10 Jul 2015

'Give KiwiRail certainty' - Greens

3:35 pm on 10 July 2015

The Green Party says the Government is preoccupied with cars and trucks and must provide KiwiRail with more certainty over its future.

The Treasury recommended the Government fund KiwiRail for one more year while undertaking a comprehensive study to look at closing the rail company.

The Treasury recommended the Government fund KiwiRail for one more year while undertaking a comprehensive study to look at closing the rail company. Photo: Wikicommons

Speaking after documents released yesterday revealed the Government had only committed to funding KiwiRail for two years, Greens spokesperson Eugenie Sage said the company needed more security.

"Particularly with something like rail, it's quite lumpy in terms of the investment patterns, it needs that security and it just shows how preoccupied National is with cars and heavy trucks on our roads," he said.

The documents showed the Treasury had suggested to the Government that it close down the country's rail network because it cost too much.

The Treasury recommended the Government fund KiwiRail for one more year while undertaking a comprehensive study to look at closing the rail company.

It said the study should be done publicly so that people were informed of the costs of running the rail network compared with any benefits it provided.

While Government ministers rejected the idea of closing KiwiRail, they only intended providing money for KiwiRail for this financial year.

But a later paper revealed it agreed to a two-year funding commitment after the company expressed worries about its long-term planning if it had only one year of funding confirmed.

In a statement, a spokesperson for the Finance Minister, Bill English, said the Government set aside $400 million in the Budget for KiwiRail over the next two years.

Before undertaking an investment of such size, it was only appropriate to canvas all options, it said.

"As we said in May, the Government is committed to a national rail network, but ongoing subsidies of around $200 million per year are unsustainable.

"The funding provided at the Budget gives the KiwiRail board a two-year window to identify savings and reduce the level of ongoing Crown funding required."

In its analysis, the Treasury said rail had high fixed costs and it faced a challenge trying to reduce them.

It estimated the net social cost of supporting KiwiRail at between $55 and $170 million a year.

And it warned KiwiRail posed considerable risk to the Government and was unlikely to ever be profitable.

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