Land Transport (Rail) Legislation Bill

I move, That the Land Transport (Rail) Legislation Bill be now read a first time. I nominate the Transport and Infrastructure Committee to consider the bill, and at the appropriate time I intend to move that the bill be reported to the House by 24 April 2020.

This Government is committed to securing the role of rail in the New Zealand transport system now and for future generations. This bill entrenches a heavy rail network that delivers for New Zealanders, and it’s our Government’s vision that rail is and should be the backbone of a sustainable 21st century transport system. Our vision is for the country’s rail network to provide modern transit systems in our largest cities while allowing increasing volumes of freight to be moved off the roads and on to the rail network.

Rail is our weapon in the fight against the climate emergency. In our big cities, rail enables us to move more people with fewer vehicles, and I point to the City Rail Link that the party opposite delayed for five years. When it’s completed in 2024, the City Rail Link will allow 54,000 people—that’s the equivalent of 16 lanes of motorway traffic to carry people in and out of the centre of Auckland every hour. That is 54,000 people every hour. That is the power of rail.

And with freight, we know that over the next two decades, the freight task in this country is predicted to increase by 55 percent. If we move all of that freight on our highways using trucks, our cities and towns and suburbs will become unlivable, and we know that there’s a lot of freight that can be most efficiently moved by rail. Not all of it; there’s plenty of freight that’s time sensitive, that needs the flexibility of the point to point service that the trucking industry offers, but there’s a great deal of freight that can be most efficiently and sustainably moved on the rail system.

Rail contributes to our national and regional economic growth. It reduces carbon emissions, it reduces congestion in our cities, it reduces road deaths and injuries, it delivers many wider social benefits, and it provides resilience and connection between communities. The freight task in New Zealand is growing, and it will continue to grow in nearly all regions. We expect freight tonnage in New Zealand to increase more than 55 percent by 2042, and all parts of the freight system will need to play their part to support this growth. Moving more freight by rail will help to achieve net zero emissions by 2050, it will reduce the number of deaths and serious injuries on our roads, it will reduce congestion, and it will deliver jobs and economic development in our regions.

The Future of Rail review found that the current state of the rail network is in a state of managed decline due to long-term under-investment. Short-term planning and funding arrangements for the rail network through the annual Budget process creates uncertainty for the rail business, KiwiRail’s freight and logistics business, as well as their customers, who include many of the biggest and most important exporters and producers in the economy. It also found that a lack of integration between the road and rail network investments has been a longstanding problem. Road and rail investments take place within different decision-making frameworks, and this makes it very difficult to achieve sensible trade-offs and policy choices between these two vital transport networks. Fixing these issues requires a long-term commitment to investing in the rail network so that New Zealand has a reliable and resilient national rail network that allows rail to play its part in the freight supply chain to move the freight that it can move most efficiently and sustainably.

On top of investment in the passenger network through the National Land Transport Fund—and I want to just say that, on Monday morning this week, it was great to be out at Trentham with my colleagues Chris Hipkins and Ron Mark announcing and kicking off the beginning of construction on the double-tracking of the railway line between Upper Hutt and Trentham. That’s an improvement to the Wellington regional network that’s been talked about for 50 years. Our Government is getting on and doing it after 50 years of other people talking about it, and Ron Mark made the comment when we were out there at the Trentham railway station that he and Chris Hipkins had campaigned in 2008 on those improvements.

💬 Michael Wood: What happened?

Nothing happened for nine years—nothing happened for nine years—but now our Government is getting on and doing it. It is part of a package worth $196 million that our Government is investing in improvements to the Wairarapa line, supporting those communities in the Wairarapa and making a more efficient service in Wellington that will serve both commuters and freight customers. And I should remind the House that, in the Wellbeing Budget, earlier this year, the Government made a $1 billion investment in the rail network—a $1 billion investment; $741 million of that is just the first phase of investment needed to start restoring a reliable, resilient, and safe freight and passenger network. Alongside that $741 million, another $300 million has been committed from the Provincial Growth Fund to support regional rail projects, to provide lead investments, and to support growth and jobs in the regions as they too recover from nine years of neglect.

Fixing rail is not only about increasing investment; we cannot continue with the current approach to planning and funding rail that we’ve inherited. Until now, rail’s been treated as an orphan in the transport system, left out in the cold, cut off from the funding, planning, and decision making in the national land transport programme. We are bringing rail in from the cold, fully integrating it alongside roads, motorways, and all the transport investments so that, for any transport task no matter what it is, decision makers can consider rail alongside other modes and invest in the most sustainable and efficient option. We want to move more people and more freight by rail, and we want to grow the network where it makes good economic sense. That means investing in the infrastructure, the rolling stock, the hardware, and the people that will make the system work as it should.

