The pitfalls of public ownership

October 4th, 2013 at 12:00 pm by David Farrar

The Herald editorial:

The Green Party has called the Government’s bail-out of “privatisation by stealth”. Would that it were so. The state coal company will cost the taxpayer $155 million under the terms of the bail-out. It would have been more if the banks holding most of the company’s $380 million debt had not agreed to exchange just $75 million of it for shares in the company.

The banks could have insisted on repayment of all the debt, liquidating Solid Energy and costing 1,000 jobs.

But State-owned Enterprise Minister Tony Ryall is saying little to suggest there is any prospect of Solid Energy going back on to the partial privatisation programme with the power generators and Air New Zealand. More is the pity. The rise and fall of Solid Energy is a textbook example of the pitfalls of public ownership.

There is a case for the Government to own some monopolies like Transpower. There is no case (in my mind) for the Government to own a coal company.

Labour’s state-owned enterprise spokesman, Clayton Cosgrove, never tires of the phrase “asleep at the wheel” when blaming ministers for the company’s ambitious investments. But Treasury records show that in 2010, when coal was still booming on China’s continuing steel production and the board of Solid Energy was making big plans to diversify, the Government was cautious.

Indeed. The Government turned down the funding for the big plans. I suspect Labour would have handed over a billion dollars and renamed Solid Energy KiwiCoal.

If world prices pick up and the company can entertain wider ambitions again, it should be sold to the biggest bid. There is no reason for coal to be a state concern and every good reason to relieve the taxpayer of further risk.

Absolutely.

We should sell TVNZ also, while someone will still pay money for it.

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41 Responses to “The pitfalls of public ownership”

  1. Ross12 (1,147 comments) says:

    “The Green Party has called the Government’s bail-out of Solid Energy “privatisation by stealth”. ”

    If that statement doesn’t show the Greens are economic morons, I don’t know what else will. Solid Energy is an SEO –100% owned by the Govt. So how can the owner of a company working out a financial restructuring with it’s banks be termed “privatisation” ? It just shows the idiots have no idea how the private sector operates.

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  2. Redbaiter (7,560 comments) says:

    “We should sell TVNZ also, while someone will still pay money for it.”

    Yeehaaaa…..!

    Let’s do it now..!

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  3. mikenmild (10,630 comments) says:

    Sell TVNZ and concentrate on Maori TV as the nation’s television channel.

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  4. duggledog (1,340 comments) says:

    No, TVNZ actually makes a return. Could sell off TV2 which would be worth a bit, and put TV1 and RNZ into one building (in Wgtn, middle of the country, cheaper) and make them share overheads. Hilarious.

    Maori TV and its frequencies should simply be handed over to Maori who are now separate to everyone else in NZ (by choice). All funding stopped and they can use their own substantial asset base (tens of billions) to fund itself. Sales in popcorn go thru the roof as they fight internally, due to hierarchy and tribalism

    50 odd million a year and nothing to show for it, barely an increase in te reo

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  5. SW (214 comments) says:

    Duggledog: “barely an increase in te reo”.

    That statement is simply wrong sorry: http://www.educationcounts.govt.nz/indicators/main/education-and-learning-outcomes/1887

    “Māori proficiency in te reo has increased significantly since 2001, especially among younger Māori”.

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  6. peterwn (3,148 comments) says:

    Wellington airport is a continuing issue. If the Airport needs further capital, the Council has to contribute one-third of it, or accept the airport has to borrow it (if LVR’s etc allow). Ignorant people are demanding that the 2/3 owner (Infratil) should meet the cost of runway extensions (if it happens) but presumably do not want to see the Council’s share diluted.

    IMO the merits of the extension are marginal. It boils down to whether passengers are prepared to pay an extra $200 each way (at least initially) (my estimate) for the long haul flights that will benefit. Business travellers and politicians would probably pay, but not the average leisure traveller.

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  7. gazzmaniac (2,317 comments) says:

    Duggledog – We have NITV in Australia (it is on the SBS4 digital frequency), and I’d say that at least 50% of the programming is from Maori TV. If MTS was shut down then NITV would have to make their own shows!

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  8. gazzmaniac (2,317 comments) says:

    peterwn – it’d probably be cheaper to just catch a plane to Auckland or Christchurch and catch the long haul flight from there. Or, if heading West, to Sydney or Brisbane.

