For almost as long as this site has existed, we have bemoaned the double-standard between funding arrangements for road and rail projects. Whereas road projects had a regular budget – through NZTA – and therefore could be planned with confidence many years ahead, rail investments always needed to be made through ad hoc processes and had no long-term funding certainty. This meant that major rail investment decisions over the years, like double-tracking the Western Line, electrification and City Rail Link, were all made only after tortuously long processes with specific arrangements.

This system for rail funding means that the planning of required future investments has also generally been neglected – or undertaken in a way that very much focuses on the short-term. The only exceptions to this, such as the Auckland Rail Development Programme or City Rail Link, are very high level and/or have been led by local government. Often the argument put forward for this ad hoc approach was based around NZTA’s funding being from road users, but this made little sense as rail delivers significant benefits for road users (around $1.4 billion a year of congestion relief benefits according to this report) and NZTA has long contributed to rail service operating costs. In short, rail has essentially been sidelined from the transport planning process, contributing to a poorly integrated transport system.

Fortunately, the government has been working on fixing this problem pretty much ever since they came into power. It seems like quite a lot of work was done through the Future of Rail review, which has led to development of a new and more integrated planning and funding approach for rail. Key components of this new system include the New Zealand Rail Plan as well as the NZ Rail Legislation Bill.

The NZ Rail Legislation Bill had its first reading in parliament last year and is now open to submissions – which close at midnight on Friday. You can have a read through the whole bill here, but what it does is summarised below:

The objective of the Land Transport (Rail) Legislation Bill is to implement a new planning and funding framework for the heavy rail track network (the rail network) owned by KiwiRail. This new framework involves bringing planning and funding of the rail network under the land transport planning and funding regime set by the Land Transport Management Act 2003 (the LTMA).

Under the proposed rail planning and funding framework, funding for the rail network will be channelled through the National Land Transport Fund (NLTF). A statutory rail network investment programme (an RNIP) will be established, which the Minister of Transport will need to approve in consultation with KiwiRail’s shareholding Ministers. This will allow the rail network to be funded from the NLTF.

These changes will also ensure enable track user charges to be established through regulations. This will ensure track users contribute to the costs of the rail network in a fair and transparent way.

Key changes proposed by this Bill include:

  • implementing a new planning and funding framework for the heavy rail network owned by KiwiRail.
  • the rail network funded from the National Land Transport Fund and give Rail Ministers decision-making rights on funding rail network investments.
  • amendments the LTMA and the Land Transport Act 1998 to implement the new framework, and bring the planning and funding of the rail network under the land transport planning and funding regime set out in the LTMA.

Generally the bill is an important step towards a more integrated transport planning and funding system and is worth supporting for that reason alone. But reading through the details and background of the bill, it seems like it’s really only a step towards a fully integrated approach to rail funding and planning. In short, while NZTA will be required to make a funding contribution to rail projects (which means there will be a more stable source of funding that doesn’t require ad hoc government decision-making on a year by year basis), the planning of rail networks will still occur through a somewhat independent process of everything else – both through the NZ Rail Plan (of which a draft was published last year) and this new document called the Rail Network Investment Programme.

This ‘partially integrated’ approach was considered alongside a more integrated option in the development of the legislation.

Even this more integrated option – which would have given local government more influence over the development of the rail network investment programme and the prioritisation of rail investments – feels like it still treats rail too separately from the rest of the transport planning process, but it certainly would be better. I hope that KiwiRail and the other transport agencies work extremely closely together to develop the network investment programmes.

At its first reading the bill was opposed by National, with their transport spokesperson Chris Bishop essentially stating that they felt the status quo was OK:

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.

I’m expecting the bill to pass into law and it doesn’t seem like something a future government would necessarily prioritise reversing. Nevertheless, it is worth putting in a submission that supports this step towards a more integrated transport planning and funding system – while also suggesting that they reconsider the ‘full integration’ option so that investment prioritisation is truly undertaken in a multi-modal way through Regional Land Transport Plans like everything else.

You can make a submission here.

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  1. “ We think that having NZTA as an SOE that has a for-profit motive and is run under the Companies Act is something that would be 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, tax payers will end up cross-subsidising road users on uneconomic routes that road 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.”

    1. I’m just trying to imagine roads run as a for-profit. Road users covering all the costs they impose on society… do you think we need Bishop to confirm he means this? Public health, social, climate costs?

      Boy they’d quickly put all the freight they can onto rail, and there’d be a quick switch to sustainable modes, eh? Carbon pricing would shoot up above Scandinavian countries and we’d see a cycling network establish quicksmart.


