The day before today, Nicola Willis told the House that they would have to wait until the ferries announcement for the details about ferries cost etc. It was the same promise Luxon has been making in Parliament over the last weeks and months: the details are coming, the details are there.
But yesterday, as we all know, Willis would not divulge anything and it was clear why:
They do not want to give Kiwis an answer yet.
They said a new entity will be formed, they are starting a procurement process in March 2025, ferries would be smaller, and that they were relying on private firms to offer them solutions.
The expensive “independent advisory committee” that the government relied on for their preferred solution drifted to the background, although Willis answered shiftily that it would be released at some point.
A few days ago, Stuff’s Jenna Lynch said she cited Cabinet papers touting $900m for two non-rail enabled ferries:
As part of the new plan, agreed to by Cabinet, the ships will be smaller than the $551 million ships previously planned.
Stuff has seen part of a paper that went to ministers, which said $900m had been set aside for the ships, while extra has been set aside for landside development costs.
NOTE: That’s a 63% increase on the original cost for the ferries.
It also means the New Zealand government cancelled a contract where we could procure a next generation, size appropriate, and full functionality Mercedes for a Toyota price.
And is now trying to buy a basic, no-frills Toyota Corolla for the price of a Mercedes.
Nicola put down the cost difference to only two points: smaller ships and non “gold plated” ports.
It was frustrating to hear:
There are no gold plated ports and never were - most of the cost over-run, as she knows, was due to the need to seismic upgrade of the ports in Wellington and Picton.
And they are end of life ports so it was perfect timing to match the replacement of the 2029 end of life ferries.
Willis speaks for her audience and the surrogates that help National and ACT amplify their chosen messages - but it was infuriating to feel that she thinks so little of Kiwis to say such misleading words.
Luxon defended her today in Levin - claiming his government was doing a good job on the Cook Strait ferries solution, and telling reporters:
“We want good value for money and a resilient, robust service”
Today though I mainly want to highlight two key points:
1. PRIVATISATION
Although Winston Peters publicly shot David Seymour down after Seymour gloated about successfully privatising the Cook Strait ferry service, the fact is the government’s entire set up - a separate company, inviting private companies to tender, not ruling out privatisation - does have the hallmarks of privatisation preparedness.
As Carl Findlay noted earlier this year:
Putting a private, for-profit gatekeeper at the heart of our national freight system will increase costs to freight customers, see profits go offshore, and cost us much much more than spending the money on publicly owned rail-capable ferries upfront.
Peters needs to be seen to champion the solution - he made it clear in yesterday’s press conference he will want credit for the eventual solution.
A March 2025 procurement start means it will be a long process and one wonders what the government has done over the last 12 months, and how incompetent they have proven themselves to be.
i.e. Despite Peters’ denials, I wouldn’t bet on privatisation being ruled out yet.
2. RAIL ENABLED VS RAIL COMPATIBLE
In late June, it was reported that the government’s “independent” and handsomely paid ferries advisory committee had landed on the government’s preferred solution from the outset:
The group had reported back to Government and had recommended the purchase of new, slightly smaller, but not rail-enabled ferries.
The group was also expected to explore who else should be responsible for paying for upgrades to port infrastructure.
Importantly, National’s 2024 Budget also saw rail budget slashed - particularly in the South Island, leading to speculation it was not going to invest in rail.
Carl Findlay from the Maritime Union:
If they are pressed on the matter, the Government will tell you the iRex ferries were too big and that caused the land-side infrastructure costs to blow out.
But here’s the thing: the majority of any land-side savings that would come with their advised preferred option (said to be two E-Flexer class ships from Sweden-based multinational Stena Line) won’t come from having smaller ships.
… In fact, the smallest E-Flexers are only marginally smaller (and, in the 2024 market, likely to cost more) than the ‘mega’ ferries the Government has been deriding as too big and too expensive – and they’ll still need new wharfs.
The only land-side ‘savings’ with E-Flexers would mostly be the result of getting rid of rail capability and not having to upgrade the rail infrastructure at Wellington and Picton terminals.
We estimate those savings are likely to be in the low hundreds of millions of dollars.
A lot of money but still far less than is likely to be lost on the cancellation of iRex, and only a small portion of what will need to be spent on our ageing terminals regardless of what kind of ferries end up using them.
And to reiterate: any saving on removing rail capability will come at the expense of higher freight costs for New Zealand businesses and our economy and the risk of making our domestic freight market significantly less competitive.
He goes on to say:
Talk in the industry is that the Government’s plan is for a Private Public Partnership via a Schedule 4A company (where the Crown is the majority or sole shareholder) – probably in partnership with Stena Line and probably including some kind of ship-leasing and private operation arrangement.
This is likely the only way the Government could claim to have shifted some of the immense cost of this decision off their books.
Or at least muddy the political waters by pushing it out for future taxpayers and freight customers to deal with.
Yesterday, Willis would only use the words “rail compatible” - that is very different to rail enabled and industry experts estimate not having rail enabled will mean:
Kiwi businesses will be paying millions of dollars a year more to move rail freight between the islands.
This is an additional cost that would be locked in for a generation.
We don’t buy new ferries often.
In other words, this government is being true to form in every single policy area - whether health, Maori-Crown affairs, science and technology, freshwater protection, climate - it appears to be trying to make itself look good - at the expense of future generations and cost to taxpayers.
Is this acceptable, New Zealand?
Post-Script
Today, Winston Peters is retrieving the microphone from the Coalition government - he tells RNZ, rail-enabled ferries are a "no-brainer" and insists they will be the cheaper option for the Interislander replacements.
The government has also sneakily shifted the numbers - all prior reports were based on a ~$3bn Kiwirail i-Rex project.
But yesterday, the government introduced a $4bn figure - claiming that was what the old project would have cost - and today Peters says this is what he needs to stay under.
Sneaky.
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