Oh, This is Rich . . .

Dr Michael Cullen to be Appointed Chairman of KiwiRail

This is one of those ironies that produce involuntary belly-laughs. Sorry--we cannot help it. Some media are reporting that Dr Michael Cullen, former Finance Minister of New Zealand under the Clark Government, is about to be appointed chairman of KiwiRail.

Some bloggers have spat bilious outrage into their cornflakes at the news. We consider it to be delicious. Let's just recap the facts.
Dr Cullen bought KiwiRail from Toll Holdings, an Australian company for $700 odd million, in a deal that the Aussie's quickly dubbed the "Sale of the Century". Toll Holdings could not believe their luck that a politician could be so stupid and commercially naive to pay that amount for a run down, ramshackle rail business--but Cullen and Clark were determined.

Within a year the business was written down to $300m or so; moreover, it turns out (as everyone with an ounce of commercial literacy knew) that in order to operate at even a modicum of efficiency, let alone profitability, KiwiRail required billions of capital expenditure. All up the cost to the tax payer would end up in the three to four billions. This, of course, did not concern the ebullient Finance Minister at the time. After all, it was taxpayers money--and that came cheap. Moreover, he was on a spending binge anyway in an attempt to undermine the National Party's election pledge of tax cuts. You cannot cut taxes when the previous government spent all the fiscal surplus. Cullen wanted to leave the incoming government with an unexploded fiscal landmine.

We will never forget Cullen's crowing in Paliament--"I have spent it all!" as he ridiculed National's pledge of tax cuts.

The incoming Key government has faced hard choices over KiwiRail. It could front up with the required billions of capital investment. Impossible. It could sell it off to some other fool. Impossible. Commercial businesses operating in the real world would never buy the thing it is so derelict. Or, it could manage the company into the ground, letting it gradually run down. The government has accepted this course.

What better outcome than to put Cullen in as Chairman, forcing him to preside over its long, slow, lingering death. It is a Machiavellian master stroke--and one must credit Stephen Joyce, Minister of NZ Rail as an archetypical Prince. Already the Government has indicated it is going to start to close down unprofitable lines. With Cullen now advocating the cause, no-one on the Left can demur. Meanwhile, having bought a lemon, Cullen will have to take significant responsibility for overseeing its rotting away.

Sure, it's not an inexpensive joke. It has cost this country a great deal of money it did not have, and we are all the more poor as a result. But at least this way, there is an ironic revenge, of sorts. Rotting lemons are acutely bitter, yet sweet in a decomposing kind of way. Cullen will have to suck it every day from now on.