Nats fear for KiwiRail after damning Ontrack report

National's leadership say a damning report into Government rail network operator Ontrack bodes ill for KiwiRail which controls the newly renationalised rail assets.

Auditor-General Kevin Brady's report into Ontrack was released yesterday -- the same day Toll's rail and ferry assets transferred into Government ownership.

The report said Ontrack needed to upgrade its own plans and systems before it started a $400 million five-year upgrade of the tracks.

It criticised Ontrack's knowledge of the state of its own network and said there was insufficient planning for the major works it intended to undertake by 2010.

The renewal plan was incomplete, staff were confused about who had responsibility for what, and there was a lack of clear performance targets and standards relating to the network.

The report acknowledged resources had been stretched by a host of problems related to the rundown nature of the network it inherited, but it said the situation needed to improve.

National leader John Key told Breakfast on TV One that while his party would not sell KiwiRail, at least in its first term, it would run it like a business. He was critical of Ontrack.

"(The Brady report) essentially said they're causing more problems than they are solving half the time, there's a whole lot of issues there."

National deputy leader Bill English echoed his views on Radio New Zealand.

He said KiwiRail under National would be run with a strong business-like focus and said Ontrack was a "shambles".

"We need to make sure this doesn't become a black hole for taxpayers' money because it's real."

He said the cost of buying KiwiRail meant less money for schools and hospitals.

Mr Key said the investment, once upgrades were included, could cost as much as $1.5 billion.

"That's an awful lot of money...for a railway. We could have ...structured a better agreement between the Crown which owns the tracks and the operation that was in existence."

However, National would do its best to make it work, he said.

Finance Minister Michael Cullen said Cabinet would consider reinvestment this month.

It would cost about an extra $80 million for KiwiRail to run in a "steady as you go" fashion for the next five years.

But later this month Cabinet would consider a more "aggressive" reinvestment package which would include options for upgrading rail stock, including locomotives.

Dr Cullen said the Government would have had to carry some of the cost of a reinvestment package even if it had not bought Toll's assets, as Toll had said it would not make that investment itself.

KiwiRail would initially be run by an establishment board chaired by former National Party leader and prime minister Jim Bolger, who presided over the 1990s sell-off of rail.

Mr Bolger, who also chaired KiwiBank and NZ Post, said the cost of fuel and environmental concerns had change markedly from when his Government sold off rail.

"The same critics who said we couldn't make KiwiBank work and questioned my motives in being chair of KiwiBank -- we've made KiwiBank a very successful bank...rail is an entirely different thing but I believe we will be successful there too."

The final KiwiRail deal cost the taxpayer $18m more than the agreed $690m purchase price after last minute wrangling with Toll.

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