said Labour botched buying Ontrack – "Labour should have said to the private shareholders `you bought it, you fix it'."

It went ahead with the purchase without first getting an agreement on sharing costs with the rail operator.

"Their solution to that is to say `we'll buy the rail operator as well'."

There were questions about whether track and operations would stay separate and other companies be allowed to run trains; whether operations would be tendered or run by civil servants.

He suspected the Government would regulate to force the wider transport industry to subsidise rail.

Mr Prebble said it was a myth to say rail was environmentally friendly if the production of rail, locomotives and the need for trucks to take goods to destination were counted.

Road Transport Forum chief executive Tony Friedlander said it was too early to comment on the impact of the announcement but was pleased Toll's rail and road operations would now be separate.

"The Government's decision to buy back Toll's rail and ferry business offers an opportunity for the road transport industry to work with the new operators of the rail network to handle the freight task which is expected to double by 2020," he said.

"But we need more details about the agreement and how the business will be run in future before making any more comment."

 - NZPA