National is accusing Labour of making unrealistic financial commitments to KiwiRail in the lead up to the last election, claiming that KiwiRail now has “negative value” and further expenditure is under review.

Infrastructure Minister Bill English suggested in the House yesterday that Labour’s pre-election campaign promises concerning the KiwiRail investment were little more than empty promises, carefully orchestrated “press releases” that would end up costing an unrealistic $3 billion.

Former finance minister Michael Cullen had aimed to set aside $1 billion for investment over five years, with a confirmed additional $121 million available in the first year.

This is above Labour’s $80 million dollar firm commitment to new rolling stock, which National announced yesterday would be spent on new Chinese locomotives.

Mr English says that while the government is working on a closer relationship with the KiwiRail board, National would not just “write out a cheque” for a further $130 million without knowing what it was going to be spent on.

Speculation that National is setting the new state-owned enterprise up to fail in order to exit the business were knocked back by Mr English, who argued that Labour left KiwiRail in such bad shape it would be unsellable even if he tried.

"The Government is the owner of a business now that probably has no value, in fact has negative value, having just 8 months ago paid almost a billion dollars for it. We will have to keep this business and try to make it work, because no one in his or her right mind would be willing to pay anything like what the taxpayer has put into it," he says.

Labour bought the state owned enterprise purchased from Toll Holdings in May last year for $690 million, not including around $200 million of debt and other costs, that pushed the cost more realistically toward $1 billion.

The rail network was valued as low as $120 million in 2006.

Allegations that former owner Toll is still getting preferential treatment as part of its sale have angered local freighting companies such as Mainfreight.