Hide on MOM

Rodney Hide writes in the HoS:

The state-owned enterprise Mixed Ownership Model that’s causing such a fuss was pioneered by and Michael Cullen over a decade ago.

John Key and Bill English are simply extending it. The fuss over privatisation is a fuss about nothing much.

In 2001, the Labour Government spent $885 million bailing out Air New Zealand. Instead of taking over the company lock, stock and barrel, the Government took an 82 per cent stake and left the remaining share in private hands trading on the share market.

Hence was born the Mixed Ownership Model.

Mixed Ownership proved itself with Air New Zealand. The trading of the company’s shares on the share market means its performance is continually and publicly assessed. That continual public feedback on performance is lacking with state-owned enterprises. Mixed Ownership provides a desperately needed market discipline on SOE directors and executives. That’s a good thing.

Labour pioneered the model and fully expected to be selling down shares as is doing.

Why did Labour never buy 100% of Air NZ, if it thinks a mixed ownership model is so bad?

Sir Michael Cullen told Cabinet, in setting up the model, that, “It may, however, be desirable to divest some or all of our shares at a future date.” The Labour Government readily accepted that a future sell-down may well prove desirable. And not just some shares, but all of them.

Sir Michael also knew that the Super Fund was set up to be funded out of surpluses, not to be funded from borrowing.

The greater discipline that the trading of shares applies to these businesses will enhance their performance. There’s no way Air NZ would have done as well if it were an SOE.

For Kiwis, it’s the companies’ better performance that will enhance the country’s economy, not whether the Government makes a profit or loss on sale.

Yep. In my view the Government should not own a company, just because it wants the dividends from it. It should only own companies that are strategically necessary – such as arguably Transpower and Kordia – infrastructure operators.

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