Madam SPEAKERI have received a letter from John Key seeking to debate under Standing Order 380 the decision by the Government to buy Toll Holdings Ltd’s rail and ferry operations. This is a particular case of recent occurrence involving ministerial responsibility. Given the significance of the decision, I consider it does require the immediate attention of the House and I therefore accept the application. I call on the member to move that the House take note of a matter of urgent importance.
JOHN KEY (Leader of the Opposition) Link to this
I move, That the House take note of a matter of urgent public importance. [ Interruption] It sounds like election night to me. Everyone is cheering. I say to Trevor that it sounds like election night to me, but I tell him not to worry and that I hope he takes the train. On 30 June the New Zealand taxpayer will part with the better part of $1 billion to buy a train set off Toll Holdings—not that we would know it from the announcement of the Government. You see, the Government wanted people to think it was paying $665 million for a train set, but we now know that is not the fact. What we do know is that the Government is buying a train set it did not need to buy—you see, there was a highly efficient operator in place, and it was within $17 million of reaching an agreement around the National Rail Access Agreement.
It was not Michael Cullen who wanted to buy the train set, and it was not overtly Helen Clark; it was Heather Simpson who wanted to buy the train set. That is right; Heather Simpson wanted to buy the train set not because it made sense economically—she had not gone to see whether it made money—but because she had read the focus groups. It was not an economic decision or a sustainable decision; it was meant to be a political decision driven by Helen Clark. What took some time was that Michael Cullen was offended by how much more the Government was paying for Toll than he knows it is worth. That is why he spent so much time trying to be a little devious about exactly what figure the Government is paying—but we will get back to that in a moment.
The second thing is that the Government is spending $1 billion on 30 June—giving money to Toll Holdings—to solve a problem we do not have. There is no problem with the efficient operator that is there. It is certainly a laudable objective to get more freight on rail, but we do not need to own the train set to do that, in the same way that we do not to need to own every trucking company, every courier company, and every taxi out there—we can just subsidise those activities if we want to.
The third thing that is happening on 30 June is that we are spending $1 billion, and we are giving it to the Australian shareholders of Toll Holdings to put into a giant black hole that we do not know how much it will cost to fill, although we know it will be a lot. But this is the good news for New Zealand taxpayers. The message from Labour is that they should not worry, because the Australian shareholders of Toll are very happy. The shareholders are very happy. As my colleague Bill English said today, Paul Little will only ever have one Helen Clark moment, and that was it, and it was a moment of madness. We went out there and spent not one-quarter of a billion dollars of taxpayers’ money more than was required but $400 million or $500 million more, for a railway we do not know how to run, and that Michael Cullen says will never make money and Helen Clark thinks is unlikely to make money. Why on earth would someone do that?
What was the first thing that the Toll Holdings people did when they got the massive payout? The first thing they did was to go into a room and high-five each other. Paul Little is a pretty big swinger over there in Australia. Can members imagine the negotiations—Paul Little versus Michael Cullen? A bit of an easy contest was going on there, and there was only one winner. We know Michael Cullen does not like “rich pricks”; well, Paul Little is about to get a lot richer when his bonus is delivered to him in a few weeks’ time. What is more, he will get to keep more of it, because there is a tax cut in Australia’s Budget tonight.
What was the first thing that Toll Holdings did after it got its quarter of a million—
That is right—it bought a trucking company. It went out and bought a trucking company. What is interesting about the deal with Toll is that the Government has left Toll with the really valuable bits of the business. It left the company with the freight forwarding business. The Government left Toll with the valuable bits of the business and said it would inherit a business it does not know how to run, which it has no expertise to run, and in which it has never been successful. The Government knows it is a deeply complex business, and says it cannot even tell the analysts how it is all going to work or how much it will cost. It says “Don’t worry. Trust us. It will be all right.”
“Trust” is the interesting bit. We might be able to trust Labour members if they were prepared to tell us how much the purchase has cost. But were they just being dumb when they paid $400 million or $500 million over the odds, or were they being sneaky when they were not prepared to tell us how much the purchase had cost? Were they being devious when they were doing that, or were they being just downright dishonest? They were asked how much the purchase had cost, and they looked down the barrel of a camera—that was when Michael was not playing with his little train set that Paul Little gave him over the table—and said it had cost $665 million. That is not what it cost, I say to Dr Cullen.
Dr Cullen will be smiling and so will Paul Little, because this is what really will happen. For 6 years Toll gets to rent the space next to the railway depots for free—and that costs a lot of money—but that was not mentioned in the $665 million cost. Neither was it mentioned in the deal that Toll is to get a subsidy to put its freight on the railway. Nor was this little bit mentioned. There is a $200 million liability: $148 million that Toll NZ owes to Toll in Australia, which the Government picked up and for which there is no asset backing, and $40 million owing on the ferries. When the Government was caught out—because that is what happened—it ran to the same journalists it had misled on the Monday and said “ ‘Nudge nudge, wink wink’; it’s actually $100 million, not $200 million.”
So one has to ask oneself this question: why has the Government not been honest? It is a pretty fair question, is it not? The answer, as my colleague has just said, is, why break the habit of a lifetime? In the election campaign when I was arguing about why New Zealanders should get to keep $50 a week of their taxes, Michael Cullen was saying that was outrageous, unaffordable, and the worst thing that could possibly happen. Next week he will get up, in worse conditions, and announce that that is to happen. But he is also the Minister of Finance who told New Zealanders it would cost $200 million for a student loan scheme that actually costs $3 billion. He looks confused. Why does Dr Cullen not pick up the Crown accounts and look at what the fair value of a $9 billion loan book is? The answer is $6.1 billion. That is what writing off the interest on student loans costs. What happened? He did not tell us that, and he was not going to tell us until the Chief Ombudsman made him tell us. The Government was not going to tell New Zealanders what that scheme cost until somebody made it.
