Editorial: Pitfalls in buying back rail

Some of Tranz Rail's biggest customers have banded together to urge the Government to buy back the network. Not the trains, you understand, just the tracks, signals and other infrastructure, and the obligation to maintain them. This, they argue, will relieve the ailing operator of an unfair burden and enable it to compete more equitably with road carriers. And for the country, they add, it opens the tracks to the possibility of competing operators.

It is an enchanting theory but Aucklanders could mention that they have heard it before. Exactly the same arguments were advanced when local bodies decided to buy back the rail corridors through the region to improve the city's public transport system.

Public money, they said quite rightly, could not be used to upgrade terminals and extend tracks for the benefit of a monopoly operator. The regional council spent many months trying to negotiate an agreement with Tranz Rail to permit competitive access to the tracks. Eventually Tranz Rail preferred to sell the lease of the corridors for a handsome sum. Since then we have heard little more about competition for commuter rail services. In fact, Auckland and Wellington regional councils are seeking legislative authority to own and run the services themselves. Auckland local bodies are now arguing about which tier of local government, or an arms-length body answerable to it, should own the business and buy the trains.

If in the end the private sector is involved at all, it seems it will be merely to clip the tickets and drive the trains. The important investment decisions - about which trains to buy and how best to finance them, about their costs, capacity, standards, amenities, where they stop and how often it is worth running them - will all be made by local body officials and politicians.

Unless private operators are required to make those investment decisions there is not much point engaging them. The principal costs and risks would fall on taxpayers and ratepayers and the private operator would make an effortless profit. Could national rail services go the same way? The Government, now intimately involved in Auckland's plans after buying back the lease of the region's corridors, will be well aware that public ownership is a slippery slope.

Tranz Rail is a troubled company, as our series this week has described. Its continued operation of trains looks marginal at best. If the Government buys the tracks and a grateful Tranz Rail decides to get out of the business, who would then run the trains? Unless a new, probably foreign, rail company was ready to step into the breach, the call would quickly go out for the Government to reinvent the late, unlamented NZ Rail.

Before we knew it, taxpayers would be subsidising services and receiving annual reports featuring the operating losses that used to be passed off as "social dividends". The wheel would have turned full circle and the country would have learned nothing from privatising the service. The purpose of privatisation is always to test the true economic value of a service by heeding the judgment of those who put their own or clients' money at risk. If those who put money into Tranz Rail have not maintained their investment, we should wonder why.

If the Government is considering buying back the rail network it would need to recover the cost of maintaining it in charges to private operators. Rail customers could find the service no cheaper. In fact, with the likelihood of higher investment in the network, and less efficiency in its administration, costs to users would probably rise, even without the Government running the rolling stock. Once you go down this track it's hard to stop the train.