The Land Transport Management Act 2003 currently deals with the planning and funding of public transport, State highways, and local roads, and this framework ensures that these land transport modes are planned on a long-term basis and have certainty. This bill amends the Land Transport Management Act and the Land Transport Act 1998 to bring the planning and the funding of the rail network under the land transport planning and funding regime set out in the Act. The new rail planning and funding framework will see a statutory three-year rail network investment programme prepared. The Minister of Transport will be required to approve in consultation with KiwiRail shareholding Ministers. The Minister of Transport will be required to approve National Land Transport Fund allocations for rail network investments. KiwiRail will be responsible for developing the rail network investment programme and the delivery of rail activities within it.

The New Zealand Transport Agency (NZTA) will also have important roles under the proposed changes. The NZTA will provide advice for the Minister of Transport on how the rail network investment programme fits with the overall land transport investment programme. The agency will also be responsible for monitoring the delivery of the programme. This bill also recognises the importance of metro rail in the Auckland and Wellington regions and, under the bill, KiwiRail will become a member of the regional transport committees in those regions. Those committees put together the regional land transport plans every three years. KiwiRail and the regions already work closely together on the development of the Auckland and Wellington rail networks, and this provision in the bill will just reinforce that relationship.

The changes to the Land Transport Act will also allow fees and charges on track users to be set by regulation and to be paid into the National Land Transport Fund. This will ensure that track users can contribute to the costs of the rail network in a fair and transparent way.

This bill is about changing our approach to transport and taking a long-term, strategic-planning approach to rail. It will consider rail and road investments together in a joined up way. It will allow fair, rational, and consistent decision-making and investment. This will deliver a better, stronger, more sustainable transport system.

Thank you very much, Mr Speaker. The National Party will be opposing this piece of legislation, and I want to explain to the House why, and want to—

💬 Hon Clare Curran: What a surprise!

Oh, well that’s a bit unfair. We support all sorts of legislation but not this one.

I want to explain to the House why that is. Let me start by talking about rail in New Zealand. It was the Minister of railways, Gordon Coates, in 1923 who said, “The railways have never been regarded or run as a profit-making concern”, and we are getting back to that point 100 years later, where the Government appears to have no expectation of commercial common sense and no expectation of profit making on the railways. We are going back to those days that Gordon Coates talked about in 1923—

💬 Hon Clare Curran: Neo-liberal.

Oh, “Hear, hear.” says Clare Curran. Well, that tells you all you need to know, I suspect.

💬 Hon Clare Curran: No, I didn’t. I said neo-liberal.

Oh. Ha, ha! Well, that doesn’t even deserve a response.

So let’s be clear about it in New Zealand. The economics of rail in New Zealand are challenging. We are a long and thin country with challenging geography. We have a population density that is far less than other countries. The United Kingdom, for example, has 338 per square kilometre; Japan has 251; we have 16. The freight used in New Zealand on the rail is difficult. The routes that the freight on rail operates on are mapped out often from routes 100 years ago, and so you have to travel over quite long distances to reach the same destinations caused by roads. So rail in New Zealand is economically challenging, but it plays an important role. That is definitely true. The Minister made mention of that in his speech, and, of course, he is correct. Freight makes sense where you’ve got bulky products that are close to markets and close to ports. I’m, in particular, thinking of the “Golden Triangle” of Hamilton and Tauranga and Auckland, where rail does make sense. In the rail lines in Auckland, Hamilton, and Tauranga there is good use of—

💬 Simeon Brown: Particularly the Auckland part.

“Particularly the Auckland” says Simeon Brown, there is good use. But let’s be clear: 93 percent of freight in New Zealand does not travel by rail; it travels on the road. Let’s also be clear that that is a decision made by freight companies and people transporting goods around, who have made those decisions because it’s more economically sensible to move something on the road by truck than it is by rail.

Rail makes sense for our metro networks. You’ll never hear a stronger defender of our passenger rail networks in Wellington: 10,000 people in Hutt South and the Rimutaka electorate every day get on the train and go into Wellington. It is a vital part of the Wellington metro network, as, indeed, it is part of the Auckland network. National is proud of our investment in metro rail. It was the National Government—despite what the Minister says about nine years of neglect—that bought the Matangi trains for the Wellington railway network. It was National that completed the electrification in Auckland, which has driven the very large increase in passenger growth on the Auckland network. Despite what the Minister says about the City Rail Link, it was National that agreed to get on with the City Rail Link.