This is a sneaky Government, it is a very dubious Government, sometimes it is a pretty dumb Government, and it is rapidly being proposed now that it is a dishonest Government. It was asked the question about the cost of the purchase and it would not answer it. Why would the Government not answer that question? Well, there are a couple of answers. One is that maybe Government members were not bright enough to actually understand the full value of the deal, and that is entirely possible, actually. That is option 1: they were not bright enough to understand the deal. Option 2 was that it was a case of the John Tamihere theory. Michael Cullen changed just one word and everything changed. When asked how much the purchase of Toll was costing, he said “$665 million”. The bit he missed out and should have added on before that was “a bit more than”, but he did not say that. He did not want taxpayers to know that, because he is ashamed of how much they are paying for it. The purchase is not being driven out of his office; it is being driven by Helen Clark and Heather Simpson. Dr Cullen laughs, like Paul Little laughs in Australia. He laughs, like the Australian shareholders laugh all the way to the bank. They are the ones that are pretty happy.
This is quite an interesting Government, because a couple of weeks ago its members got up and said the No. 1 issue in the election campaign will be asset sales. On that basis they stopped a windfall gain to the New Zealand shareholders—29,000 mums and dads—of Auckland International Airport. Those people cannot have a windfall gain, but if one is an Australian shareholder of Toll Holdings it is a completely different issue. Those shareholders can have half a billion dollars, but the Government tells the New Zealand public it is a quarter of a billion dollars, because it does not want to tell them how much the deal is worth. Government members are the same people who said that the No. 1 election issue would be asset sales, but, by the way, they are happy to sign off for the Chinese to buy Vector. The Government bought Toll Holdings not because it was a good deal, not because freight cannot be carried using the existing operator, not because it knew how to run the business, not because the business was worth that, not because the Government ever believed it would make money, and not because the purchase is part of the Government’s transport strategy in 2007; the Government bought Toll because it wanted to make life difficult for the National Party. That is the only reason it bought Toll, and that ain’t a good reason to buy a railway.
Helen Clark and Michael Cullen have been telling people that by the way, when the Government owns Toll, the subsidy will go away. Do they have any idea whom the subsidy goes to? It does not go to Toll Holdings; it goes to the customers of Toll Holdings. That same subsidy will be paid to New Zealand companies to put freight on the railway.
But this is the worst-case scenario. We now have the worst of all scenarios: we own a business that we do not know how to run. We own a business that we could never sell, even if we wanted to, for the kind of money that Toll got. We could never sell it at those kinds of rates, because we paid half a billion dollars. The message for New Zealanders is that under Labour their shopping trolley is one-third more expensive, their interest rates have doubled, their fuel prices are going through the roof, and by the way, while they are at it, they have waited 9 years for a tax cut. But the priority of Michael Cullen is this. It is not mums and dads who are working hard, it is not people who are trying to make ends meet, it is not the terrified people at the meatworks today who have lost their jobs, and it is not the people whom Ruth Dyson went on the radio about and said we should not worry about them having lost their job, because actually everything is very good. Dr Cullen’s priority is not any of those people; it is pure politics. That is what matters more. What matters is not the shareholders in New Zealand; it is the shareholders of Toll Holdings.
The facts of life are that this is a Government that has no priorities.
Hon Trevor MallardOh, well, at least at Merrill Lynch we knew what we were doing. If we had advised the Government on this purchase, we would have told it that it would cost $1 billion, and we would not have told the Government to mislead the New Zealand public. What happened this week is quite clear. We now know that Labour is prepared to mislead New Zealanders. It does not care about that. It is prepared to spend millions and millions of dollars more than it needs to, and it is prepared to be reckless, because this is the bottom line: we are 5 months from an election, and that means that anything now goes. As long as it fits into the category of being political, anything goes.
Well, this is my message for the New Zealand public. National knows that they work hard for their money. We know they care about what they do. We know that they demand performance from us, and we are not going to treat them so badly that we will not only waste their money but deliberately mislead them when we do it. Michael Cullen, the man who has form, the man who has a track record to go with his train set, has misled the people of New Zealand. New Zealand taxpayers deserve—
Hon Lianne Dalziel Link to this
Don’t be so insulting—the people of New Zealand have long wanted to buy back rail.
Well, while that member is out there defending Government ownership, maybe Dr Cullen will want to answer just this one question. If taking out an efficient private sector operator was such a good thing to do, then maybe he will want to explain why, with Government ownership of ONTRACK, there are more speed restrictions on the New Zealand track than there ever have been in the history of ownership of that track. The answer is that those members sat around in a room and said “To hell with the New Zealand taxpayer. To hell with whatever we have to pay for it. It doesn’t matter if it is a dog. We think it might make money.”
Well, National cares too much about New Zealanders to do just that. Labour members cannot defend the indefensible, and even when they do people should not believe them, because last week they were caught lying and they will just do that again.
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
I raise a point of order, Madam Speaker. I am certainly not prepared to accept that last statement from that member, particularly given his track record.
The ASSISTANT SPEAKER (Hon Marian Hobbs) Link to this
Yes, he did. When he said that he was not prepared to accept that statement, I took that to be that he was asking for a withdrawal and an apology. Could the member withdraw and apologise.
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
What we learnt from that lazy Parnell wine bar ramble was a number of things. Firstly, we learnt yet again the lack of any collective memory in the National Party. That speech was almost word for word what National members said when we bought Air New Zealand. They said that it was an effective private company; it did not need to be bought. We would not know how to run it. We should not have it. And now Mr Key says that it was a sensible thing to buy Air New Zealand. We learnt, also yet again, that when the chips are really down, National members still hate New Zealand ownership of our infrastructure. They want foreign ownership of New Zealand’s infrastructure. Even more, they hate Government ownership of key strategic assets. They believe: “private sector good; public sector bad”, no matter what. But of course they lack the balls to promise to sell anything that is in Government ownership. They lack the balls to do it, even though they believe that it is totally wrong to have these things owned by the Government.
Hon Bill EnglishActually, this is a serious matter. I have never heard that expression being allowed in this House, but you sat and listened to it being used three times. I have to say that that is disappointing. If that is the standard that is going to be exercised, then the standards in Parliament will be lower than they used to be.
