3. AMY ADAMS (National—Selwyn) Link to this
to the Minister of Finance
What reports has the Government received on the returns on major capital expenditure?
Hon BILL ENGLISH (Minister of Finance) Link to this
On 1 July 2008 the previous Government acquired KiwiRail Holdings for $690 million. Since then, taxpayers have provided further financial support of $322 million. Yesterday’s financial statements show a current valuation, made by PricewaterhouseCoopers, of $349 million or barely half of the acquisition cost. Taxpayers have thus lost at least $300 million, with no chance of recovering that loss.
There will certainly be ongoing financial issues relating to Government capital expenditure on KiwiRail. We expect it will take several years to sort out that mess. That matter comes on top of a track record of capital cost blowouts, such as the prison building programme where costs escalated by over 30 percent, and the new Supreme Court that started out as a $19 million project and ended up costing $83 million.
The economic outlook has changed considerably and the Government will need to ensure that every dollar of capital is spent effectively. One step we have taken is to establish the National Infrastructure Unit to oversee major capital expenditure. The unit will ensure that New Zealand’s long-term infrastructure needs are well understood, that major projects are subject to proper economic appraisal, and that the Government improves its procurement practices across the board.