Railway administration has reflected public expectation of rail’s social and economic role

Changes in the way railways in New Zealand have been administered reflect their lessening influence on everyday life and a growing expectation that they should be commercially successful.
For much of the last 150 years, railways have been run by a Government department, headed by a general manager responsible to a Minister of the Crown.
When the growing dominance of road transport in the second half of the 20th century consigned rail to a specialist role in moving bulk goods and urban passengers, a different administrative model was considered more appropriate.
That led to the introduction of models intended to place railways at arms’ length from politicians and promote a commercial approach.
It was a very different from rail’s beginnings when provincial councils had a railways department headed by a general manager. With some occasional variation, this was the model adopted after the provinces were abolished and the Government took over their railway functions.
The early architect of the railway network, Sir Julius Vogel regarded railways as a nation builder rather than a business. His views were echoed some 50 years later in the 1925 New Zealand Government Year Book: “The railways in New Zealand have never been regarded, or run, as a profitmaking concern,” it said. “Even if practicable, there is little doubt that such a policy would not meet with the approval of the public, nor would it bring about any material improvement in the condition of affairs as a whole”.

In 1878 two Railway Commissioners were appointed, one for each island. Divided control was deemed unsuccessful and was followed in1880 by the appointment of a General Manager responsible for all opened railways. Responsibility for railway construction was vested in the Public Works Department.

Early New Zealand governments avoided the proliferation of portfolios. As a result it was not until 1895 that the first Minister of Railways, Alfred Cadman, was appointed by Prime Minister Richard Seddon.

Apart from an autonomous Railway Commission of 1889–94, and the quasi-independent Government Railways Board of 1931–36 – the railways remained under direct ministerial control until the mid-1980s.

The Government Railways Board of 1931-36 was the result of a Government Commission of Enquiry into Railways. It was formed in the depths of the Great Depression and was an early attempt to separate Railways from direct political control.
A Board member, Daniel Rees recalled the experiment in a book called Was it all Cricket?: “It was a good board, and was given almost unlimited powers,” he wrote. “The Minister of Finance alone had any legal authority over us and then on matters of finance only.
“The Board quickly saw the wisdom of shielding the management from all interference of a political character. The effect was most gratifying and, although it took time, the result was administrative control comparable with privately owned industrial concerns.”
The experiment ended with the in-coming Labour Government who in 1936, restored the departmental model. Things were to stay that way until the gradual deregulation of transport freed road transport from restrictions on how far they carry goods and impacted on railways finances.
The 1977 abolition of the old 40-mile limit, allowing road transport to compete with rail over a new limit of 150 kilometres, created competition on key routes like Auckland-Hamilton, Hamilton-Tauranga, Wellington-Palmerston North and Christchurch-Ashburton.
The Railways response was to highlight it’s “rock and a hard place” position. The General Manager of the time, Trevor Hayward, released the first of a series of booklets entitled Time for Change which took the Railways case to the public. 
But rather than arguing against road transport deregulation, he explained the challenge Railways faced providing loss-making public services.
He foresaw a future for Railways based on expanding commercial services, continuing services that provided a social benefit – but in a transparent fashion and cutting those services that couldn’t be justified.
On 30 July 1981 the Government introduced legislation changing Railways into a state-owned corporation from 1 April 1982.  It came with a seven-person board, loans being converted to capital and greater commercial freedom.
The Minister of Railways at the time, Aussie Malcolm, said: “Railway problems are not such that a totally revolutionary approach is warranted. Instead, what is needed is a strengthening in commercial outlook and a freeing up of many of the day to day decisions from the political process.”

But the complete removal of road transport distance restriction in 1983 compounded the challenge facing rail which depended on freight for almost 70 percent of its revenue. Trucks which had carried around 50 percent of land transport freight in 1972 were carrying more than 80 percent by 1993.

The international consultancy firm, Booze Allen Hamilton, were engaged by Railways to make recommendations on improving the business’s efficiency. The  options they provided triggered changes in Railways’ organisation which altered structures, reduced services and cut staffing numbers dramatically.

In spite of a campaign slogan to “save rail” the incoming 1984 Labour Government did not find itself in any position to live with significant railways deficits.

In 1982, Railways had employed around 21,000 people. By the time the business was sold to the consortium that was to become Tranz Rail, staff numbers had been reduced to less than 5,000.

The New Zealand Year Book of 2010 records that losses continued to be a problem. In the economic statement of 20 March 1990 the Minister of Finance reported that the corporation had an accumulated debt of $1.1 billion and that the Government was considering future restructuring options for the corporation and had passed legislation to put its operations on a more competitive footing.

As a result, in 1990, the operating assets of the Railways Corporation were transferred to a limited liability company under Government ownership, New Zealand Rail Ltd.

Three years later, in 1993, the company was sold to the consortium that later became Tranz Rail.

Sources: New Zealand Railways, the First 125 Years, David Leitch and Bob Stott, 1988; New Zealand Government Year Books. Victoria University, New Zealand Electronic Text Collection.