Hon Dr MICHAEL CULLEN Link to this
I raise a point of order, Madam Speaker. I have just listened to a speech where in sentence after sentence we were accused of misleading the public, and of misleading Parliament. I sat there and took it. I note yet again that National members whinge and moan when anybody responds to their personal attacks.
The ASSISTANT SPEAKER (Hon Marian Hobbs) Link to this
I will address the issue. There is an issue of the tone of the argument. There is an issue of that word particularly being used. I understand that it is in the hands of the House to object to certain language being used as against the tone, which is the same thing the member took exception to. So if he is objecting to that language being used—that particular word—then I suggest that it actually has to be taken up and added to the glossary of terms.
I think that any decent person in a public place would object to it, Madam Assistant Speaker, and I do.
Hon Dr MICHAEL CULLEN Link to this
I withdraw and apologise. Yet again, we are not allowed to use New Zealand English in this House, only some kind of poncy language that suits the National Party when its members are under any kind of attack.
The important point is that although they say they will not sell any State assets, they hate the State owning assets, and there is a big “h” word we are not allowed to use in Parliament that describes that particular set of political principles. It shows where they are really coming from in election year. That man, John Key, has swallowed so many dead rats he looks like a walking rodent cemetery these days, going around the country.
Every fact he gave was wrong. We are not paying a billion dollars on 30 June. When did anyone add into the purchase price of an asset its long-term investment programme? When was that a standard accounting principle to be applied in this case? Is he not aware that Toll was looking to the Government for a subsidy for exactly that investment while the track remained in private ownership? National says, and Mr Key said it quite clearly, that the Government should subsidise a private foreign owner of a New Zealand strategic asset—and he is nodding his head—then have extracted a 13 or 14 percent rate of return, effectively on the basis of that Government subsidy. That is National Party economics, and it is why the public of New Zealand does support the return of rail into New Zealand ownership. Why should the taxpayer subsidise foreign owners to make a profit and take it out of New Zealand? That is madness—
The ASSISTANT SPEAKER (Hon Marian Hobbs) Link to this
I wonder whether Mr Auchinvole would please lower his voice. I can hardly hear the speaker on his feet. Thank you. That is one warning; otherwise I shall ask him to leave.
Hon Dr MICHAEL CULLEN Link to this
The Leader of the Opposition said we were within $70 million of agreement. First of all, let me tell him we have never been able to enforce the National Rail Access Agreement. We had an agreement; it provided for arbitration. We went to arbitration and we basically won. Toll refused to accept the arbitration and, secondly, it was looking for subsidies on top of that subsidy on the track itself. It was a bottomless pit of ongoing growing subsidies going to a foreign-owned asset to extract profits from New Zealand.
Thirdly, he said we do not have a problem. Well, I suggest he gets out of that Parnell wine bar and goes to ask the potential customers of rail in New Zealand whether they are satisfied with the performance of rail in New Zealand. They are not satisfied with the performance of rail in New Zealand. They want to see—[Interruption] “Subsidise it.”, he says! So again he says to subsidise a foreign-owned company to extract profits in terms of a 13 or 14 percent rate of return out of New Zealand. He regards that as some kind of patriotism. He regards it as some form of sensible use of taxpayers’ money. I will debate with that man on any public stage in the country on the proposition that it makes more sense to subsidise foreign owners than it does to subsidise a New Zealand Government - owned asset that will be run on a commercial basis as a State-owned enterprise, with the current management taken over, and with the current staff taken over. And we will make a better job of it than did the asset strippers who ran that company from 1993 onwards.
Toll is the first operator to try to put some improvement into the rail system, but the company made it clear that it needed ongoing subsidisation from the New Zealand Government to achieve that aim. And I suggest that the member reads John Roughan’s article in Saturday’s New Zealand Herald, which explains that if we get to that point, it does not make sense any longer for that to remain within private ownership.
Mr Key mentioned Paul Little and said he was just a “rich prick”. No, he is not; he is just rich. But Mr Key does not understand the difference between those two statements, and I will leave him to try to work it out as he moves along. He says we do not know how to run these kinds of businesses. We have some of the most successful businesses in the country in State ownership. When National members are arguing that, they are arguing that we are making too much profit out of those State-owned enterprises. Yet on the other hand they say we do not know how to run a successful business within State ownership. Well, why then does the member opposite now believe that it is a good idea to buy back Air New Zealand? He now believes that it is a good idea to buy back the track, but we have to commit far more investment to the track over the next 5 years than we do to the rolling stock, in order to make an efficient railway system. We would never have been able to get back from Toll a return on that increased investment in the track. We had already promised the first $200 million on track investment with no return from Toll, at all, and we have been unable to extract a return on the subsequent investment over and above that, and would never have been able to do so. Those are the numbers that have to be put against the purchase price of Toll to make a proper comparison. But if the member believes that it is so bad, then let him promise that he will try to privatise it at the first opportunity.
We know we can create in this country an efficient, effective rail system. It will get large numbers of trucks off New Zealand’s roads. That will reduce the number of people killed on New Zealand’s roads. Every life saved on the roads is estimated now, I think, at something like $3 million. That is what it is worth—every life is worth $3 million. The rail system will reduce pollution. It will reduce greenhouse gas emissions, and every tonne reduced of greenhouse gas emissions is a reduction of the liability on the Crown’s account, because at the moment Kyoto Protocol liabilities rest with the Government. So the Government will save money in that regard while investing in a decent rail system.
This Government is proud to reverse at last the failed experiment in a privatised rail system, as we reversed the failed experiment in a privatised national airline with Air New Zealand. If the National Party wants to fight the election on this, then I want to say that this is not about you, John. It is not actually about you; it is about New Zealand, and you have got to stop living in that kind of little bubble where the whole world is about you. There is not some kind of film being made about you in that regard. This is about New Zealand’s interests, not the interests that you have been promoting for most of your working life. It is not the interests where you bet against the New Zealand dollar and short it.
I raise a point of order, Madam Speaker. Again, I think we have heard the term “you” used about a dozen or 15 times in the last 2 or 3 minutes. I would have thought you would bring some attention to it, but just because the member is a senior member of the House, it does not mean he can address you in that manner.
