English Bill: Urgent Debates — Tranz Rail 
Text is incorporated into the Bound Volume 
English Bill: Urgent Debates — Tranz Rail 
[Sitting date: 10 June 2003. Volume:609;Page:6064. Text is incorporated into the Bound Volume.] 
Hon BILL ENGLISH (Leader of the Opposition) 
: 
 I move  
That the House take note of a matter of urgent public importance 
. We see in the Tranz Rail deal yet another example of how this Government is slowly strangling our infrastructure in New Zealand. There is among this Cabinet a growing belief in its own commercial judgment and a growing sense of momentum that it has the capacity to interfere in some of the most complex commercial and economic issues this country has to deal with because it has the strong belief that it can do better than anyone else. 
Before I come to the Tranz Rail deal itself I need to alert the Government to the effect that its actions have. By the time that it has bought Air New Zealand set up the Electricity Commission made a mess of the roading bill and done this deal over Tranz Rail it will have sent some very clear signals to the commercial community in New Zealand and also to any potential investor in New Zealand from overseas. Those signals are bad ones. It is now clear that the Government at any stage for any reason can interfere with any network or infrastructure industry in New Zealand because there is no major infrastructure industry where the Government has not stepped in. That is the first point. Anyone who is considering investing in New Zealand has to take into account now the risk that Dr Cullen will decide that he knows best. He may have a fancy little deal that squares off the Greens the polling the business community and the Labour caucus so he may step in—and he does. So we have now the reintroduction in New Zealand of something that disappeared 15 years ago—that is political uncertainty. 
The other signal the Government sends to investors is related to that. It is the signal that the rules can change at any time. Let us imagine that someone is considering buying Tranz Rail. The Government is in there trying to do a deal having strong opinions about particular bidders that it decides it does not like and with a very clear understanding in the wider commercial community that the Government will break or bend the rules to suit itself. I will come back to that. With regard to the rail industry this decision follows on very closely from what occurred in the electricity industry where in order to execute a short-term political tactical move the Prime Minister decided “something needed to be done”. An Electricity Commission has been invented. That will skew the rules of the electricity market for many years to come and the investors are starting to vote with their dollars. They are starting to decide that if they cannot trust the Government to operate according to certain and predictable rules then they are unwilling to take the risks of making an investment. 
The way that the Government steps in is pretty random. It seemed to be willing to let the large-scale forestry assets in the central North Island—which anyone would argue are of important economic and public benefit in New Zealand—go through the normal commercial process. It was a bit messy but that process sorted out the fact that the original buyers had paid too much and when they could not realise the value of the assets a receiver picked up those assets and has been dealing with them in ways that the commercial community understands and can react to. On the other hand the Government has decided for reasons it has still not explained that it had to step into the Tranz Rail argument. The Minister has offered only one explanation as to why the Government stepped in: that the trains would stop running. That is the silliest explanation that he could have given because any shareholder creditor or receiver has a strong interest in making sure that the trains are kept running and they would not have stopped. Given that no one believes that reason we look forward to hearing what the real reason may be. The Government has introduced into New Zealand’s investment environment uncertainty political interference and a lack of transparency and that is slowly strangling the lifeblood of this economy. 
Let us look at the action the Government has taken. I want to pick up on what I regard as the most distasteful aspect of this deal. This Government campaigned through the late 1990s for a Takeovers Code which it then put in and now it puts up a deal that requires a waiver from that code. The Takeovers Code as the  
New Zealand Herald 
 absolutely correctly pointed out was put in place to stop exactly the type of deal the Government proposes. Paul Swain put in place the Takeovers Code and now he is the Minister overseeing a deal that requires a waiver from the panel because he is trying to get control of Tranz Rail without making an offer for 50 percent of the company. The Takeovers Code effectively rules out any ownership offer of between 20 and 50 percent of a company. Who is asking for exactly that kind of proposition? It is the Government. [ 
Interruption 
] The Government says it is not doing that. Let us hear from the Government about whether this deal will need to go to the Takeovers Panel because a waiver is required or whether the Government has found a way around that requirement. That would show—and it does show—that the Government wants to bend the rules for its own benefit when it wants to do its own deal for its own political purposes. 
Now I come to the second most distasteful aspect of this deal. This deal is an indirect subsidy to the major users of the railway. It consists of the Government buying the tracks taking all the investment risk on the tracks and charging an access fee to any operator who operates on those tracks—or actually to Tranz Rail because it is a monopoly and I will come back to that. Why is the Government doing that? One cannot help but conclude that the major users have exercised substantial influence over this Government in making that decision. Members know whom the large user is who will benefit the most: Coalcorp. 
Hon Paul Swain 
: Solid Energy. 
