1. JOHN KEY (Leader of the Opposition) Link to this
to the Minister of Finance
What is the full and final cost of the Government’s purchase of Toll NZ Ltd’s rail and ferry business?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
The total purchase price, including transitional arrangements, is $690 million, as appropriated in Budget 2008. As is usual, the purchase of a company involves taking over existing debt, which in this case will be around $140 million. This includes an additional $18 million debt that has enabled the Government to obtain full ownership of all the buildings and to charge land and building rents at market rates from day one, and to move to commercial rates for freight forwarding.
What is the Government’s best estimate of the cost of purchasing or upgrading rolling stock that taxpayers will now have to fund?
Hon Dr MICHAEL CULLEN Link to this
As I indicated this morning, a steady-state case—in other words, no improvement in business—would involve roughly $80 million over the next 5 years. I will be taking a paper to Cabinet in a few weeks’ time, probably at the end of this month, with a longer-term, more aggressive investment programme. Of course, Toll was looking for some form of subsidisation of any investment that it might undertake into rolling stock in any case, had it retained ownership. It needs to be remembered that the youngest locomotives in the fleet are already something like 20-odd years old.
Hon Mark GoscheHon Dr MICHAEL CULLEN Link to this
It is clear that most New Zealanders have responded with enthusiasm to the buy-back of the rail system. They know it is a vital system in terms of our future and that only Government ownership will guarantee the investment we need. Some have mocked this as misplaced nostalgia for the glory days of rail. With oil at US$140 a barrel, I thought perhaps even Mr Key had caught up with the fact that life has changed.
Rt Hon Winston Peters Link to this
Can the Minister confirm that such a buy-back would have been obviated had National not, on 20 July 1993, sold New Zealand Rail not for $400 million but $328 million, and given that it carried a $30 million debt; that National was the recipient of a promise of $200 million of capital development by the buyers—Fay Richwhite and Wisconsin Central Transportation—that did not happen, and that ended up, after recapitalisation, driving the shareholdership down from $9 - plus to, at its lowest, 28c; and is this a case of gall or amnesia, or both, that such a question could be asked by National today?
Hon Dr MICHAEL CULLEN Link to this
To be fair, I think Mr Key was on his overseas experience at that particular point in time, but in fact it is worth noting that this morning the Rt Hon Jim Bolger, the new chair of KiwiRail, did state very clearly in his speech there had been gross under-investment in rail over recent years by the private owners and there was a need to catch up in that regard.
If the Minister of Finance thinks the National Government is to blame and got the decision wrong and lacked the business acumen when it sold the rail in 1993, why has it reappointed the person who was Prime Minister at that time to run the new rail service?
Hon Dr MICHAEL CULLEN Link to this
Some of us are capable of learning from our mistakes. The member makes his so quickly in response to questions, as he did this morning with the media, he has not time to learn from them.
Rt Hon Winston Peters Link to this
Can the Minister confirm that in 1993 the Booz Allen report stated that the railways were in that year making a profit of $36 million; that the rail was forecast in 1994, 1 year later, to make $100 million profit, at which point National sold it off to its mates—National did not go to the market, just directly to its mates on that fateful day, 20 July—
Rt Hon Winston Peters Link to this
It is daylight robbery. It is dreadful. It is awful, and that member is the kind of sucker who goes for it.
Madam SPEAKERRt Hon Winston Peters Link to this
That being the case, can the Minister please describe to this House why on earth he would put in charge someone who made that sale—namely, Jim Bolger—for the same reason that Labour put him in charge of Kiwibank, even though he sold the New Zealand bank, the BNZ?
Hon Dr MICHAEL CULLEN Link to this
What I can say is the Rt Hon Jim Bolger has proved to be a very successful chairman of State-owned enterprise boards, and New Zealand Post and Kiwibank have been highly successful. I have every confidence he will achieve the same success for KiwiRail.
What is the Government’s best estimate of the cost of upgrading the national rail network over the next 5 years?
Hon Dr MICHAEL CULLEN Link to this
I do not have that figure in front of me. I know that ONTRACK has put out a figure of a $460 million investment over the coming period of years. That investment, of course, would be required whether or not the Government bought the rolling stock operation.
Rt Hon Winston Peters Link to this
Can the Minister give us any reports that he may have received as to the costs to New Zealand of having sold New Zealand Rail back in July 1993 not in an open market or by any tenderer situation but exclusively to the then National Government’s mates, in this case Fay Richwhite; and could he quantify what we may have lost as a consequence of that, given that within 3 weeks the sharemarket showed an uplift of $188 million when the world markets heard about the value of New Zealand Rail after the buy-out?
Hon Dr MICHAEL CULLEN Link to this
I do not have reports that enable me to quantify those numbers, but clearly New Zealand Rail was sold for far less than its value at the time. Equally clearly what was demonstrated by the success of New Zealand Rail previously, and its subsequent history, is that State-owned enterprises are perfectly capable of being run as successful, commercial enterprises. Private sector businesses in the infrastructure area do not always invest sufficiently in that infrastructure.
Can Dr Cullen confirm that the reason the trains were painted red is so that they can be a constant reminder to the taxpayers of New Zealand that that is the colour of the ink that will be flowing through the books, post this purchase?
Hon Dr MICHAEL CULLEN Link to this
If the member is so opposed, why does he not come straight out and say that if National is elected it will sell KiwiRail? I ask John to say—to have the courage, to get the bottle, and to come out with it—that he is opposed to State ownership of the rail system.
Hon Jim AndertonHas the Minister received any reports about parties in this House that predicted the failure of Kiwibank and how much money it would lose for the people of New Zealand; and is there any report at the moment on parties in this House that are saying similar things about the New Zealand rail, and what is the likelihood that they are right on this?
Hon Dr MICHAEL CULLEN Link to this
We were assured by Mr Key and his associates that Kiwibank would be a failure; it has succeeded. We were assured that KiwiSaver would be a dud; it has succeeded enormously well. National members are telling us that KiwiRail will be a failure, and I am sure that within at least 3 months Mr Key will be claiming full credit for the success of the takeover.
Does the Minister of Finance accept that the Government has paid far too much for the assets of KiwiRail, and in fact the happiest people today are not the taxpayers of New Zealand but the shareholders of Toll Holdings?
Hon Dr MICHAEL CULLEN Link to this
Toll certainly needs to cash up—there is no question about that particular fact of life; there is no question the Government has paid a premium price. But the alternative is continuing to subsidise a foreign-owned company failing to invest sufficiently in basic infrastructure, increased expenditure required on roading, increased accidents on the roads, and increased greenhouse gas emissions at a direct cost to the taxpayer. Which part of all of that does Mr Key not understand in his desperate desire to ensure that his mates in Merrill Lynch and elsewhere can make millions out of privatisation?
Rodney HideIf it is correct that rail was sold, according to Mr Peters, for $328 million, and it was then run into the ground with no investment, how on earth has the taxpayer been hit with a $690 million cost to buy it back, plus $140 million in debt; or did this Minister get suckered?
Hon Dr MICHAEL CULLEN Link to this
Having made the most profitable purchase, according to the accountants of New Zealand history, in one area, certainly not. We bought the track for $1 and it is now valued at $10.5 billion.