Hon Dr MICHAEL CULLEN Link to this
It is not about him; it is about New Zealand. It is not about the kind of person who believes that one makes a lot of money betting against New Zealand and can then come back here and believe that one is some kind of super patriot, while secretly planning in the second term of Government to sell off State assets and saying: “We will not sell any State assets in the first term in Government.” That is an interesting sort of statement to make. We know that Bill English promised that rail would be sold if the Government bought it back.
Hon Dr MICHAEL CULLEN Link to this
Oh yes, the member did say that—very, very clearly. We know that Bill English has been sat upon in this regard and told to shut up, and that he disappeared for a week after the sale of rail was announced. We know that the public supports the reacquisition of rail in New Zealand. We know that it makes sense in terms of an integrated land and sea transport plan. We know that it makes sense environmentally. We know that it makes sense in terms of safety. We know it makes sense in terms of retaining value in New Zealand. And, knowing all those things, we are not in the slightest surprised that the National Party, therefore, opposes it.
PETER BROWN (Deputy Leader—NZ First) Link to this
I will try to take some of the emotion out of the debate, but I have to say that I agree in very, very large measure with what Dr Cullen said. As transport spokesperson for New Zealand First, I have had a number of members of the public contact me about the buy-back of the rail system, and not one of them has been critical. Not one single person has said that the Government is doing the wrong thing. I cannot comment on the price; I have not seen the details of the negotiations. But $665 million strikes me as being a lot of money, particularly when it was bought by Toll for, I think, $394 million a few years back. So New Zealand First waits with interest to see the details of the agreement when they emerge. But the simple question that should be asked is whether we need an efficient railway system in this country.
David BennettWe do. Even David Bennett is acknowledging that we do. The second question that the member may be able to answer is whether Toll would deliver an efficient railway system as efficiently as this country needs. I have to say that it would not. Even over a long period of time it would not have delivered the service that this country needs when it comes to railway matters.
We have only to follow the track record thus far. Toll was closing down segments. Toll, a monopoly provider, has to service principally the interests of its shareholders. The Government, on the other hand, has the ability to service the interests of New Zealand, New Zealand business, and New Zealanders. Why the difference? Why would we expect an overseas organisation—an Australian organisation—to service the long-term interests of New Zealanders if these are in conflict with the requirements of its shareholders?
Many, many organisations have come out in favour of the railways being brought under Government ownership again. When we look back to when it was sold in the early 1990s, we see that we were promised—I think there was a TV programme promising this—that the New Zealand railway system would turn into something super duper. But what happened in fact was that it was asset-stripped, large chunks of it were sold off, and the owners and those associated with the owners became very, very wealthy. The railway owners at that time became the biggest truck owners and truck operators in this country. That must tell us that they were not putting the interests of the railway service first and foremost. They became the biggest truck operators in the country, and that is still the case with Toll. Tranz Link is the biggest trucking operation in the country, and, as we have just been told, it has just purchased United Carriers in Whangarei.
The Government now, with the ownership of the railway system, can take a total strategic overview and, if it is correctly managed, it can develop it so that it gives a huge advantage to New Zealand economically and socially. It can introduce what the British people have looked to introduce—a freight facilities grant scheme. I am told that it works exceedingly well for the British, and I will quote from a paper outlining that scheme: “Taking freight off congested roads and moving it by rail or water can have environmental and wider social benefits. However, rail and water can sometimes be more expensive than road transportation. Three schemes are available that are designed to facilitate the purchase of the environmental and social benefits that result from using rail or water transport instead of road.” I will not go into the details of the scheme, but the British introduced that scheme some years ago in an effort to take trucks off the road and transport freight on either the canals or the railway system, and there is no reason why New Zealand cannot follow that sort of line. In short, the Government can determine whether it is cheaper or more cost-effective to develop a road as against giving some incentive to freight movers, or even passenger operators, to put a train on the rail track. The freight mover does not have to be a monopoly provider. The Government could open it up to private enterprise on a chartered basis, on a lease basis, or on any basis that it is inclined to use. For example, Tranz Link could end up operating a freight train between two particular points. Many, many innovative options could be introduced with the correct management.
I note that Mainfreight, another major trucking company, has welcomed the announcement and has pledged to up its own investment if services improve.
I believe that the Hon Maurice Williamson, a former Minister, is a director of that company. I ask whether that is so.
Well, that is contrary to the information I have been given. But Mainfreight is a major player when it comes to transporting freight. It has welcomed the Government’s purchasing back the rail system, as has the coastal operator—the shipping organisation. Mr Grout, the President of the New Zealand Shipping Federation, said that control of rail freight and inter-island vessels opened the door for the Government to lock in policies for a more efficient and sustainable transport sector. [ Interruption] The member at the back of the Chamber is making a lot of noise, but he would not have a clue what needs to be done when it comes to transport in this country. He has proven that, time and time again.
New Zealand First is quite delighted that the railways are coming back under the Government’s wing. However, I have a concern. I know that a National speaker will follow me shortly, after I have taken my seat. A National member will rise and explain National’s view in perhaps more detail than Mr Key managed. Will National sell rail back to private enterprise, in due course? The statements National has made are that it will not sell it in its first term in Government. National is quite convinced its members are going to sit on the Government benches after the election. Will a National Government sell rail if it gets more than one term in office?
Hon Parekura HoromiaI am being a little hypothetical at the moment. If National ends up on the Government benches, will it sell rail if it gets a second term in office? Will National sell Air New Zealand if it gets a second term in office?
Bob ClarksonBob Clarkson came here to develop his financial interests, and he is living right up to that. He came here to develop the Clarkson empire, and he is living right up to it.
As I said a few moments ago, New Zealand First is very supportive of the Government buying rail back. We will welcome the details when Dr Cullen releases them on 30 June. We suspect that $665 million is somewhat over the top, but one would expect that sort of figure to buy rail back. Toll was in a monopoly position. It had an asset that had to be developed, and it still needs to be developed. The Government saw that the only way of developing the asset was to buy it back, so Toll had control of the negotiations and the Government agreed to $665 million. We look forward to reading the small print, but meanwhile I have to say that New Zealand First is delighted that the railway will come back into New Zealand ownership.
