NZTA failed to properly regulate transport sector, review finds

A review has found there was a failure by the country’s transport agency, NZTA, to properly regulate the transport sector.

Transport Minister Phil Twyford said the Government is acting swiftly to strengthen NZTA’s regulatory role.

“It found previous transport ministers had directed NZTA to focus on ‘building roads’ at the expense of keeping people safe,” he said.

The independent report found in the time period 2007-2015, the Ministry of Transport’s monitoring of NZTA was “not fit for purpose and would not have identified significant performance issues”. During that period National was in Government from late 2008 onwards. 

The report said there had been no single cause for the failure, “but rather a series of underlying factors”.

The Government is adopting all recommendations of the report, including appointing a director responsible for all of NZTA’s regulatory functions and powers and allocating $45 million into NZTA’s regulatory function.

Two reviews were carried out, one which looked at the Ministry of Transport’s role in monitoring NZTA and another into NZTA’s regulatory performance.

Mr Twyford said the review was carried out to keep the public safe.

“There are real lessons to be learned so we can have confidence in NZTA. We’re cleaning up a mess here,” Mr Twyford told media this morning.

He said the systemic failure of NZTA’s regulatory role had been a contributing factor to the “blow out” of deaths and injuries on the road over the last 10 years.

The report described NZTA as treating those they were supposed to be regulating, such as WOF providers, as customers, instead of treating the travelling public as their customers.  

Ministry of Transport’s chief executive Peter Mersi said the Minister shared responsibility for the regulatory failure, and called the report a “wake up call for the Ministry”.

He said prior to 2017, the Ministry’s monitoring function “wasn’t always able to capture information regarding NZTA’s regulatory performance, nor did we highlight our concerns to the Board in strong enough terms”.

NZTA board chair Brian Roche said work began to resolve the issues as soon as they were identified.

“Our regulatory function is already in a very different place. We have set a goal of becoming a best practice regulator and we will work relentlessly to get there.”

The report found there had been issues with NZTA including a lack of clear regulatory strategy, lack of regulatory scope, issues in decision making, applying sanctions and its focus.

In a statement National’s transport spokesperson Chris Bishop says NZTA was a high performer under the previous National Government and the agency now, under Phil Twyford, is “dysfunctional”.

“Nowhere in the review’s findings does it say that NZTA disregarded public safety, and for Phil Twyford to suggest otherwise is simply misleading,” Mr Bishop says.

“In fact, the report actually says NZTA has a regulatory workforce that is passionate about land transport safety.

“Under National, the NZTA was renowned as one of the highest performing agencies in Australasia. Today, under Phil Twyford, it is dysfunctional.

“National is unashamedly focused on building safer, more efficient roads because safer roads save lives. The road toll was flat-to-falling during our term in Government.

“The current Government’s focus on building a slow tram in Auckland has come at the expense of delivering safer roads. It’s shameful that Phil Twyford has cancelled 12 roading projects across New Zealand that were ready to go, despite a $7.5 billion surplus. People will die unnecessarily because of this.”

The review was sparked by the death of passenger William Ball, 65, who was killed near Dargaville in January last year after his frayed seatbelt malfunctioned during a crash.

Road user bill hikes after road safety regulatory failures

Road users are set to foot the bill for improved safety inspections, after years of patchy oversight and dodgy warrants of fitness.

National's transport spokesperson Chris Bishop and Transport Minister Phil Twyford.

National’s transport spokesperson Chris Bishop and Transport Minister Phil Twyford. Photo: RNZ

The government said the failings, detailed in two reviews released on Wednesday, contributed to the rising road toll, and it wanted to set things right.

Transport Minister Phil Twyford laid the blame for a rise in deaths on the roads squarely at the feet of the previous National-led government.

“We are cleaning up a mess here that was left by the former National Government, the report clearly documents massive regulatory failure for the nine years National was in office.

“The report clearly states that the priorities and incentives were wrong and that the Transport Agency was encouraged to focus on building roads at the expense of its regulatory mandate,” said Mr Twyford.

But National’s transport spokesperson Chris Bishop rejected that.

“I think it’s disappointing that Minister Twyford is potentially using what is a very serious issue to make a series of political attacks on the National Party, that’s not what the report says.

“The report makes it clear no one single person is to blame, no one single event is to blame, there was an accumulation of problems,” he said.

The final report, reviewing the Ministry of Transport’s oversight of the NZTA, did not blame anyone for a rising road toll, but Ministry chief executive Peter Mersi said the report was a “wake-up call” and the Ministry must share responsibility for regulatory failure.

As a short-term boost, the NZTA would get $45 million for operations and safety inspections on vehicles caught up in warrant of fitness failings.

But the papers released said there was no mechanism for funding NZTA’s regulatory work in the longer term.

Mr Twyford said early next year Cabinet would look at bringing in a system, recognising that better enforcement benefits all road users.

“We are going to commence a funding review of the Transport Agency so full policy process to consider exactly the capability that’s needed, how much extra that it’s going to cost and how that will be funded,” he said.

