Finance Minister Nicola Willis defends $2000 a day ferry advisors, says ‘KiwiRail got us into this mess’

Finance Minister Nicola Willis has defended wanting independent advice on the future of Cook Strait ferries from experts charging $2000 a day, “given KiwiRail got us into this mess”.

The Herald has revealed members of the ferry ministerial advisory group have been paid more than $80,000 between them since being appointed just two months ago.

The group was announced after the Government refused to give KiwiRail more money for its mega ferry project - leaving the plan to replace the ageing Interislander fleet dead in the water. Overall costs, including new terminals and wharf upgrades, had ballooned to almost $3 billion.

KiwiRail is now negotiating the exit from a fixed-price $551 million contract signed with Hyundai Mipo Dockyard in 2021.

Willis told Newstalk ZB Wellington Mornings host Nick Mills that paying these advisors was hundreds of millions of dollars cheaper than going ahead with a failed project with large cost escalations.

“These are people with real expertise in terms of ferry business, infrastructure procurement, commercial contracting, freight, governance, government enterprises, and those skills are what we need right now to get a good decision that means we can replace the existing ageing ferries and ensure safe, reliable ferry services,” Willis said.

“The alternative is that we continue to rely only on KiwiRail for information and advice and our concern as a Government was, given KiwiRail got us into this mess, it wasn’t appropriate to simply rely on their advice.”

Willis said it would not be sensible to rush into making the wrong decision and repeat mistakes of the past.

“The lack of a back-up plan here is not the fault of an incoming Government who are faced with a blown-out, disastrous project,” she said.

“The lack of a back-up plan goes to both KiwiRail, who at no point actually created a back-up plan of their own, it also goes to the previous Government, who didn’t have a back-up plan in place.”

Labour's Wellington issues spokeswoman Ayesha Verrall says the former Government did not accept the cost blowout. Photo / Mark Mitchell

Labour’s Wellington issues spokeswoman Ayesha Verrall, who joined Willis on Newstalk ZB, said the former Government did not accept the cost blowout KiwiRail presented to them.

“We were in the process of working with them to make sure a more acceptable price could be arranged. So it’s not the case to say that we accepted the cost increases that were there in that project,” Verrall said.

“We saw value in staying at the table and not necessarily incurring the costs that have now been sunk and staying at the table and seeing if something better could be done. Unfortunately, we no longer have that option because the deal has been totally scrapped.”

KiwiRail’s cost blowout came to a head last year in the lead-up to the general election.

In February 2023, KiwiRail told the Government the overall cost had escalated to $2.6b.

Ministers wanted the state-owned enterprise to provide further information and work with officials to look at different options.

KiwiRail went on to review all aspects of the iReX project to make sure costs were being managed prudently.

In September 2023, Cabinet made an in-principle funding decision to help plug some of the cost escalation, but it was not enough to complete the full project.

The 2023 general election brought a change of Government and Willis was informed of the new $2.6b cost during coalition negotiations.

She received written briefings from KiwiRail regarding the iReX project on Thursday, November 30 and met McLean and Reidy again later that evening.

By then, the cost had escalated to $3b.

On December 13, Willis issued a statement saying the Government had declined KiwiRail’s request for an extra $1.47b for portside infrastructure.

Georgina Campbell is a Wellington-based reporter who has a particular interest in local government, transport, and seismic issues. She joined the Herald in 2019 after working as a broadcast journalist.