JEANETTE FITZSIMONS (Co-Leader—Green) Link to this
I begin by congratulating Dr Cullen and the Government on finally seeing the light at the end of the tunnel. It has taken a long time.
JEANETTE FITZSIMONS Link to this
It would be nice if the light at the end of the tunnel was a train, but these days the chances are that it is not, because there are not many of them. The reason we need to get back control over the rail system is so that there will be more trains.
Not too long ago Dr Cullen, in replying to my questions in the House, was giving pretty much the same view of trains as we have been hearing recently from the National Party. But, whether it is due to rising oil prices, the threat of climate change, or the Greens wearing him away like water wearing away stone, he is now recognising that rail is an essential part of New Zealand’s infrastructure going into the 21st century in a climate-constrained world with very high and constantly rising oil prices. I congratulate him on that.
The history of New Zealand’s rail system is the history of changing ideology. What a long way we have come from the early 1990s, when Ruth Richardson sold the whole rail system, for what she called “top dollar”, to overseas interests that were not the least bit interested in running a railway. That was the biggest mistake in that decision. She did not sell the rail system to a company that was experienced and interested in running a good rail service. She sold it to people who were basically asset strippers, and who took most of the value out of the rail system, put very little back, and left us with a run-down and seriously damaged asset. I campaigned against the sale of the rail system in 1993, along with the unions in Auckland, where I lived at that time, with environmentalists, and with everybody else who at that time already knew that peak oil was coming—though we were a fairly small minority.
It took the Greens a couple of years to persuade the Government to take back the track, which happened in 2003. That was a bold and brave decision, because in 2003 the ideology that the private sector can always do everything best, can clip the ticket, making a big profit, on the way, and can provide cheaper and better services to the consumer in the process still had not entirely disappeared. It was on the wane, but it had not completely gone. The Government was not quite bold enough to recover the whole thing. It took back the track, and it put in $200 million to fix up its very sad state. It was not enough, but it was a good start.
The Government thought it would get a rail company that was good at running trains to run the rail services. Separating the track and the trains seemed worth a try at the time. Getting an experienced rail company to run the trains seemed worth a try, but ever since 2003 Toll New Zealand and the Government have been locked in combat about the meaning of the track access agreement and the size of the track access charges. The fact is that we cannot expect a seriously run-down asset to be upgraded and brought up to standard simply by using the profits made on the services. It was always clear that there would have to be major Government investment to get the rail service back on track.
It may be that if we had bought the whole thing in 2003, we could have got it more cheaply than we have got it now. I think that is probably true. But that is not a reason for saying at this stage that we should not recover it and recognise that we missed some opportunities in the past. The fact is that oil is now roughly 12 times more expensive than it was in the 1990s. It is now well over US$120 a barrel. It dipped to US$10 a barrel in 1998. Does anyone still remember oil being US$10 a barrel? I do.
JEANETTE FITZSIMONS Link to this
Yes, it is because I am so old, I say to Mrs King—both of us, I guess. At that stage, in the 1990s, after the oil price spikes of the late 1970s, and the crushing, to some extent, of the hegemony of the Organization of Petroleum Exporting Countries, the world took some other strategies, and the price dipped to the point where all of the preparation for peak oil was dropped, all of the investments in alternative fuels were dropped, and everybody said “Isn’t it lovely? Oil is so cheap.”, and partied like there was no future. Well, there was a future, and it is a future of oil at US$126 a barrel, not US$10 a barrel.
It just so happens that when we send a tonne of freight a kilometre by rail, it takes about a fifth as much oil as when we send it on a truck. For long-distance freight that is going from one major centre to another major centre, there is no doubt at all that a properly laden train is the most efficient way of sending it. Better still, if the line can be electrified—and most of the North Island Main Trunk Railway now is—we are using New Zealand renewable electricity, rather than imported and expensive oil or diesel. In an energy-constrained world, sending as much freight as possible by train makes a lot of sense.
But that is not going to happen very quickly. We do still have a system that is seriously run down. We do still have areas where trains have to slow down because of the state of the track. We do still have tunnels and bridges that need upgrading to allow the larger containers and the heavier trains to pass. Signalling upgrades are needed. Station upgrades are needed. This is a case for biting the bullet while oil is still US$120 a barrel, which will look really cheap in 10 years’ time, and investing in upgrading a system that will enable us to run freight on a lot less oil in future. I believe that the Government now has the intention to invest seriously in the train system. That will not be easy: with reducing surpluses and the economy heading into a more difficult patch, the Government will have to keep its nerve to continue investing in the rail system. But if it does not, we will end up with an asset that is not capable of delivering what we will demand of it in future years. Once we have the track upgraded, we need, of course, some new locomotives and we need some new rolling stock. That will be expensive but we need to order them now. We need to signal a very clear intention that this is the track we are going down.
When we have done those things, I look forward very much to a restoration of the long-distance passenger services that we once had. People these days are not very interested in spending hours and hours on a train when they can spend 1 hour on a plane. Well, in future that 1 hour on the plane will be very much more expensive than it is now. Airlines all over the world, including Air New Zealand, are putting up their prices because of the price of oil. Nothing is actually going to replace cheap oil. We will have transport fuels of a sort, but they will not be cheap. The same will apply to driving one’s car. So where a rail system exists, I look forward to passenger trains being reinstated, and to people once again discovering the delights of a trip where they can take a book, where they can look out the window, where they can plug in their laptop and do some work, and where they are not constantly wrestling with the wheel of a car and negotiating other traffic, or sitting on a bumpy bus. If I am sitting on a bumpy bus I cannot read without getting carsick, and I think a lot of people are in that situation, as well.
So I say well done to the Government, but it needs to have the nerve to keep going. This is only the start. This is the start of a decent rail system in New Zealand’s future, but we need to make that investment now.