Hon BILL ENGLISH 
: Righto Solid Energy. The Minister for Economic Development made that quite plain when he said that this deal would now allow the West Coast coal to be transported across the South Island. 
Today I challenge the Government to outline just what its objectives are. Why should the taxpayer front up with a substantial subsidy for rail freight when the primary beneficiaries of that will be Solid Energy Fonterra and the forestry companies? If the Government wants to provide cheaper rail freight rates it has the easy option of just providing a direct subsidy. Why does it not just provide a direct subsidy to a commercial operator of our rail network? The Government is quite free to do that. If it wants to get freight volume off the roads it can just provide a direct subsidy. Then it would have a clean-running commercial operation where the taxpayer had not taken a substantial investment and commercial risk and we would have a transparent transaction between the taxpayer and those who will benefit from this indirect subsidy. 
Today I challenge the Government to tell us who will benefit from this decision. Why has the Government not offered a transparent subsidy? I say to the senior Labour whip that the reason for that is that New Zealand’s economy is so open. Its rules have been fair transparent and predictable and if the Government wants to change or break the rules it should be brave enough to do so quite openly. But it has not done that. 
To come back to the major users have they not been sucked in? They have been pulled along by Dr Cullen who has kept saying to them that the Government will do this deal. [ 
Interruption 
] The senior Labour whip makes the point that the Government has done this for political reasons. We have a $200 million bill in order to try to prove a point about what happened in 1991. The Government has now allowed Tranz Rail a monopoly use of the line. The major users thought that they were to have a deal that would bring—[ 
Interruption 
]. I raise a point of order Mr Speaker. There has been a constant barrage of interjections. It has not stopped and you have not moved to make sure that the interjections are rare witty and to the point. I suggest that you do so. 
The ASSISTANT SPEAKER (Hon Clem Simich) 
: I thank the Hon Bill English. Interjections have been coming far too often and I ask members to please tone it down. 
Hon BILL ENGLISH 
: The major users are in the position where they have pushed the Government to the trough and now that they have found the Government will not let anyone else get in it they will be upset. However the major users cannot say they were not warned because dealing with Dr Cullen is pretty difficult and unpredictable as Singapore Airlines and Toll Holdings have found out. Dr Cullen thinks he knows more about commercial deals than anyone else in New Zealand. He thinks that he is much more knowledgeable than Singapore Airlines and that Toll Holdings is just hopeless—it does not understand how the world works. Toll Holdings just runs a huge transport business so how would it possibly know what it is doing? 
The major users need to understand that whatever rules the Government now signs up to cannot be guaranteed. This Government will be the owner of this railway for only a couple of years and the rules will certainly change. We do not believe in an indirect subsidy from the taxpayer to one particular commercial operator in New Zealand. I hope that the major users will salvage something out of this deal if they can get competition on the tracks but I suspect they will not because Dr Cullen has already said there will be a 60-year monopoly for Tranz Rail. 
We now run the risk of the worst possible outcome. The Government owns the tracks and my guess is that it will be as efficient in doing that as it was last time it owned them. A monopoly with a guarantee will be operating on the tracks and worse than that there will be a guaranteed taxpayer subsidy to ensure that the operator makes a profit. Which other business or shareholders in New Zealand enjoy that privilege? Why has Dr Cullen said that he will set the access fee in such a way that it guarantees the operator a return on capital? What kind of left-wing idiocy is that? The Government is to set up a monopoly guarantee it a profit and then send a bill for $200 million to the taxpayer—boy that is smart! That is this deal. But at least the bill is smaller than that for Air New Zealand which was $1 billion. 
Let us get this clear: the Government is making a deal whereby the taxpayer will subsidise rail freight and Dr Cullen will take all the responsibility for maintaining the tracks and who knows what that will cost? At least the Government has owned up to that; it has no idea what that will cost. Only one operator will ever be allowed on the tracks because the thresholds are so low for volumes that competition will never happen and the one operator will be guaranteed a profit. This Government cannot say “profit” without spitting. It regards any profit as an ill-gotten rip-off of the customer and it has decided to guarantee the profit— 
Gerry Brownlee 
: Unless you’re Taito Phillip Field. 
Hon BILL ENGLISH 
: —Unless of course one is Taito Phillip Field. This is another step down the track for a Government that is increasingly showing its left-wing colours. It now has majority ownership of the electricity industry and total control of it. It now owns the national airline and has total control over that because it makes the rules as well as owning the airline. It is now making the rules for the railway and intends to own Tranz Rail as well. The Government has a mess in its roading legislation which it will never get through in order to solve that problem. Those industries are the lifeblood of the economy and the sclerosis that is building up in them is entirely the fault of a Labour Government that thinks it knows better than everybody else. Dr Cullen is the expert on mergers on takeovers and on running large companies!