      1. “Road users covering all the costs they impose on society” isn’t a bad idea.

        Congestion charging takes a bit of set-up, but you could cover the rest of the costs easily enough through the fuel tax / RUCs.

  2. The claim that road transport is funded by user pays was always weak, and is getting weaker as this infrastructure boom grows, because:

    1. user charges only cover a part of the direct (financial) costs (100% State highways, 50% of local roads, 25% PT operational costs).
    2. very few of the indirect (economic) costs it lumbers on society, eg death and injury, public health burdens, environment cost, social costs such as severance, etc
    3. increasingly general taxes are being used direct to fund it anyway, like this latest plan, which, along with all interest, is not funded from user charges at all.

    1. This needs to be sheeted home.

      And with borrowing, it’s not even our general taxes, but the general taxes of our children.

      Also, even the neolib strategy accepted that road user charges needed, ethically, to fund safe cycling and walking, since driving is what presents the risk to people using those modes. So there’s an enormous deficit to pay from road user charges to establish those safe networks which were so arrogantly ignored.

        1. Yes, and the land cost they’re referring to there is simply of the first order – the space given to parking. Whereas the land cost involved in a car dependent sprawl city vs a compact city with sustainable transport is massive, and requires more analysis of the second and third order effects.

          They also mention social costs from the lack of access that car dependency causes, but don’t attempt to monetise them.

          Good analysis, still understating the subsidy.

    2. Also there is no return on investment. NZ citizens have billions of dollars invested in roads and the land underneath them ($100s of billions I suspect; anyone know the exact number?). And currently that investment is effectively making a loss (we are still pouring in money from rates and general taxes). Some people get a lot back from that investment (trucking companies, people who drive on expensive motorways, people who drive in the city, etc). Some get almost nothing (such as Doris who drives to the shops once a week). The National party wouldn’t run a power company like this (giving away power at below cost price), largely because it causes all kinds of distortions (why not mine bitcoins if power is almost free?). But they quickly lose their ideology when it comes to roads.

    3. So the perennial argument made by the likes of Chris Bishop (and some truckers etc) above that roads are self-funding and therefore good, and rail is subsidised and therefore bad, is, even if you can accept the value judgement (in itself a nonsense), just not support by the facts.

      All transport is subsidised. All transport modes have benefits and costs, and they do not fall in perfect alignment with type. Some rail spending is more valuable than some road spending and visa-versa.

      1. People like Bishop don’t realise if anything goes wrong with the tracks it comes out of KR working budget not the NZTA budget but the broads repairs comes out of either NZTA or Local bodies budgets and with the trucks working in different places the funds may not be from the areas they are based in , i.e local councils rates for the say pot holes they produce .

    4. Your points are incomplete.
      1. The cost of State Highways has been as you say fully funded by the NLTF taken from fuel taxes. For much of the 80’s and 90’s the system was underfunded and governments of both colours took fuel tax money into the Consolidated Accounts to spend on anything they wanted. It is only as the population has grown that they found they couldn’t continue to underfund road transport. The local road 50% share is because roads have an access function that improves value to owners. If the local projects had no local value then they wouldn’t be done.
      2. Road transport contributes to ACC both on the fuel tax and through employer and employee contributions. I accept the value of deaths and injuries are much higher than that but there is a contribution.
      3. The first interest of every Government is to stay in power so I guess they will always offer to do popular things, even when they are in a coalition with those who don’t like it.

      1. Most of the motorway network investment in the 50’s to 80s/90s was funded out of the consolidated fund and that was critical in encouraging so many people to drive and then contribute to the NLTF.

        However in recent times, there have also been considerable investments in the road network not from the NLTF. This is mainly in the form of govt packages from both the previous government and of course just last week the nearly $7b announcement.

      2. “The local road 50% share is because roads have an access function that improves value to owners. If the local projects had no local value then they wouldn’t be done.”

        Ah, rational economic man. If only local politicians didn’t make decisions about value on other criteria..

      3. Yes Matt L. Also we can add in the simple fact that most roads are built by developers with no money at all from the NLTF. So they have zero funding based on user charges.
        As for last week’s package it was the Clark government that moved away from funding based on economic return and moved to funding based on political whim. Now we have what we have, a completely politicised approach where projects get named in election year and are chosen to maximise electoral value rather than any transport purpose.