Dr PITA SHARPLES (Co-Leader—Māori Party) Link to this
The Māori Party comes to this debate with a range of feelings about the Government’s snap announcement to buy Toll’s rail and ferry business for $665 million. The decision to claw back significant assets into the ownership of the Crown is a significant challenge to the context and the history of privatisation in Aotearoa. The major beneficiaries of privatisation—big business and transnational organisations—came into Aotearoa and bought up large on all our existing infrastructure. Too many New Zealanders have become casualties of that policy over the last decade or more. Māori have been hit particularly hard by much of this privatisation and sale of New Zealand assets through the sale of workplaces like forestry, the railroad, and Telecom, which employed huge numbers of Māori, and the break-up and sale of many of the country’s freezing works. The Government was also selling off resources subject to Treaty claims—resources that were hard enough to recover when held by the Crown, but ones that would become nigh impossible to get back once ownership moved offshore.
Because of the monetary policy decisions by successive Governments, the Māori Party has been advocating for a greater emphasis on sustainable, equitable, and participatory solutions—solutions that put Aotearoa first. Establishing a properly integrated rail system is one such solution—the use of State-owned assets for the benefit of all who call Aotearoa home. We think back to some 21 years ago, to 1987, when the Labour Government set about passing the State-Owned Enterprises Act, and we recall the advice of the Waitangi Tribunal at that time on this matter. The tribunal drew the nation’s attention to the fact that the legislation took no account of the need to address Treaty of Waitangi concerns. On 29 June 1987 the full Court of Appeal unanimously declared that the proposed wholesale transfer of assets to State enterprises, without establishing any system to consider whether the transfer of such assets would be inconsistent with the principles of the Treaty of Waitangi, would be unlawful. As a result, a clause was added stating that nothing in the Act would be inconsistent with the principles of the Treaty. This was a dark period in our history; a period that went against the interests of Treaty partners, and that ruthlessly and recklessly failed to take fully into account the consequences of the assets passing from the Crown upon the honour of the Treaty. Justice David Baragwanath, in referring to the historic New Zealand Maori Council v Attorney-General decision of 1987, demonstrated the glaring and profound damage that stripping the nation’s assets would do in terms of the Treaty relationships: “The Crown was about to deprive itself of the capacity to honour by return of disputed assets the manifold breaches of its Treaty obligations. They would pass into the hands of third parties and be irrecoverable.” So when Labour determined to invest in rail we thought of this past, we thought of this history, and we welcome the move as a positive move for our future.
There are other reasons why we supported the Government’s decision to buy back the rail. We have an absolute commitment to working in ways to ensure energy efficiency and sustainable progress in terms of environmental management. In this context the electrification of rail, and the possibility of having longer, heavier, and more efficient trains—which mean that more freight could be taken off the road and put on rail—are all positive steps along the way towards achieving cleaner emission control. The Māori Party is happy to support investment in the rail infrastructure to deliver a better service and thereby reduce the number of cars on the road. We note that the rolling stock was old. Reports about having to take stock out of museums to cope with the rail demand hardly engenders confidence in the industry. However, there is a concern we share with other parties in the House about the prospect of taxpayers having to face an extra $200 million as part of the Government’s buy-back of the national rail service. We applaud what the Government did in having the courage to invest more than $1 billion in the country’s rail and Cook Strait ferry services, including the planned upgrades. But a lack of transparency is always a worry we have with this Government. The $200 million debt should have been declared upfront.
Ultimately, we know that the decision to buy back the rail was always designed to engender votes in an election year, and we are disturbed at the environment of secrecy that has surrounded some of the Government’s statements. But, on balance, we certainly support the decision, in our belief in the value of keeping our assets here under New Zealand ownership and for the benefit of New Zealanders. Thank you, Madam Assistant Speaker.
Hon MAURICE WILLIAMSON (National—Pakuranga) Link to this
I am delighted to take part in this debate, and to say to the House, first of all, that I would really like some questions to be answered. The question that needs to be answered here is how many members of this House really believe that it requires Government ownership of an entity to make it work effectively. [ Interruption] Let me take Sue Moroney through the question. Does she think it would be more effective if, say, the farms of this land were owned by the Government? There is a model out there in the world where the Government owns the farm, and the peasant workers work on it. It is called communism, and it is stamped in Eastern Europe as “Best Before 1990”. But I believe that Sue Moroney probably thinks that that is how our farms would be run in the best way. Michael Cullen could easily be upstairs right now negotiating to buy back the farms.
Let us take it further. What about manufacturing in the factories? Who believes that manufacturing and production in factories would work better if those factories were Government-owned? I ask the members of the House who think that to put up their hands. Again, not one member’s hand has gone up. This is interesting. No one thinks that. Members clearly think it would be better if the private sector kept hold of the manufacturing sector.
It does not mean we cannot put some subsidies in place if we think certain things need to happen. The Government does that all the time with research and development tax credits and other things. That is what the Government does if it decides it wants one particular part of industry grow, or one particular part of industry to change. So through financing and subsidies it can achieve that outcome—but not through ownership, not through buying New Zealand Steel or Comalco, or any of the other major manufacturing or production outfits.
Let us carry on. How about we go with some other things? How about if those members think it would be better if the Government owned coastal shipping? I hear that is a big part of the integrated strategy. [Interruption] Coastal shipping! Wow—we will see Michael Cullen out negotiating with Rod Grout in a few days to buy back the coastal shipping operations! Of course, it is nonsense. It is absolute nonsense. Ownership does not determine efficient use of an asset.
I ask another question. How many members of this House think rail was run efficiently and effectively when it was Government-owned? I want to have a look at this—I have not seen even a Green member’s hand go up on this one. I will repeat the question in case it was not clear. How many people think that New Zealand Rail was run effectively and efficiently when it was Government-owned?
Shane ArdernHon MAURICE WILLIAMSON Link to this
Right! I think Shane Ardern raises a really good issue. He wants his tractor back. The stories were legendary. In fact, New Zealand Rail did one thing brilliantly—let us get that right. It employed lots of people. It was actually a Government repository for unemployment. It spilled them on to the railway network. But if we look at the freight carried per employee when the Government owned it, we see that it was a disaster. It was, by any world standard of any transport sector, a disaster, and that lot over there are telling us that that is what we are going to go back to, with the Government owning it.
