A cautionary tale

OPENING SALVO

In January 2014, John Key stood before an Auckland business breakfast and dropped a bombshell.

If he won that year’s election, he would consider asking Treasury to explore issuing a request for proposal to investigate the desirability of selling maybe as much as 49% of Learning Media Ltd.

Leaving the breakfast, businesspeople couldn’t recall the announcement or anything else in the speech.  “He’s a bloody good guy, though, that John Key,” they said.

In Wellington, the reaction was shock, horror.

“I knew this would happen if we let that neoliberal bastard get back in,” spluttered the new RNZ political editor.

The teacher unions warned of plans to privatise the schools.

 Embattled Labour leader David Shearer attacked:  “What he’s saying, well, really, is when we read, um, you know, Margaret Mahy to our parents, I mean kids, we are insulting her memory because Meadow in the Lion will be Chinese, or the paper it’s on.”

His finance spokesman, David Parker, agreed.

 “If you want to sell assets, you would at least sell poorly performing ones like Meridian Energy and not strategic assets like Learning Media with 18% returns.”

 Ministers then hit the provinces to sell the bold plan.

 Mr Key said it wasn’t about reducing debt but building new schools and hospitals, and getting kiwi mums and dads investing on the NZX.

 Bill English said it was about stopping debt reaching 40% of GDP, being in surplus by 2017/18 and attracting foreign funds.

 Gerry Brownlee said Finland had done it years ago.

 Steven Joyce said it was a world first: “A genuine kiwi innovation story.”

 SOE minister Tony Ryall said he agreed with the prime minister.

Organic paper
The issue dominated 2014.

 In June, failing Labour leader Grant Robertson said 2014 was the last chance to stop the government flogging off the family silver.

 “Once it’s gone, it’s gone,” he said.

 Russel Norman said the sale would void Learning Media’s policy that school materials be printed on recycled organic paper.

 Education minister Hekia Parata assured him the policy would stay.

Learning Media boss David Glover said there was no such policy.

Ms Parata ordered him to implement it.

State Services Commissioner Iain Rennie said she didn’t have the power.

Ms Parata said she would pass over-riding legislation.

Mr Key told her to shut up.

“Whatever”
Labour campaigned hard on the issue, “Save Our Schools.” 

Its advertising agency, Pagani & Pagani, created a cute abbreviation to reach Waitakere Man.  Billboards shouting “SOS Labour” appeared throughout the land.

It worked.  According to a secret UMR report found by Max Key at Oh Calcutta!, 81% of New Zealanders thought his father planned to sell the schools, 78% were opposed, and 0.3% said they would never vote for him again.

Tempers flared.

 In the TV3 leaders’ debate, floundering Labour leader David Cunliffe told the nation: “First they came for the electricity companies, and I didn't speak out because I have solar panels.  Then they came for Air New Zealand and I didn’t speak out because I fly Emirates.  Then they came for the school books ….”

“Whatever,” interrupted Mr Key.  The worm hit the top of the screen.

 Victoria University’s Jon Johansson said it was, like, way cool to have an election won by a single word.

WAI 8361
On Saturday night, in his victory speech at the SkyCity National Party Central, Mr Key confirmed officials would carefully explore whether 49% of Learning Media should be sold.

Treasury boss Gabriel Makhlouf kindly dropped into St Stephens Ave the next morning to say yes.

 Macquarie was appointed to show that the shares the government wanted to sell were a good buy.

 However, unbeknownst to Mr Makhlouf, Mr Key or anyone else, the Maori Council had a Waitangi Tribunal claim that educational materials are a taonga under Article Two.

 WAI 8361 had languished for years in a bureaucrat’s in-tray but suddenly an urgent hearing was arranged.

The council told the tribunal: “Educational materials are a taonga and the Crown would be in breach of the treaty if it sold shares in Learning Media.”

The tribunal found: “Educational materials are a taonga and the Crown would be in breach of the treaty if it sold shares in Learning Media.”

After receiving the report, Mr Key pointed out that while the council was threatening legal action, the Iwi Leaders Forum preferred negotiation.

Years later, texts between the forum and council were released: “Ain’t he heard of a good cop / bad cop routine, bro!”

Besieged Labour leader Andrew Little urged that 100% of Learning Media be given to iwi to stop 49% falling into private hands.

But worse was ahead for poor Mr Key.

“The Textbook Case”
Back in 2015, the Ministry of Education was responsible for 15% of Learning Media’s revenue.  Its chief executive, Catherine Isaac, said schools couldn’t afford planned price rises.   If prices rose, she would mothball all the schools.

Polytechnics, kindergartens and every other Learning Media customer chuckled, telling the same story of woe.

In his autobiography, 21 Years on the 9th Floor, Mr Key suspects the stories were exaggerated.  He hints that Maori and the education sector played a co-ordinated game.

Macquarie, though, was apoplectic.  How could they now value the shares?  Unless Learning Media settled with Ms Isaac, its fee was lost.

Mr Key made a quiet call to Mr Glover.  Of course pricing was a matter entirely for the SOE.  But, if Learning Media wanted to cut its prices, that would be good too.

The company’s value fell.

Popular Labour leader Clare Curran said it was the worst possible time to sell.

Her finance spokesman, David Parker, agreed.

“If you want to sell assets, you would at least sell top performing ones like Mighty River Power and not flog off poorly performing ones like Learning Media for a song.”

Mr Key pressed on.  After all, the courts had injuncted him in 2012 from selling 49% of the energy companies, undermining his most clearly mandated election promise.  It wasn’t going to happen again.

But the council sued.  And won.  As Chief Justice Sian Elias found in The Textbook Case, NZ Maori Council v Attorney-General (2016): “Educational materials are a taonga and the Crown would be in breach of the treaty if it sold shares in Learning Media.”

Iwi then settled with Chris Finlayson for 12.5% of the company.

January 2017
In January 2017, John Key stood before an Auckland business breakfast and dropped a bombshell.

If he won that year’s election, he would consider asking Treasury …