I welcome—

💬 Hon Phil Twyford: More like delayed it for five years.

Well, he might quibble, but I welcome what the Minister said around the thousands of passengers that that will allow the Auckland metro rail network to take. That will be a good thing, because they’ll be people not in cars; they’ll be people using that rail link. And, of course, I think you’re beginning to see passenger usage in Auckland continue to increase. So rail in New Zealand definitely has a place, but we need to be cognisant and we need to be clear that the economics in many parts of the country are challenging.

That brings me to the second point I want to make, which is about what is the appropriate structure for rail in New Zealand. It would be true to say that rail is probably the most reviewed operation in New Zealand history. We have oscillated, basically, from rail as a public service sponge for excess employment, which was how rail operated throughout most of the 1940s and 1950s and 1960s. It was the biggest employer in the country and the Government owned the rail. There were no commercial disciplines whatsoever, and there were railway lines and spur lines all around the country. I think everyone agrees that that was, essentially, a sub-optimal state of affairs. It was totally economically inefficient and, of course, we unwound that in the 1980s—and 1982 was when the restructuring started. People actually often claim it was Prebble that destroyed rail or started it all. It was actually started in 1982 under Muldoon—that great reformer, not. But he started the process of reforming rail, and then, of course, we had the reform of rail from 1984 onwards. Then we had privatisation from 1993 to 1996, and then the renationalisation when we now have KiwiRail in 2008.

The National Government’s approach to KiwiRail was to expand rail where it made sense—and that’s in Auckland and Wellington and the “Golden Triangle”, as I talked about—but to try and make sure it was run in a commercially focused way. That brings me to the concern about this bill and about where this Government is taking rail, which is that we are now seeing—on the great oscillation in New Zealand in how we run rail between public service non-commerciality and complete profit maximisation—the wheel turn again back towards that public service mentality where commercial discipline goes out the window.

So I’ll give you an example. KiwiRail, even though it’s a State-owned enterprise, has been revalued by Treasury as an entity that is just a public benefit.

💬 Michael Wood: That’s an entirely different issue.

Well, no, it’s not a completely different issue; it goes completely to the point, which is: what is the expectation of rail in our transport system? If Treasury and the Government regard KiwiRail and the Crown accounts as an entity that is not a for-profit entity—that’s the distinction: it’s not a for-profit entity; it’s a public-benefit entity—that has an impact.

We saw the instruction to KiwiRail to cease the ending—not do the diesel electrification, which Michael Wood talked about back in 2018. And so what we are seeing on the pendulum is KiwiRail revert to being something that doesn’t have any commercial discipline on it. And Mr Twyford, the Minister, talks about the huge increases in funding going to rail. Our concern in the National Party is that none of that is based on strong business cases because none of them are available. We saw $331 million in Budget 2019, we’ve got huge amounts of money going through the Provincial Growth Fund, and our concern is that those investments are actually wealth destroying. They’re not actually investments that will grow the economy; they’re actually wealth destructive. We’ve seen the opening of commercially dubious lines like Napier to Wairoa, for example, which members opposite got very worked up about when the last National Government was in power. But they’ve reopened it. Do you know how much freight’s travelled on that line so far? Nothing. Nothing. No freight has travelled on the Napier to Wairoa railway line.

So that brings me to the third point, which is why we don’t support this bill. The first point is we don’t believe the case for change has been made. And the Minister really didn’t make a very strong case for change. We think the status quo is fundamentally satisfactory. Road users pay for roads and the maintenance of existing roads through fuel taxes and road-user charges and the users of rail pay for the use of the rail network through a State-owned enterprise (SOE), which is called Kiwi Rail.

We think that having KiwiRail as an SOE that has a for-profit motive and is run under the Companies Act is something that’s a good thing because it promotes commercial discipline. It means that we don’t get uneconomic, wealth-destructive investments. The worry with this bill is that, essentially, road users will end up cross-subsidising rail users on uneconomic routes that rail users don’t wish to use. And so the concern is that this is going to be a giant waste of money, and that is why we oppose the bill. Thank you, Mr Speaker.

I’m very pleased to be able to have the opportunity to speak in this debate and I, firstly, want to address the very interesting peroration we just had from the previous speaker, Chris Bishop, which did provide some interesting information about the history of rail in New Zealand and the National Party’s position on it at various times. But very few points actually came close to addressing what the concerns of the National Party might actually be with the substance of this bill.