There is another thing we could do. I have the calendar here. We can get it out and mark the first day of the school holidays. That is what I want members of the public to do from now on. If they are going to be travelling, they should get their calendars out, work out when the school holidays are, work out when the Christmas break is, and work out when Easter starts, and they should not go near the ferries on those days. I am telling them now what will happen—they will be on strike. We know they will be on strike. The unions would love to strike lots more, but they have been a bit hamstrung under their previous ownership. The change in ownership has freed them up brilliantly. The Government now owns them, and the unions are saying: “We can take these guys to the cleaners, and they will either have to pay us or we’ll knacker them.” What a stupid thing to expose oneself to—to become the new owner of an old asset that was stuffed anyway, and then say that it was run hopelessly by the Government in the past, the Government will overpay for it, and now the public will get a good deal!
I have not seen a single hand go up to one of these questions today. Not one member of the House! Not even the Greens thought rail was run effectively and efficiently when it was Government-owned. Now we get this grubby, secret little deal where we will not get the facts about how much was spent. We will not know what was actually done in terms of giving access to a sweetheart deal.
Interestingly, Peter Brown raised the case of Mainfreight. Mainfreight liked the deal, he said. That is not quite true. Mainfreight has the most schizophrenic view of this world I have ever heard. Its chief executive, Don Brain, said it was a great idea, and Richard Prebble, who was a director of the company—a long-time director—said it was a disaster and an outrage. So Mainfreight better get its act together. It has a senior director of its board of representatives saying it is an outrage, and its chief executive saying it is a great idea. So I do not think we can take Mainfreight’s view into account. It has two totally different views. [Interruption]
That is right. I should come back to the lost tractor. We should not tell too many stories, but Richard Prebble told us about one time when a wagon got shunted off the end of the wharf here in Wellington. They finally decided they had better put some divers down to find it. They brought in the navy divers and the floating crane, and down they went. When the divers came up they said: “Which one’s yours?”. There were six freight wagons down in the ocean. They had been bumped off the end of the wharf but no one cared.
There was a story about a farmer who got so angry about his tractor not showing up that we went out in search of it. He found it somewhere. I have a story about my uncle. This is a great story. Shane Ardern will know this man. He owned butchers shops in Ōpunake. His name was Ernie Poole. He had a horse that was a New Zealand champion. Actually, Sue Moroney’s family will be able to repeat this. The horse’s name was Wandering Ways. It was the first 2-year-old or 3-year-old to win the Easter Cup. Do members know why its name was Wandering Ways? He bought it at the yearling sales. He had it shipped to Ōpunake, and 4 months later the horse was found somewhere in Northland because New Zealand Rail had lost it. I swear to members that that New Zealand champion horse’s name was Wandering Ways because of the way rail had taken him all around the country. That is what we will go back to.
Hon MAURICE WILLIAMSON Link to this
Yes, he bought it as a yearling and got it as a 2-year-old! The thing was skin and bone. Everyone is laughing; this is a great joke, and this is what we will go back to. The Government has talked about how we need rail to be integrated with our transport strategy. Does that mean we will buy the trucks? Does that mean we will buy the ships? Does that mean we will buy the taxis? No, we do not need to buy any of those parts.
Moana MackeyHon MAURICE WILLIAMSON Link to this
There is the stupid Moana Mackey asking whether we will sell them. [ Interruption] I am just asking her whether we need to own—
I raise a point of order, Madam Speaker. I take exception on behalf of Moana Mackey to the comment that the member, in his excitement, made.
The ASSISTANT SPEAKER (Hon Marian Hobbs) Link to this
I am sorry, but the member cannot take exception on behalf of another member. That member herself has to take objection.
I raise a point of order, Madam Speaker. I understand that the member is getting excited, but I did take exception to that comment. I do not think it was warranted.
Hon MAURICE WILLIAMSON Link to this
I withdraw and apologise. If that is the worst thing I can do today, then that Government should withdraw and apologise for its proposal to buy this stupid rail system. The point I am trying to get over, time and time again to those members, is that if the Government wants to do things in the transport sector, then it can get into regulations, it can get into subsidies, it can get into rules, if it wants to, to change outcomes. But the Government does not need to be the owner. Who, for example, sold Telecom? That is a good question. Who decided that while the telephone company was owned by the Crown, it was a disaster? It had 25,000 employees, and, I think, within 4 years of privatisation that number had dropped to 7,000. Who sold it? Was it that dreadful National Government? Help me on this. No—members are shaking their heads. No, it was not National. You see, the Government did not need to achieve outcomes through ownership. There are all sorts of ways.
Hon MAURICE WILLIAMSON Link to this
Helen Clark was the Deputy Prime Minister, and Michael Cullen was the Associate Minister of Finance when Telecom was sold. That is who sold Telecom. All I am saying to members on that side is that if they had wanted to get some outcomes in rail—and I accept they want to move more freight, and we have not yet heard how that will happen—ownership is not necessary. Why does ownership change the outcome? According to Jeanette Fitzsimons it costs one-fifth as much to move freight on a train as it costs on a truck. If that is the case, if one were a freight forwarder, one would have to be mad to use trucks. It is not quite as simple as that. Trucking companies give flexibility. They give discounts and all sorts of access to networks.
Hon MAURICE WILLIAMSON Link to this
Yes—and the horse shows up the next day and does not get called Wandering Ways. That is exactly right. I heard Jeanette Fitzsimons say that the other good thing about the rail is that the vast bulk of it is electrified and we are using renewable energy. That is not true. A huge chunk in the growth in electricity generation in this country has been from fossil fuel burning. If the Government thinks that that is good for the nation, it is wrong.
The National Party is totally, absolutely opposed to the Government’s purchase of the railways. We think there has been no transparency whatsoever. The sums of money paid are appalling, and the way the outcomes the Government says it is trying to achieve will be achieved have not in any way been documented to this House.
