One of the many rule changes that came into effect with last year’s birth of New Zealand’s current Parliament involved urgent debates. It allows the Speaker to announce prior to Question Time that there will be an Urgent Debate, rather than after it (and immediately before the debate). On Tuesday he did exactly that.
Scenes from Parliament on Commission Opening Day 2023 Photo: VNP / Phil Smith
The topic was the recent stranding of the Interislander ferry Aratere. Both Green and Labour MPs had requested the debate, but first dibs and the opening speech went to Labour’s Chief Whip Tangi Utikere.
Plan B anyone?
He outlined the recent event and went on to talk about the current government’s cancellation of a 2021 contract to have brand new ferries constructed in Korea and delivered and operating by February 2026. The ferry contract, he noted, had been cancelled in the face of increasing ferry failures but without any alternative plan.
“The situation is this: what occurred on Friday evening was in the context of having no plan B—no plan B. We are still waiting to hear what their plan is going to be.”
Earlier, during Question Time, Chris Hipkins had repeatedly asked the Prime Minister about the status of the shipbuilding contract. Was it cancelled? If so, at what cost?
The answers were grudging and not filled with detail. Possibly the most detailed response from Christopher Luxon was that “KiwiRail have repudiated the contract, but there's ongoing commercial conversations.”
The Government’s lack of detail on responding to this issue was a recurring theme of the later debate. Certainly not much is known as yet.
”We don't know the full wind-down costs of that particular exercise. It could be $200 million; it could be 300 million. We don't know what the actual break penalty clause is as a result of cancelling these two ferries. It could be $100 million; it could be $200 million. That is on top of the wind-down costs. And then, of course, we have the shipyards that may still very well be building these ships…” – Tangi Utikere.
“…what we've just heard there from one of the shareholding Ministers for KiwiRail …is that despite all of this bluster and approximately 10 minutes in a speech, we have no meaningful plans whatsoever for what is to happen in 2026 and beyond. – Chloe Swarbrick
“…not only the Minister for State Owned Enterprises but the Minister of Transport have told this House that they have had the advice back from their ministerial advisory group, that they have had a discussion about it around the Cabinet table, and that they know what the recommendations of that ministerial advisory group are. They actually have a solution in their heads. They are sitting through this debate, refusing to tell New Zealanders how we will have a resilient Cook Strait connection, and are instead blaming the KiwiRail board, saying that they need to prioritise safety.” – Arena Williams
Repudiation
Later on in the debate the Prime Minister’s word choice during Question Time was teased out by former law professor Duncan Webb – law professors love that kind of thing.
“There's a word that's been bandied about in respect of the iReX ferries: they've ‘repudiated’ them. Now, it's an interesting word to use—you don't see it very often. Here's what it means: we're refusing them; we're unilaterally declining to take them. Now, what I read into that is that the Government is now in a dispute resolution process, trying to find out how much they have to pay in damages for illegally breaking their contract. Now, that's going to be very expensive.
There is a real risk here about our commercial reputation. New Zealand, as a sovereign nation, has a very good reputation for not breaking our promises. We've just broken a $550 million promise with a major commercial player in the marine and wider heavy industry sector. The Hyundai dockyards is not going to rush to build us our new vessels.”
Government responses and costs
Leading off the Government’s response in the urgent debate was the Minister for Transport, Simeon Brown.
Ministerial responsibility is one of the cornerstones of government. As the minister responsible for KiwiRail the metaphorical buck for this issue stops on the desk of Simeon Brown – though that idea didn’t seem entirely familiar to him.
“The reality is this is an issue that KiwiRail, as the owners and operators of those ferries, must take responsibility for. They are responsible for the maintenance of their ferries, and the reality is, over the last number of years, when the last Government was in charge, there was so much focus on the big shiny new ferries, they lost sight of the focus on actually maintaining what they already had—they lost sight on what they already had.”
Government speakers had many things to say about the cost of the now dead iReX project. The two new larger ships were to have cost 551 million. But when you buy new ships you also need to rework the port-side infrastructure to fit them. And those costs had jumped hugely, reaching four times the cost of the ships.
“The landside, port-side infrastructure went from being around $200 million to being over $2.2 billion as part of that particular project.” – Simeon Brown
Duncan Webb agreed the costs had jumped, didn’t accept that there was a blank cheque.
“Now, look, I do want to be clear: I was the former Minister for State Owned Enterprises; iReX was very, very difficult. It's accurate to say that the costs blew out—they did….
“The documents that are now in the public domain will show that I as Minister for State Owned Enterprises, the Minister of Finance, and the Minister of Transport were continually putting disciplines around KiwiRail, both in cost savings and to make sure that they were using their own balance sheet to fund what was possible. But what we heard was a proposal which brought our ferry system into the 21st century, that was rail-enabled so that we can utilise our rail network to its best capacity, that had vessels that were low carbon, highly efficient, and extremely seaworthy, and port-side infrastructure that wasn't aging and falling apart but earthquake resilient. That's where a lot of the money was going: into a Wellington port that would stand up to a major event.”
Green, ACT and NZ First
For the Green Party Chloe Swarbrick called a plague on both their houses.
“I think, just there, members of the New Zealand public have seen a shining example of why it is that we have an approximate $200 billion infrastructure deficit in this country. We constantly see the chopping and changing of legacy parties in charge, binning projects that the other one did not like, with no meaningful plan on the horizon.”
Speaking for the ACT party was Cameron Luxton, whose solution involved a cash register.
“ACT's policy is to add KiwiRail to the mixed-ownership model. By selling 49 percent of the Government's shares, this would ensure KiwiRail has the accountability and flexibility needed to keep the ferry service running properly—100 percent Government ownership means KiwiRail isn't subject to commercial accountability; KiwiRail's investment decisions are dominated by politics rather than commercial realities.”
Interestingly, Mr Luxton’s argument for selling half of KiwiRail sounded a lot like an argument for an increase in back office government workers. Don’t tell David Seymour, but apparently there are nowhere near enough.
“Right now, KiwiRail's commercial performance is monitored by a small, overworked team at Treasury. In Budget '24, the budget for Crown company monitoring—that's all Crown companies; not just State-owned enterprises (SOEs)—was roughly $5 million, whereas the net asset value of SOEs alone was roughly $40 billion. That's a management fee of 0.1 percent. Even the cheapest private equity funds charge around 1 percent plus performance fees. Either the Government is getting a bargain of the century or many taxpayer assets are being seriously under-managed.”
New Zealand First’s speaker had a different problem. Winston Peters had signed and promoted the iReX ferry contract back in 2020 as Deputy Prime Minister, now he was on the other side of the same debate – though not in the House. Speaking for New Zealand First was Andy Foster, who spent much of his speech criticising the deal Winston Peters had signed, but, like Simeon Brown, decided the real blame lay with the servants.
“The big problem here was that KiwiRail, I think, were exceedingly arrogant. I think that what, basically, they assumed is that everybody was going to jump to their tune. That was their assumption, and I'm going to come to some illustrations on that. They ordered the ferries before they had anywhere to put them—they ordered the ferries before they had anywhere to put them. I can remember, at the time when that was news, thinking that is extraordinarily brave—extraordinarily brave—to the point of being reckless.”
It was an impressively rollicking debate, one of the better ones I‘ve heard in recent times. The issue was significant and concrete, the arguments were both varied and interesting. The blame was tricky to pin to a target but in plentiful supply. The debaters themselves were never dull and often rousing.
But mostly, I think the Speakers’ use of the new rule (allowing an hour or so warning that an urgent debate is pending) gave everyone enough time to prepare for something well worth the hearing.