    As for who funds it, if Infratil foot the whole bill then they’d want to have the council’s share substantially reduced. It is a good example of why councils shouldn’t own airports.

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  9. burt (7,797 comments) says:

    No, TVNZ actually makes a return.

    A perfect example of missing the point….. Should the government own a TV channel ???? The answer is not based on “is it profitable?” … the answer is a principle issue and return on investment is a goal – not a principle….

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  10. gazzmaniac (2,317 comments) says:

    And if it is making a return, maybe it is time to sell TVNZ and use the capital somewhere else.
    While they are at it they could shut down Radio New Zealand, it doesn’t and won’t make money.

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  11. Lipo (229 comments) says:

    he Green Party has called the Government’s bail-out of Solid Energy “privatisation by stealth”.

    Well whenever you borrow money from an overseas bank and put up the assets of your company as collateral you are effectively handing over control of that asset to a private company
    Are the Greens saying that no Government, SOE, or Local Council is allowed to borrow offshore for money

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  12. bc (1,332 comments) says:

    Ten years ago I would say no way to selling TVNZ, but you would struggle to look at TVNZ and see anyone that resembles a broadcaster reflecting New Zealand culture. TV1 is full of American crime shows and TV2 is just reality rubbish.

    TV3 actually does a reasonable job of showing NZ content. “Harry” was awesome (a NZ Underbelly), the drama with the two actresses from Outrageous Fortune (Blue Rose I think it was called or something like that) wasn’t as good but it was great to see NZ drama on screen. And of course TV3 has always supported NZ comedy (7 Days etc). Unfortunately TV3 has also headed down the path of reality rubbiish lately. A sign of the times I suppose.

    So the government might as well see of TVNZ. As mikenmild mentioned above Maori TV has become our de facto National broadcaster (screens some pretty good foreign films too).

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  13. bc (1,332 comments) says:

    gazzmanic, I don’t think the purpose of Radio New Zealand is to make money!

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  14. Redbaiter (7,560 comments) says:

    “Ten years ago I would say no way to selling TVNZ, but you would struggle to look at TVNZ and see anyone that resembles a broadcaster reflecting New Zealand culture.”

    Wanting a broadcaster to “reflect NZ culture” is no reason that can justify robbing the taxpayer to start a TV channel.

    You want one that does that then do it yourself.

    If its as needed as you say it is, should be no problem gathering some investors together, floating the company and setting up operations. The due diligence you have clearly already done will have proved the model a marketing success.

    So why can’t you start up a TV channel that suits your wants yourself bc?

    Or would you just rather vote for a politician to rob the public to bring you your wants?

    That will set a grand precedent for the economic survival of our country won’t it?

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  15. bc (1,332 comments) says:

    Wow, Red, you just don’t get it do you.
    It’s got nothing to do with me and what I want. Unlike you, I don’t believe that everything is about me.

    The taxpayer isn’t “robbed”. For what we pay, we are rewarded many times over with what we get in return. Some of which is priceless.

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  16. HC (152 comments) says:

    While one may debate about the sense of having an SOE primarily engaged in coal mining, I am vehemently opposed to the idea of selling TVNZ. The SOE concept is not as bad as some make it, and Solid Energy’s problems are somewhat out of the usual, so measures to save and correct the enterprise are ok. The electricity generating SOEs did though seem to be doing well as state owned businesses. As for TVNZ I suggest the following:

    Restore TVNZ to a true public broadcaster, rid them of celebrity style, severely over-paid news readers and presenters, and bring in community programs, more local and also international documentaries, better and more proper current affairs programs, REAL news (instead of silly infotainment style “news”), allow more input by the public (e.g. screening of shows, performances, reports and films by volunteers wanting to share), even let them broadcast some educational programs.

    Also bring in a channel like TVNZ7 was again, and have Parliament TV allowed to use the time when Parliament is not sitting, to present informative programs and debates on issues of the day, on major legislative proposals, new laws and whatever. The wider public lacks understanding and knowledge of what happens in government and politics, and it is time to INFORM them, so that we get informed voters, as only informed voters can ensure a true and vibrant democracy in New Zealand.

    On top of that some improvements to Radio New Zealand, also establishing a separate channel that caters more for younger listeners, are overdue.