Hon ANNETTE KING (Minister of Transport) Link to this
The National Party is totally, absolutely opposed to the purchase of rail by the Government. It is absolutely and totally opposed to it, but it will not sell it. Have members heard of the television programme The Vicar of Dibley? There is a character in it who says: “Yes, no, yes, no, yes, no, no, yes.” That is the National Party. That is John Key and Bill English put together. They say: “Yes, no, yes, no, yes, no, yes.” They do not know whether they want to sell the railways. We have just heard a passionate speech from Maurice Williamson. He is always passionate about things. He passionately told us that National members are opposed to the purchase of rail. They are opposed to the purchase, but Maurice Williamson did not say: “But we won’t sell it.”, because he would not actually be in favour of them selling it, buying it back, or whatever. He would not have been on the page to begin with. He is always off the National Party page. He has his own approach, and I like it because at least he is honest about what he thinks. At least he tells the people of New Zealand where he stands when it comes to transport. I do not always agree with him, but his leader does not know whether he is Arthur or Martha.
National members would like the public of New Zealand to believe they would never sell another asset. You see, they did their polling. They found out that the people of New Zealand do not like the sale of State-owned assets—infrastructure that is important to New Zealand. It is not about a few trucks; it is about the only railway system we have. They find that the public of New Zealand does not like it to be sold off, so, because it is election year, John Key has told big Bill English to be quiet and not to support the sale of State-owned assets just now. He said: “Wait until after the election, and if we’ve got the Treasury benches, then just watch what we’ll do!”. I say to the people of New Zealand that they should listen to what the National Party is saying. They should listen to its words, because those words are weasel words. We have just heard it, really, from Maurice Williamson. He said it all. He said that National does not support the Government buying back rail. National would love to sell it but it will not tell us that before the election, because people might not vote for it. That is what it is all about. People might not vote for National if it told them the truth, which is that it would like to sell State-owned assets. National has always supported the sale of State-owned assets.
I have to say that I almost got the giggles when I listened to the speech from the Leader of the Opposition, John Key. He was the man who was opposed to the Government buying back Air New Zealand, but this week he is telling New Zealand that he supports it, and that it was his idea to buy back Air New Zealand. What short memories those members over there have. I thought that people who are listening to this debate would be interested in the debate that was held when Air New Zealand was bought back by this Government. The debate was held on 13 September 2001. This is what Bill English said about buying back Air New Zealand. He said that it had “sent the commercial credibility of New Zealand and New Zealanders down the tubes”. That is what he said buying back Air New Zealand did. He went on to say: “The Government has now placed us in a very difficult situation and it is this: there is no path ahead for Air New Zealand, and the Government says that in its statement today. It has committed NZ$500 million, and there is no path ahead for Air New Zealand. It is a crippled airline at the bottom of the world, with a huge taxpayer liability around its neck. Where does that money come from? Well, $600 million …” comes from the “Superannuation Fund. I have been saying to audiences: ‘Wouldn’t it be hard for the Government to resist the temptation to invest that in Air New Zealand?’, and that is exactly what it has done. The first investment of the Superannuation Fund is to invest … in a risky loan to Air New Zealand.”
National opposed the purchase of Air New Zealand and now today its members are telling New Zealanders that it supports it, that it has always supported it. Well, the record shows that National opposed it. Members opposite said they could not run an airline if they were the Government. Maurice Williamson has just told this House that the Government cannot run State assets. Well, this Government has shown that State assets can be run successfully. New Zealanders are very proud of their airline, because it is run successfully and in a business-like manner. And so it will be with the railways of New Zealand.
Maurice Williamson likes to talk about the old days of rail and he filled us with great funny stories about the things that went wrong with New Zealand Rail. What he forgets is that the straightening up of New Zealand Rail happened under the fourth Labour Government. So when National became the Government—Richard Prebble actually does not take credit for straightening out some of New Zealand Rail—it was able to sell it off because there was something to sell off. It sold if off to its rich mates. The sale of New Zealand Rail to Fay Richwhite was the biggest scandal in New Zealand. It was a sale that was not worth its value—not the value of that company as it was when it was in Government hands. National sold it to its rich mates at a bargain basement price and they stripped out the assets of rail in New Zealand. It ensured it did not invest in rail upkeep. Nor did it invest in rolling stock, and we saw the use of rail to move freight in New Zealand deteriorate because the railway was deteriorating.
Everybody knows that one has to invest in one’s asset. When there is an owner who only wants to strip the profits out to send overseas to its overseas foreign owners, then that owner will not invest in its asset for the benefit of the people of New Zealand. This Government believes that one has to invest in assets that are for the benefit of New Zealand. I say to the National Party that we do not believe it, nor should the people of New Zealand believe it, when it says it will not sell rail. We know that National will sell rail at the first chance it can, because it is philosophical. National believes that the Government cannot run a business enterprise. Well, we have proved National members wrong, because Air New Zealand is operating in the international market, winning awards as a top operating airline, and it is majority Government-owned.
New Zealand Rail will once again be moving freight and passengers around this country. I will tell members why. This Government will invest in rolling stock and in line upkeep in New Zealand, because that is what is needed. What the National Party has not told people is that the company that owns rail now, Toll, was not interested in keeping lines open in provincial New Zealand. It was not interested in the upkeep of railway lines that go to our provinces where our provincial people live—people who need good networks in transport. It was not interested in keeping those lines open unless perhaps there was a subsidy or two that could be put in its pockets and sent overseas to its foreign owners. So this Government said that there is a point when this particular piece of infrastructure ought to be owned by the people of New Zealand, when we ought to invest in this infrastructure and make it work for the people of New Zealand. The New Zealand public will see, given the opportunity, and led by this Government, that rail in New Zealand will once again be moving freight around New Zealand. It will be moving passengers and supporting the people who live in our Timarus, our Gisbournes, our Whangareis, and our small parts in New Zealand, because we actually think they count, as well.
I support the purchase of rail. I am delighted we own this piece of infrastructure. It is so important and crucial to our transport system. I say to the people of New Zealand that they should think long and hard, because the National Party today showed its real colours. National members speak out of both sides of their mouths, but what they are saying is that they do not support the ownership of Air New Zealand or of rail. If they get the opportunity they will sell it—mark my words.