Kiwirail on the wrong side of state funding

Most countries in the world are expanding their rail networks. But the future of ours is looking uncertain as a series of closures shrinks it ever further.

The past 12 years have seen the closure of passenger rail services to Rotorua, Tauranga, Napier, Dunedin and Invercargill, as well as the recent mothballing of the Stratford to Okahukura and Napier to Gisborne lines, the closure of Hillside rail workshops and the sacking of 181 staff.

Only four long-distance passenger rail services are left and they are struggling to survive. The Northern Explorer service between Auckland and Wellington runs only every three days in each direction, and is targeted at tourists. The Capital Connection between Palmerston North and Wellington is on the brink of closure, and KiwRail is trying to sell off the TranzScenic services between Christchurch and Greymouth, Wellington and Auckland and the Tranz Coastal service between Picton and Christchurch. KiwiRail's freight business, on the other hand, is doing well and has grown by 25 per cent over the past few years.

But the competitiveness of rail freight depends on improving its reliability, reducing travel times, and upgrading a network that has suffered decades of neglect.

The network still has 800 wooden bridges that are a century old and need replacing, along with thousands of railway sleepers, old rolling stock and signalling technology. But desperately needed maintenance is being deferred once again as KiwiRail struggles to compete as a commercial enterprise.

So what is the future of our ailing network? Will it continue to limp along half-heartedly, or even die a slow death? Or will it be resuscitated in a few years, and redeveloped into a modern, effective transport network?

The rail network's problems date back to 1993, when a former National government sold it to Faye Richwhite. During 15 years of private ownership, with almost no investment, it was run down to the point where parts of it were unusable.

The Labour government brought the track back into public ownership in 2003, and the network in 2008. It promised to invest $1 billion in upgrading the network – a decision National vigorously opposed. When National became the government in 2008, it was less than enthusiastic about inheriting a government-owned railway.

Focused on building new motorways, National seemed to regard rail as a white elephant, an "old technology" and a financial burden on government.

But it agreed to keep KiwiRail going, providing it could be turned into a commercially viable business. It promised to invest $750 million to upgrade the network, on the proviso that there would be no further investment after that, and released a 10-year Turnaround Plan to turn KiwiRail into a self-supporting commercial operation that would fund all future maintenance itself.

The Rail and Maritime Union dismissed the plan as a blueprint for the systematic destruction of KiwiRail, pointing out that no rail network in the world runs commercially without some government support, especially when it's competing with a road transport industry that is heavily subsidised by taxpayers.

It union also pointed to the lack of a level playing field between rail and its competitor, the trucking industry. While KiwiRail is expected to pay for the full costs of maintaining its network, the trucking industry is not expected to fund roads fully or fund repairs from natural disasters. But KiwiRail is expected to fix rail bridges washed away by flooding, or any other network problem. It closed the Gisborne line because it didn't want to spend $4m on storm-damage repairs.

So it's not surprising that, three years down the track, the Government's plan hasn't turned KiwiRail around. In its desperation to generate revenue, KiwiRail has started retrenching again, deferring maintenance, letting lines such as the Napier to Gisborne one die, and laying off staff (including key track maintenance staff). It also made a series of cost-driven blunders, buying 18,000 rotten, Chilean railway sleepers and Chinese locomotives and wagons that aren't performing as expected. More closures are likely, as any unprofitable part of the operation is likely to be shut down, under its new commercial mandate.

So, failing a change in government and approach, KiwiRail is likely to shrink to a freight-based network focused on servicing just a few big customers such as Fonterra, Solid Energy and New Zealand Steel. Another possibility is that the Government will try to sell it again, and some suspect that's why it recently split KiwiRail into two companies.

A more sustainable solution would be for the Government to take over the running and maintenance of the rail network and leave KiwiRail to operate the freight and passenger business on a commercial basis, paying a track-user charge to the Government – just as trucks pay a road-user charge.

This would create a level playing field between trucks and rail, and would hopefully provide the basis for a return to a high-quality, sustainable national rail service that is, in my view, essential for a sustainable national transport strategy, as well as to reduce our dependence on oil and the number of trucks on our roads.