        1. “most roads are built by developers with no money at all from the NLTF” True, and forever more, their maintenance is a burden on our rates…

  3. Matt
    you said, “We think that having KiwiRail as an SOE that has a for-profit motive and is run under the Companies Act would be a good thing.”

    So what about roads?

  4. I’m confused by Nationals response. The status quo supports non commercial decisions making by failing to ensure transparency of costs on routes, and a constant handout approach for government money.

    Full alignment of rail infrastructure would lead to KiwiRail able to operate as a commercial company as opposed to essentially a government service.

    If National were focused on free market in this area they should still oppose as not going far enough to integrate. Even full integration of operation infrastructure work would not mean road users money went to rail. That would be a seperate prioritisation step.

    1. National are not fiscal conservatives but vested interest gatekeepers. Strangely, because of the incumbent power pattern in NZ this means the closest description of their core constituency is cows and cars. Or rather their owners. No surprise then they are tarmac obsessives, waterway despoilers, and climate change action resisters.

        1. If you insist on snide political comments, at least have the honesty to spell out what you are calling the current givernment.

        2. According to Vance, the coalition of parties that lost the last election by losing support and getting less than half the votes are the real winners, while the coalition of parties that increased their support and got more than half the votes are the “coalition of losers”.

        3. Thank you John D I had no idea what a CoL was. The only losers were the party seen as too toxic to work with by the smaller parties.

    2. National aren’t a party of the free market, they never have been other than a brief attempt by Ruth Richardson between 1990 and 1993.

      1. National in the ’40s & ’50s under Sid Holland campaigned on an anti-Communism/Socialism and pro-free enterprise messages.
        However, their actions when in power didn’t match those words much.

        National was definitely still pro-free market after Richardson was gone and big Jenny was PM. They were just nowhere nearly as much so.

  5. So beyond the modern government speak what does all this mean. Who pays for the track management. If there isn’t enough track user charges to maintain the network who makes up the difference. If Kiwirail makes a commercial loss what happens. Does Kiwirail have all the capital spent on something like the third main put onto its books or is it placed somewhere else. Its all as clear as mud to me. Can anyone help me out.

    1. It means funding from the National Land Transport Fund via the NZTA, as per strategic roads, cycleways and footpaths.

      1. So okay I get the bit about the land transport fund funding rail projects but it is unclear to me what happens to the track access charges. Does Kiwirail pay track access charges to the land transport fund. I would have thought track access funds would have being to cover maintainence.Maybe they have there opex and capex muddled up.

        1. Or maybe this doesn’t do a hell of a lot about anything and allows things to happen if somebody thinks it’s a good idea but then again maybe they won’t and nothing will happen seems an arse about face sort of a project. Maybe this is stage one and they are still trying to dream up stage two and three. All transparent from a transformational government not.

  6. While this is far from ideal and is not transformational, this is further evidence that the current government are a better bet for the next three years than National if you want improvements to PT and rail.

  7. Whatever the reasons, we’ve seen NZTA has been part of the action, or lack of, on the NW, on light rail in general, on funding their favourite road projects from whichever activity class they can get their hands on, on convincing the government that roading spend is a political winner and worthy of financially crippling our kids…

    So if they’re put in charge of rail spend, what do we need in place to prevent ideological sabotage or incompetent bungling (whichever has been the cause of problems to date)?

    1. This is a really good point and I hope someone is forthcoming with an answer. I’m highly suspicious that the existing lack of consequences for holding up vital infrastructure could merge with the semi-frequent need for huge bailouts for rail operations and networks to create a massive financial blackhole for taxpayers, from which the average New Zealander would see little actual benefit.

    2. I agree with you. NZTA should stay out of rail decision making, hence the need for independent national rail entity under the Ministry of Transport to plan, fund and maintain above ground track infrastructure, signalling and train control on ‘open access’ non profit making cost recovery basis, to all rail operators including Kiwirail – the rail operator.

      1. While I agree that NZTA in it’s current state isn’t the best to be funding rail, I think the roads and rail funder should be the same agency.

        This would allow corridors to be assessed in their whole, rather than a set pot of funding for each mode. An example would be a second rail tunnel under the Kaimai’s negating any need for capacity increases on SH29 and SH2.

        1. NZTA is struggling with public transport and I have little faith in NZTA making good decisions in investment in the national rail network without being road bias.

    3. In a perfect world NZTA would be responsible for all national transport networks, and would make decisions without bias to road.

      The organisation just needs running through with a broom to clear out the dead wood from the Transit NZ days.

