Has Labour actually gone insane? As in stark, raving, Monster Loony Party mad?
I’m assuming the answer is yes, judging by today’s incredulity-creating announcement that, if elected next year, Labour will essentially nationalise the electricity industry.
This is the sort of policy UK Labour would have had under Michael Foot in the 1970s.
At a stroke, Labour is proposing to dismantle the electricity market, ruin Contact Energy and Mighty River Power and decimate the Government’s share float plans for both MRP and Meridian.
Oh, and sell thousands of mum and dad investors down the Mighty River, since MRP’s share price would almost certainly plummet if the company was forced to retail only through a government department at whatever price it deemed to be fair.
Not just MRP and Contact. Also TrustPower and Todd Energy. Every single generator of electricity would effectively become nationalised as they would only be allowed to sell electricity to the Government at whatever price the Government unilaterally sets.
I’m no fan of high power prices – and I don’t own any Contact or MRP shares – but what Labour is proposing is essentially nationalisation a la Brazil or Argentina. This is Third World, funny-money stuff. Goodness knows what the fi
nancial markets will make of it. And what message does it send to overseas investors?
The impacts of this policy will be felt far beyond the electricity sector.
I’m tempted to see this as a last-ditch attempt to derail National’s plans to part-sell its electricity assets, but if that’s the case it’s going to seriously annoy a lot of investors who were poised to put funds into Mighty River Power.
It’s extremely rare that I agree completely with Economic Development Minister Steven Joyce, but his comment today that the plan was “a return to the 1970s-style monopoly provision of electricity…Only North Korea and Venezuela did not think such ideas are nuts” is pretty much spot on.
I agree with Joyce that Labour is virtually sabotaging the economy.
As does Business NZ, reported here.
Also the Herald editorial is scathing:
Earlier this week, a Herald editorial suggested people thinking of buying Mighty River Power shares had little to fear from David Shearer’s statement that the Labour Party planned to shake up the electricity market when next in power. That, however, was before it was known how far back in time Labour planned to travel and how errant its policy would be.
We need policies for the future, not attempts to turn the clock back.
This suggests nothing less than a return to central planning. It harks back to the situation that pertained before the electricity industry was transformed from a state monopoly into a market supplied by four main generating companies. Mr Shearer seems to be looking at that time through rose-tinted glasses, ignoring the inefficiencies and, most notably, the blackouts that were a feature.
Security of supply would become a real issue. Why would a generator invest in new generation capacity when the price for any power it produces will be unilaterally decided by a government department?
The most unfortunate aspect of Labour’s new policy is that it has identified the problem. “When markets are not truly competitive, excessive profits are extracted from consumers,” David Parker, the party’s energy spokesman, said yesterday. The most logical response, however, is not to return to a failed approach but to provide the setting for competition to flourish. Despite all the criticism of price rises, the market has succeeded to the extent that there has never been a power failure. It also has the framework that offers the best outcome for consumers.
The telecommunications market confirms as much. But making a market truly competitive generally requires a substantial amount of tinkering. Temporary government intervention may be required to facilitate the development of competition. But that is not Labour’s intention. In cahoots with the Greens, it proposes a move which, if implemented, would be every bit as damaging as some of the latter party’s monetary policy delusions.
More and more of the policies being put forward by Labour and Greens are 1970s policies.
Their monetary policy is to go back to pre 1980s reforms. Their welfare policies are to bring back universal child benefits such as we had in the 1970s also.Tags: Colin Espiner, Labour, nationalisation, power prices