The problem is that there are several core fallacies that sit at the heart of the National Party’s analysis of rail. As soon as you mention it, it’s kind of like National Party bingo. David Bennett pops up and says “socialism” as soon as you talk about rail. It’s just this Pavlovian instinct. And we had another good one from Mr Bishop, which was the claim that rail in New Zealand is not viable as a transport mode because it doesn’t make a profit—because it doesn’t make a profit.

💬 Chris Bishop: I didn’t say that.

Mr Bishop should check the Hansard, because this was one of the assertions near the very beginning of his speech. And of course the interesting thing about that assertion is that it never gets applied by the National Party to roads. Does anyone have a reasonable expectation that there needs to be a profit made out of the New Zealand roading network? Never. But we always get this fundamental objection to any investment in New Zealand’s rail network that doesn’t turn a profit, as if that somehow undermines its role as a core piece of transport infrastructure in New Zealand.

What Mr Bishop also did not address was actually the core purpose of the bill and why the National Party might object to it. At its heart, what this bill does is says that in a country like New Zealand—particularly a small country, I would argue—it makes sense that we have an integrated transport network, that we have a model for planning and funding our transport infrastructure that is actually linked together, that allows us to make rational decisions about where the money best goes to get the best transport outcomes. Whether it’s around the efficiency of freight, decongesting the country, environmental impacts—let’s actually look at the ability that we have to invest as a country and then make rational decisions about whether that should go into roading solutions or rail solutions or coastal shipping solutions or whatever it is.

What is important about that approach is that it shifts the dial on the approach that we have had for so many years in New Zealand where we haven’t had a mode-neutral approach, but where the investment has just, virtually, automatically gone to roading. That is one of the reasons—coming to one of the points that Mr Bishop raises, he’s quite correct when he says that 93 percent of freight in New Zealand currently goes by road. Without doubt, road has been and is and will continue to be an incredibly important part of the New Zealand transport infrastructure system, and will probably continue to be the dominant mode by which freight is sent around the country. It’s a strawman argument; no one is arguing against that. But, of course, people do make their choices about the infrastructure that they use based on the quality of the infrastructure that is available to them, and the fact that we have had decades of rundown, and asset stripping of our rail system has in fact made the rail system less efficient and less capable and less of an option for people who might wish to use it.

I remember one of my very first select committee annual reviews when I was elected as a member of this House was on the Transport and Industrial Relations Committee in the previous Parliament. I remember the poor bloke, the chair of KiwiRail, turning up and telling us about the utterly woeful state of the infrastructure that he had to oversee. So we have a freight network in New Zealand in which trains have to slow down to a virtual crawl because they’re going over bridges and other pieces of infrastructure that are 100 years old and need a massive amount of investment to actually make them a viable option.

So one of the core things that this Government is about is having a mode-neutral approach and about making the investments so that people, whether they are looking to send freight around the country, whether it is passengers in our cities, actually have real transport choices—

💬 Chris Bishop: Why don’t you pay for it then?

—and then can make rational choices about the best way to send—“why don’t they pay for it?” Well, it’s exactly the same question with roading, of course.

💬 Hon Members: Fuel tax! Excise tax!

The Government makes investments—yes. And this is the point that Mr Bishop forgets about this bill as well: this bill is about rail making user charges and paying into the National Land Transport Fund—that is what this bill does. So the objections of the members opposite that, somehow, this is about a free ride for rail are utterly spurious, because the bill itself says that rail should make a contribution and then, as a Government, we make rational decisions. That is what they are arguing against—they are arguing against an integrated transport network and a mode-neutral approach to making transport investments. That is the core of it—the National Party’s fundamental, unhealthy, almost screwy sort of love affair with as many big roading projects as possible at the expense of actually making the best transport decisions that are available.

Let me make this point as well, the point around cross-subsidisation. Under the previous Government, in 2016, KiwiRail actually undertook a study that was carried out by Ernst & Young that actually looked at the economic contribution of rail to New Zealand’s economy. What the Ernst & Young study revealed was that, actually, rail delivers $1.6 billion of benefits to the transport system.

💬 Chris Bishop: Oh yeah.

This was a study that Mr Bishop scoffs at that was carried out under the previous Government in 2016, and they suppressed it—$1.6 billion of decongestion benefits that the rail system at that point in 2016, as parlous and rundown as it was, delivered to the broader transport system. So those members shouldn’t talk about cross-subsidisation unless they are prepared to look at the benefits from rail that actually accrue to the rest of the transport system as well. That goes to the very point about this bill. It is just stupid policymaking to put our transport modes in different buckets and not have an integrated transport planning and funding process. That is all this bill does. What do those members object to about having a transport funding mechanism whereby we say “We’re mode-neutral and we make the decisions based on the best investment and the best outcomes for New Zealand’s transport network.”? It is bizarre that the National Party can’t deal with that.

