NZ Herald on SOEs

December 1st, 2010 at 7:32 am by David Farrar

The NZ Herald editorial:

The Party’s finance spokesman, David Cunliffe, raised some eyebrows last Thursday when he spoke favourably of allowing state-owned enterprises to form subsidiaries in partnership with private shareholders.

Could it be that Labour is relenting on the stern anti- stance it adopted under Helen Clark?

Alas, no. Mr Cunliffe was talking strictly of subsidiaries. It would be an enlargement of the state’s role in the economy, not a diminution of it.

Even the Clark Government was open to this idea. Trevor Mallard, urged it upon the when he was minister of state-owned enterprises, though nothing happened.

Mr Cunliffe, in his speech at Victoria University, cited Kiwibank as an example of a subsidiary that had added value to its state-owned parent, NZ Post. The next day he made it clear Kiwibank would be excluded from the envisaged private partnerships.

So alas, it is a policy from the Clark Government.

This policy will not answer the Stock Exchange’s prayers for blue chip listings of public utilities. But unless the National Party leadership has more gumption on that subject in a second term, there is not much prospect of SOE share floats from either of the main parties.

The bipartisan policy on no asset sales is I suspect unique in the developed world. And that is not unique in a good way.

Labour probably wants to sound more moderate and reasonable on a subject such as privatisation, even if its real motive is to increase state participation in the economy.

This is true, but they may find it hard to explain why they are pro-private sector investment in “new” assets ut 100% against in existing ones.

At least the policy Mr Cunliffe has revived, and the Government can readily endorse, opens the way for private enterprise to propose projects to SOEs and tap their resources. That sort of investment could be better for the country in the long run than passive private holdings in the parent utility.

No company should need additional capital unless it has something new to do. In that event, it is sensible to set up a subsidiary to do it.

With the benefit of private investors’ assessments of value, and the discipline of sharemarket accountability, the foal would outshine the horse. The state should open its stable and let all its enterprises reach their potential.

I agree.

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12 Responses to “NZ Herald on SOEs”

  1. Pongo (356 comments) says:

    Float 49% in a retail offer and put the proceeds into the NZ Super fund then NO ONE can complain.
    If they want us to increase our savings then the government need to release their iron grip on our biggest and most investable companies.

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  2. berend (1,602 comments) says:

    DPF: The bipartisan policy on no asset sales is I suspect unique in the developed world. And that is not unique in a good way.

    National voters voted for a big government man, talking smaller government. Spending up, emigration up, debt up, state size up, distance to Australia up.

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  3. Pete George (21,831 comments) says:

    It’s more important that National address this, they are the ones most likely to be able to do something about it. Get a mandate, then do it.

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  4. James Stephenson (1,885 comments) says:

    unique in the developed world.

    Perhaps the problem here is the use of the word “developed”?

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  5. mickysavage (786 comments) says:

    The Herald is right in that this is not a suggestion that Labour would countenance the privatisation of state assets. The emphasis on “new” subsidiaries in David Cunliffe’s speech is confirmation of this.

    And there is not a change of emphasis with PPPs. Labour invited proposals for a PPP for the Waterview connection. The requirement that there is a robust case and that the economic benefits be greater than if the Crown putting up the capital will mean that only the most exceptional of projects would get through. Cunliffe is not ruling them out, but he has set the bar at a very high level.

    And National should come clean and say if they are going to privatise Crown assets if elected next year. Then the voters can have a proper choice.

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  6. burt (7,096 comments) says:

    mickysavage

    That’s a pretty long way of saying “it’s OK when Labour do it”. But good on you for getting past grunting and saying “Labour good – National bad”.

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  7. malcolm (2,000 comments) says:

    Distribute shares to the real owners of the SOEs – namely the taxpayers and consumers of NZ.

    If the government sell or float SOEs, the money will just go down the welfare sinkhole and NZ will have nothing to show for it.

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  8. tom hunter (4,012 comments) says:

    Don’t sweat it Mickey. Come 2017, perhaps even 2014, you and Labour will be back in power and finding that the SOE and general government landscape will be largely unchanged from the last days of Helen.

    Then you’ll be free to boost spending on all those starving, ragged government departments and such like, to make up for the years of National privation, plus more wealth redistribution and – naturally – increased and new taxes.

    I’ll probably vote for your side as I hate the idea of a slow death.

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  9. somewhatthoughtful (437 comments) says:

    How about providing examples of where privatised natural monopolies increased the consumer value and experience, guys?

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  10. malcolm (2,000 comments) says:

    Transpower is a natural monopoly, but the generators are not (Meridian, Contact, Might River etc).

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  11. burt (7,096 comments) says:

    Next will will have mickysavage defending state owned generator profits because it is money collected for the benefit of the people. In the next sentence he will talk about how bad the GST rise was on electricity because it was a highly regressive cost of living increase. Please don’t expect him to understand the similarity of the consequences, it’s a party tribal thing and he’s never going to get it.

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  12. Inky_the_Red (719 comments) says:

    What has happened in the electricity (Generation) Industry proves that a regulated monopoly is better for consumers than a oligopoly.

    Since ECNZ was split (household) electricity prices have increased by about 3 times the rate of general inflation. Profits have poured into the shareholders of Contact Energy and Minister of Finance. For all-purposes this excessive profit is a tax on power users (that is all of us).

    The government should not be selling the electricity SOEs. The government should be uniting the generation assets into a single government-owned entity. As part of this the wholesale price of electricity should be lowered to its true cost and Central Government return it retail businesses to the local community that the fool Bradford made sell.

    I see the big success other SOE sales have been. The government have to buy back rail and Air NZ, the private owners of Telecom failed to invest in the needed infrastructure, BNZ, Postbank (and the other Aussie owned banks) rips off NZ bank users. SOE sales have not improved this country

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