    Having the whole broadcasting and other media left to private enterprise is not advisable, as the over-dependence on advertising revenue leads to too high a risk of “compromised” journalism. Do not bite the hand that feeds you, that seems to be on the mind of too many these days, but a functioning democracy needs a healthy balance between various types of media, also in regards to who controls it. So public broadcasting, ideally with extra online services for internet users, must be maintained. Even if this necessitates a reasonable fee, I would not mind paying this, rather than have Sky or so dominate the whole market at some time in the not too distant future.

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  17. Ed Snack (1,734 comments) says:

    bc, I think you mean valueless, a good deal of what TVNZ produces is entirely without value. We pay many times over for very little.

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  18. bhudson (4,734 comments) says:

    For what we pay, we are rewarded many times over with what we get in return. Some of which is priceless.

    Like low-flow shower heads and eco bulbs?

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  19. mandk (818 comments) says:

    Ross12: “If that statement doesn’t show the Greens are economic morons, I don’t know what else will”

    They’re not economic morons, they are crypto-Trotskyites who will promote any idea that could lead to the downfall of capitalism. They have no interest in seeing a well-ordered and prosperous economy.

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  20. bc (1,332 comments) says:

    Ed Snack – we will have to disagree on that one.

    bhudson – WTF ??

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  21. dime (9,395 comments) says:

    ““Māori proficiency in te reo has increased significantly since 2001, especially among younger Māori”.”

    thank god for that! as a guilt ridden white guy, dont think there is a limit on the amount of money that should be handed over to preserve their language.

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  22. SW (214 comments) says:

    As a businessman dime, do you think there is no value in preserving Te Reo and Maori culture generally? Does that preservation not have some value to our Tourism industry?

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  23. Richard Hurst (754 comments) says:

    Coal prices have fallen by 40% since 2010. Its made digging for coal about as economically sustainable as farming crossbred sheep for wool!

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  24. dime (9,395 comments) says:

    SW – are maori that lazy that they cant teach themselves without getting a pay cheque?

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  25. SW (214 comments) says:

    dime – if you were Maori, would you decide to teach your children English or Maori? What do you think would be the better investment for their future?

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  26. flipper (3,541 comments) says:

    SW (80) Says:
    October 4th, 2013 at 4:04 pm
    As a businessman dime, do you think there is no value in preserving Te Reo
    *****

    The whole Te Reo business is a nonsense and of value only for confusing tourists – here and abroad.
    True story: in 1960 the ABs toured South Africa. The team Manager was a tough ex Surfer, front row forward, and AR councillor, Tom Pearce.

    After three games Pearce and the ABs became annoyed (nay pissed off) when the Boer mayors delivered welcoming addresses in Afrikaans.
    On the fourth occasion, Pearce stood and delivered a reply in Maori. He named every Maori place name he remembered from Cape Reinga to the southernmost tip.

    A week later the Boer media cottoned on, and published the truth. Never again were the ABs welcomed in Afrikaans.

    So Maori does have some uses.

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  27. PhilBest (5,117 comments) says:

    I have always had a strong suspicion that the belief in “our” ownership of “assets” that “our” taxes have “paid for”, is most strongly held by people who don’t pay taxes, or pay in very little.

    I reckon referenda on the fate of State owned assets should be held, restricted to the payers of tax only.

    It should also be pointed out loud and clear that some “assets” have only ever incurred a net loss to the NZ taxpayer, somewhat like the UK’s Concorde project, which cost money to develop, cost money to make, and cost money to run and at no time clawed back revenue to cover any of it. The national rail system in NZ is like this.

    To be fair, a lot of the road network is too – problem is it only supports marginal rural economic activity. Our urban economies should have been provided with half of the network length that is instead connecting a few farms to outer Wikikkamukau and outer Wiakikkamukau to the rest of the economy.

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  28. bhudson (4,734 comments) says:

    bhudson – WTF ??

    bc,

    Our taxes pay for the bureaucracy that brought about such gems as low-flow shower heads and Eco bulbs. A blanket statement that “For what we pay, we are rewarded many times over” is made more relevant when we consider all of the things we are “rewarded” with for what we pay

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  29. Steve (North Shore) (4,495 comments) says:

    Sell TVNZ? Just shut the whole shooting works down. Who would want to buy such a shithouse outfit such as them? What will the ‘stars’ do? fuck of to Oz hopefully

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  30. GPT1 (2,087 comments) says:

    I’m just relieved that we didn’t sell off NZ POst in the 90s. What a disaster that would have been for the public coffers…
    Oh.

