Monday, May 05, 2008

Government to Buy Back Rail and Ferries for $665Million

Finance Minister Cullen has agreed to buy back the rail operations from Toll. Cullen's Statist credentials are now confirmed. Cullen said buying the rail operating business was the best way to increase investment in the industry and make it more responsive to customers' needs.

What could be more customer responsive than a business risking its own capital?

In a blow back to the Muldoon years Cullen says cabinet will soon consider multi-billion dollar investments into rolling stock.

Wasn't it having the then Railways managed by the government of the day that got it to 22,000 staff, and tiny four wheel wagons capable of 50km/h?

Cullen Says

Dr Cullen said Toll had done a good job increasing freight volumes and streamlining the operation of terminals, but it had struggled to run a "commercially viable" business without government support"...

So the Labour Government will be a more astute and cleverer operator than Toll - a multi-billion dollar transport company with significant operations worldwide?

Or will those subsidies go straight to staff, suppliers and customers?

Cullen goes on

"The Government will now avoid paying subsidies to third parties and we also avoid the on-going disputes over the implementation of the National Rail Access Agreement that had the potential to destroy value in the business and erode the morale of the people who work in it."

Cullen's myopia against private capital is now absolutely declared. The subsidies will still be there - just they won't be efficiently filtered through one third party but through every begging bowl that is proffered. Customers, Staff, Suppliers, Local Government...

Toll has apparently been paying about $48 million a year since an access deal was struck in 2004, with the Government picking up the shortfall of about $10 million needed to maintain and improve the tracks.

So, the Government has agreed to spend $665 Million to avoid subsidising a private operator to the tune of $10Million per annum....instead the Government will subsidise itself. Not a bad idea if it was true...

I'll bet it costs the Government more than $10Million per annum to run its new rail operation...

As has been shown with OnTrack, the government owned rail infrastructure company, it is impossible to manage the myriad of customer, staff and supplier conflicts if you are state owned. The knowledge of the other side in a negotiation is government can always be persuaded to find the money - just ask Cunliffe - witness his debates with the Doctors and Nurses.

1 comment:

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