Road Transport Forum chief executive Nick Leggett said everyone behind the wheel could be forced to pay up under that new system.

“We have some concern because it sounds as though the government has a plan to add more costs to all motorists and transport operators.

“We really need to see more detail about that and also understand the definition of what the problem is.”

Added costs of regulation

Mr Leggett said truckers could not afford new levies… and did not want to see a swing from under-regulation, to expensive over-regulation.

“Another added cost, and it’s not just the financial cost of more regulation, it’s the time taken in having to jump through red tape and hoops that will actually slow down productivity.”

A Cabinet paper also said NZTA would demand that garages and certifiers had higher insurance cover.

A truck certifier – who RNZ agreed not to name – said his guess was his insurance premiums will double or triple and he would have to pass that cost on to customers.

Motor Trade Association head Craig Pomare said many garages had ignored his recommendation to have a million dollars liability cover.

He said the NZTA insurance rules were too vague and needed tightening – even if it cost businesses more.

“The regulation is too wide, whatever is required to cover the expected risk, well… who knows what that is.”

The NZTA also confirmed that next month it would stop giving out free warrant of fitness vouchers, and customers with dodgy WOFs would have to go back to their garages to seek costs.

Mr Bishop said National would scrap any government policy that lumped more levies on drivers.

Whopping $5.3 billion increase in the value of the national rail freight network

Crown financial statements detail whopping $5.3 billion increase in the value of the national rail freight network to $6.3 billion with valuation done on a public benefit basis rather than a commercial basis

A change in the way the national rail network is valued means the Government has increased its carrying value by a whopping $5.3 billion to $6.3 billion.

This is disclosed in the Crown’s June year financial statements released on Tuesday.  

“Following a review to consider the context of KiwiRail’s purpose within a multi modal transport system, the underlying assumption of the benefits of rail were reframed as: ‘Rail enables access and mobility, transporting people and goods to where they need to go, supporting productivity and business growth, reducing emissions, congestion and road deaths, and strengthening social and cultural connections between communities’. As a consequence, a valuation for the rail freight network that only reflected its cash generating potential was no longer appropriate,” Treasury says.

“These financial statements include the valuation of all the rail infrastructure using an Optimised Depreciated Replacement Cost [ODRC] method. To the extent that the assets deliver public benefits and would be replaced, a replacement cost approach is used, depreciated to reflect the extent the assets are through their useful lives. The valuation is ‘optimised’ by reporting components within the network that do not produce benefits, as surplus assets that are measured at their recoverable amount.”

“The impact is to increase the value of the rail freight network to $6.3 billion compared to a value of $1.0 billion that would have been reported under the previous basis,” says Treasury.

The Crown accounts also show a reversal of KiwiRail’s previous impairment expense of $2.6 billion, resulting from the change in the valuation approach of the rail network from a commercial basis to a public benefit basis.

Treasury notes the rail network comprises around 3,700 kilometres of track, excluding yards and sidings, and is used primarily for freight transport. It is, however, also used by KiwiRail for long distance passenger transport and access is provided to the Greater Wellington Regional Council and Auckland Transport regional authorities for metro passenger services. The rail infrastructure earns revenue from freight and long distance passenger charges. Network access charges are also collected from the two regional authorities for the metro services.

“Since the restructuring of KiwiRail as a profit-oriented entity in 2012, the rail network infrastructure used for freight services, including dual use assets required for freight operations, has been valued at fair value, reflecting the recoverable amount that could be expected to be received from a third party in an orderly transaction. The portion of dual use assets not required for freight operations and metro only assets were reported in these financial statements at an optimised depreciated replacement cost basis, reflecting the community benefits of this investment rather than treating this portion as a cash generating asset at a whole-of-Government level. Those valuation approaches reflected the government purpose in holding the assets,” Treasury says.

KiwiRail ‘remains a profit-oriented entity’

Treasury notes last year’s financial statements disclosed that the Government had initiated a rail review. This recognised the challenges in making investment decisions, marrying the duality of commercial “for profit” activities aligning a State Owned Enterprise’s commercial mandate with other “public benefit” activities that deliver social benefits instead of commercial returns, and integrating short-term funding commitments with investment decisions for long-life assets.

“The findings of the Review of Rail were reported to Ministers in May 2019, who noted that all rail, including freight, contributes to national and regional economic growth and reduces emissions and congestion, reduces road deaths and injuries, facilitates wider social benefits, and provides resilience and connection between communities. The report also noted the necessity of continued commercial disciplines and focus of KiwiRail to support efficiency in asset management, and to drive commercial returns from the provision of freight, property and tourism operations,” Treasury says.

Cabinet agreed in principle “to a resilient and reliable rail system to deliver on the outcomes for transport and wider benefits the Government seeks.” Budget decisions were made on this basis.

“As a consequence it is no longer appropriate at the whole-of-government level to reflect the rail freight network as a cash generating asset, ie, at its recoverable amount, given the wider reasons for the Crown’s investment in the rail infrastructure. This changed view at a whole-of-government level does not affect the treatment of the assets in the financial statements of KiwiRail itself, as it remains a profit-oriented entity.”