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  31. bc (1,332 comments) says:

    TVNZ pays a return to the government. What has that got to do with “taxpayer bureaucracy”? It certainly has nothing to do with light bulbs and shower heads.

    Weird.

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  32. SW (214 comments) says:

    Flipper – heh amusing story!

    Do you really think the only value is for confusing tourists though? I think if that was the case, you would see it disappear rather than be promoted more by businesses in the tourist industry.

    For me it isn’t rocket science. People are naturally interested in different cultures and ways of life etc. When you travel to Greece, Egypt, Thailand, USA, whereever, you will spend money on experiencing cultural crap that is different to where you come from.

    NZ is no different. Like it or lump it, Maori culture gives NZ a point of difference. That difference has value.

    What the government spends on protecting the language and culture is a different argument. But I just don’t agree that it is has no economic value, and have yet to be convinced otherwise.

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  33. bhudson (4,734 comments) says:

    bc,

    Fair point. I read your reply to Red and not the comments preceding it. And took your comments as being that taxpayers are rewarded many times over for the taxes they pay.

    But I see now it was related to that tax which is diverted to public broadcasting and admit I was dreadfully wrong.

    We’d be better off with those taxpayer funds diverted to the low-flow shower heads and Eco bulbs

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  34. WineOh (548 comments) says:

    The part on privitisation by stealth was probably do do with the part where as part of the bailout deal the banks have to convert part of their debt to preference shares in Solid Energy… which effectively is a partial sale.

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  35. OneTrack (2,583 comments) says:

    But we must keep Solid Energy. Because its an “asset”.

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  36. Lindsay Addie (1,129 comments) says:

    Steve (North Shore),

    The government won’t sell TVNZ, they need them because they’re a propaganda arm for the Americas Cup team…….

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  37. gazzmaniac (2,317 comments) says:

    Coal prices have fallen by 40% since 2010. Its made digging for coal about as economically sustainable as farming crossbred sheep for wool!

    Coal prices also tripled in the five years to 2010, and Solid Energy were making money then. The coal business is as viable as ever, but the way they run their business is not. It is also interesting to note that they have only made a loss for two years, the years to 2012 and 2013.

    dime – if you were Maori, would you decide to teach your children English or Maori? What do you think would be the better investment for their future?

    I don’t know about dime, but I wouldn’t waste my time with Maori.

    For me it isn’t rocket science. People are naturally interested in different cultures and ways of life etc. When you travel to Greece, Egypt, Thailand, USA, whereever, you will spend money on experiencing cultural crap that is different to where you come from.

    I don’t. When I travel I tend to find the local pub.

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  38. burt (7,797 comments) says:

    DPF

    On public ownership – I just got my annual ACC bill again and when I add that total to the ACC component registering my car and my motorcycle I pay well in excess of $3,000 year and that’s just the direct payments.

    Perhaps the Labour lite National party could show us they are more than a gaggle of lefties wearing blue ties and grow some balls making changes to socialist failure state owned monopoly NZ.

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  39. CharlieBrown (889 comments) says:

    Here is a simple and fair way to handle SOE’s. As people like to call it their “family china” or “our assets”, give shares in every SOE to every single person on the electrol roll. Then we can do with those shares what we like… put our money where our mouths are. Can any of the socialist R’tards see anything unfair about that?

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  40. CharlieBrown (889 comments) says:

    SW – ” People are naturally interested in different cultures and ways of life etc. When you travel to Greece, Egypt, Thailand, USA, whereever, you will spend money on experiencing cultural crap that is different to where you come from.”

    I don’t give a rats about the culture, when I travel I go to see the natural sights, other people go for the sun, other people go for the culture. Your statement reflects the problem with most socialists… they think everyone are the same and think like they do and can’t imagine differing views. Liberals believe everyone have their own views and should be able to put their resources behind what they value. Thats why we should give all our SOE’s back to the people who can make their own decision on it.

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  41. SW (214 comments) says:

    CharlieBrown – Equating a statement that people are interested in different cultures with me being a socialist is just crap. If you think my point was that everyone travels to experience different cultures then you have missed my point completely. Of course people have different interests and travel for different reasons.

    That doesn’t mean there is no value in a country’s culture. Perhaps you can’t imagine people with differing views to yours? Don’t take my word for it, ask yourself why so much of our tourism industry uses Maori culture, symbols, language etc in advertising.

    Perhaps you think it is all to do with political correctness or something? Personally, I think it is because it brings in revenue.

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