This bill is important, and at each level it ensures that rail is brought into the transport planning process—in the National Land Transport Fund, but also at the regional land transport planning level. Members and people watching this debate may not be aware, but we do have a regional land transport planning process, whereby territorial and local authorities and local residents can front up to a committee—I think it’s about once every three years—that makes decisions that feed into the national land transport planning process about what the important projects might be in each region, and I have gone and submitted in Auckland to that effect. This bill will ensure that at that level as well, people, whether they’re in Auckland or Wellington or Christchurch or the regions, are able to front up to their regional land transport planning committee and actually talk about the investments that would make a difference in their area. They can advocate for roading projects and they can advocate for rail projects or other transport modes. Again, it’s actually about having an integrated approach at every level.

The story of rail in New Zealand is one of a nation-building piece of infrastructure. You only have to go back to the 1880s and Julius Vogel and his vision for a connected New Zealand in which people and freight could move around. It was an essential part of the building of this country. But then, in a period of significant decline and rundown and abuse through the 1980s and 1990s—rail was, of course, privatised during the 1990s, under the National Government of that era—it was shamelessly asset-stripped by foreign corporate raiders. Hundreds of millions of dollars were, basically, stripped out of that system and taken overseas by fat cats, and New Zealand was left with a rail system inherited by the fifth Labour Government that was utterly on its knees. So I pay tribute, actually, to the Government, and particularly Michael Cullen, who intervened to make sure that New Zealand had a functional rail system. Without that decision, New Zealand’s rail network was in absolute dire straits.

Since that time, we have actually seen a significant renaissance of rail, whether it’s on the freight front or whether it’s in our cities, where investment—which mostly commenced under the fifth Labour Government—has delivered massive increases in patronage. Commuter patronage in the Auckland region since 2010 has gone up, I think, by about four- to fivefold, or 400 to 500 percent—absolutely outstanding stuff.

This bill, which comes out of the Future of Rail report initiated by this Government—and I acknowledge our partners, New Zealand First and the Greens, who have been right in behind this—is about building a viable future for rail, a mode-neutral, integrated planning and funding system to deliver the best possible transport network for New Zealanders to get people and freight moving freely around our country. It is bizarre that the National Party opposes those things, but not surprising, given their bizarre, anti-rail bias. But I think that New Zealanders in the cities and the regions all over our country are going to be right behind this excellent piece of legislation and the further renaissance of rail under this Government. Thank you, Mr Speaker.

Thank you, Mr Speaker. Well, that previous member—why, why was he so relentlessly putting the boot in to his own team? He talked about Michael Cullen. Well, Michael Cullen’s philosophy was “sell low, buy high”, and over that side, they call that investment. Well, we can guess where it’s going to lead to, if that’s their approach.

He talked about the model that KiwiRail operates under now and he spent minutes telling us how poor it was, but who set it up? It was the Hon Dame Annette King, and he’s just told us how rubbish she is. That’s absolutely terrible. Look, I’ve got more respect for Dame Annette than that, and certainly a lot more than Mr Wood does.

But I want to talk about the three elements that are really behind this bill but that aren’t explicit in the words, though they are the true reasons behind it. The first is they are blinded by ideology—particularly, two of the three governing parties—where they have this romantic love for rail, often couched in terms of emissions reductions, but this is one of the few items that the three governing parties can actually agree on. Labour and the Greens just see it as this ideological bent they have for “If it’s rail, it must be good.”, but for New Zealand First, as long as it is reminiscent of the 1970s, they are into it. I mean, you only need to look at their economic policy to see the truth behind that statement.

So what we have is them trying to say “We’re going to do whatever it takes to have more rail.”, and they try to claim that if only the public would agree to investment in rail, it would shine through and everyone would see it as the greatest thing since sliced bread. Well, here’s the reality: New Zealand’s had a rail network for 100-odd years, and people have been able to shift themselves or their goods on that rail network. If it was the optimal choice, then passengers and companies moving goods would be using it, and here’s the thing: if they were using it, then it would generate revenue and profit and it would have been able to reinvest that in its stock and its tracks, and it could have done the renewal they are talking about. It’s the failure of rail to meet customers’ needs which drives the problem here.

All they are saying is “Let’s take some of the taxpayer money and make a bad situation even worse.”, because, as far as they’re concerned, if it’s rail it must be good, which brings us—

I’m sorry to interrupt the member.

Debate interrupted.

The House adjourned at 6 p.m.