Budget 2008 includes $690 million in capital funding to buy back the rail system after 15 years of private ownership, Finance Minister Michael Cullen confirmed today.

On 5 May, Prime Minister Helen Clark and Dr Cullen announced that the government had agreed to proceed to purchase the rail and ferry assets held by Toll Holdings Ltd for a purchase price of $665 million. An additional $25 million is included to cover the costs relating to the lease arrangements applying to Toll Tranz link and the secondment of staff from Toll Australia for a period of up to eight months.

“Rail will be a central part of building a truly sustainable and highly efficient transport sector in New Zealand,” Dr Cullen said.

“With rising awareness of the challenge of global climate change, many nations are turning to rail as a key component of 21st century economic infrastructure. The government bought back the track system in 2004, and with the full rail system back in public ownership from 30 June, New Zealand will be able to develop an integrated land and sea transport strategy.

“The selling off of the rail system in the 1990s was a painful experience for New Zealand. Despite the progress made by Toll in lifting rail volumes in recent years, it was clear that private ownership of the rail system was always going to require significant government subsidisation.

“This included not just the ongoing shortfall on the Rail Access Agreement, but major investments in capital rolling stock from next year. The subsidy required would have totalled in the hundreds of millions of dollars over the next decade, and further into the future.

“The government believes that the public would find the perpetual subsidisation of private profits for an Australian firm which also had a monopoly until 2070 to be untenable.

“With rail back in New Zealand hands, we can invest in a rail system that delivers for the economy and our communities, especially in provincial New Zealand.

“In the months ahead, I will present a short to medium-term plan for investment in both rolling stock and improvement of the track. I will also release full details of the purchase and transition agreement, including the debt we will take on from Toll, as soon as I am legally able to do so.”