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Taxpayers face having to pay an extra $200 million as part of the Government's buy-back of the national rail service.
The extra money - not publicised when the Government announced the deal last week - is a loan to former owner Toll New Zealand from its parent company in Australia.
It is on top of the $665 million price agreed for the country's rail and Cook Strait ferry services, which Finance Minister Michael Cullen has admitted will cost hundreds of millions of dollars to bring up to standard.
This pushes the total cost of the deal, including the planned upgrades, to more than $1 billion.
The Prime Minister this morning said she could not confirm the $200 million loan.
"I can't confirm or deny it," Helen Clark said this morning when she was questioned on TV One's Breakfast programme.
"That's an allegation that's been made. There's still commercial and confidential negotiations going on. It's simply not possible for me to comment."
Last night, a spokesman for Dr Cullen also refused to confirm the loan, citing confidentiality requirements.
"We're asking people to withhold judgment until they see the full details."
The deal is due to be settled on June 30 and further details are likely to be announced before then.
But the Herald understands from a source close to the deal that the loan is part of Toll New Zealand's liabilities, which the Government automatically takes over as part of the deal.
It could avoid paying back the loan only if Toll agreed - which is seen as extremely unlikely.
National's Finance spokesman Bill English yesterday called on Labour to answer questions about the deal so taxpayers knew how much money was going to be spent.
He questioned the deal Dr Cullen had struck, saying Toll had retained the "lucrative" freight arm of the business while the Government had paid more than the rail business had been valued at previously.
Mr English said Toll had also negotiated rent-free use of depot space in prime locations next to rail depots for six years.
"Rumours abound about price discounts for Toll's freight in addition to this sweetener," he said.
Mr English said New Zealand was becoming a laughing stock because of the Government's lack of business sense.
"Taxpayers need to know how much more value Michael Cullen has handed to Toll - in the form of their money - in this desperate election-year lolly scramble."
National is unhappy with the Government's purchase of the rail service, but it has said it would not sell the assets in its first term should it win power at the next election because it has promised to conduct no asset sales in that period.
Labour is trying to sell the deal to the public by saying it will help modernise the transport sector and aid the fight against climate change.
Ministers are talking of the reduction in freight on roads that could come from having a better rail service, although they admit the railway assets are unlikely to ever make money.
Labour is also likely to be hoping for an electoral spin-off from the move to get an important piece of infrastructure back into public ownership.
- With NZPA