    4. *A side note with respect to consolidating responsibility and coordinating implementation – an international perspective*

      In Hong Kong, which has a famously efficient rail network, the railways are overseen by the Highways Department. See here: –

      HyD is HK’s most powerful government department and they get local roads and pedestrian provision terribly wrong with the dire effects upon city planning). But the coordination of roads and rail is great.

  8. Bishop’s response is not an economic one. His party prefers roads over rail because the former allows people to carve out their own use through private cars and trucks.

    With rail, you need to share and you do not get that all-important feeling of being in control. It’s how some people manage life’s risks and insecurities.

    That’s a reasonable ideological position to promote but it should not be confused as a rational argument of any sort.

    1. So are we digging up all the roads and shunting people onto trains then? People will still have roads and the feeling of ‘being in control’? Or not being in control if road death toll numbers are anything to go by.

    2. You forgot the bit about them getting major funding from the Road Transport Forum, or whatever is it’s current incarnation

  9. my guess is the nats are pro roads because the people that want to make money out of building roads are funding their election campaign. Bishop will probably be pro tobacco too given his background before politics.

      1. Don’t worry. Nobody has any intention of getting you started on anything. You start yourself on far too much as it is.
        And yup, here you’re going again, with something that’s not even relevant to anything anymore…

        1. Nobody has to be ” appointed as spokesperson” to tell you what is common sense: Nobody wants to get you started talking about anything let alone the trade unions (out of the blue), but you rant away without any prompting anyway.
          If you want to make a bigger noddy of yourself blathering on your confused appreciation of Labour and the Unions with nothing to prompt it: Go on right ahead Vance.

  10. It’s encouraging that KiwiRail have been and are recruiting significantly at the moment so at least they think they are in an expansionary phase.

  11. The utterly unimpressive, mediocre and inarticulate Chris Bishop and how he’s supposedly an up-and-coming star within the National party is a stark reminder of the generally poor level of political leadership in NZ.

    If Paula Bennet wasn’t already.

      1. No really: He’s just as bad if not worse.
        He’s definitely as much of a pillock with a mistakenly inflated opinion of himself as Twyford.

      2. ‘Still way better than the current transport minister!’

        Based on?

        Twyford at least semi ‘get’s it’. He talks the right ideas, understands Urban Development to a certain level. He is just absolutely useless, thus far at delivering anything.

  12. Matt, I’m not clear on whether they have chosen or excluded the council involvement in the RNIP. You say they’ve excluded it, but Michael Wood stated the following in parliament:

    “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. ”

    It sounds to me that they have chosen to include councils?

  13. Thanks for this post, I have just finished reading the Draft New Zealand Rail Plan and it was fascinating seeing what is planned and how much is required just in maintenance after decades of managed decline.
    I will now submit on the Land Transport (Rail) Legislation Bill.

  14. If the government is serious about funding and upgrading the national rail network, they need to treat the rail network as a strategic ‘non-profit making’ steel road asset and on the same footing as NZ State Highway and Regional roads networks, with both being funded from the National Land Transport Fund.

    The national rail network above ground track infrastructure, signalling and train control needs to be separate from Kiwirail Holdings Ltd and be a crown entity under the Ministry of Transport with it own administration to plan, fund, procure and maintain NZ’s rail network across the 14 regions that the rail network covers, to operate as an ‘open access’ cost recovery network to any rail operator whether its freight, freight/passenger like Kiwirail, regional, inter-regional and/or long distance passenger, urban/metro light rail, heritage rail museums, etc.

    The NZ Rail Draft plan whilst focusing on freight which I totally support, its very light about urban, regional and inter-regional passenger rail services other than Auckland and Wellington, regional rail in the greater Wellington region and inter-regional rail between Wellington and Palmerston North and Hamilton and Auckland. This is nothing in the plan about regional and inter-regional rail in the the remain 11 regions like Canterbury region, Otago region, Southland region, etc.

    My other concern is, Kiwirail Holdings Ltd being a SOE has a ‘conflict of interest’ by being the ‘owner’ of the above ground track infrastructure, signalling and train control and being the rail operator, will only maintain the rail network to suits its business interests by not upgrading or closing track that it sees surplus to its business requirements, which could stifle the re-introduction of a national regional and inter-regional passenger rail services unless the government directs Kiwirail not to do so and any other independent rail passenger train services like the Antipodes Explorer, a revamp Auckland to Wellington overnight train service, etc.

    The planet is warming every day and as a country we need to stop looking through our ‘short term here and now’ tinted glasses and start adapting and future proofing if we can, our 2 critical national steel and asphalt transport networks to a warming planet.

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