NZ POLITICS DAILY: Buy the assets back?

Should opposition parties pledge to renationalise companies being partially privatised by the National government?

It is a question that goes to the heart of the debate over the asset sales, and it’s discussed today by John Armstrong in his column, English puts Labour on the spot during defensive week for National.

Armstrong suggests that Labour is being wise to fudge the issue. He says that if a future Labour government was to reverse the partial privatisation process this would have to be funded out of increased borrowing of perhaps $5-7billion, and signalling such an "extravagant" policy would be to "shoot itself in the foot" as it would "cut right across Labour’s efforts to portray itself as a careful manager of the economy".

This is also a position pushed on Labour-friendly Standard blog, see for example: The art of the possible.

On a strategic level this is certainly true, but in substance it makes no sense. Labour’s whole argument against asset sales relies on the premise that it makes more sense to trade off greater government debt for the full revenue streams of the SOEs. So by logical conclusion, Labour and other opponents of the share float should be making it clear that the float will be reversed.

As Armstrong also correctly points out, "the irony is that the threat of a buyback may be the best weapon the Opposition parties have to stymie the share floats. Investors might shy away from applying for shares if they knew they would be required to sell them by a Labour-led government".

Pledging renationalisation would normally be a standard position for any leftwing party opposing privatisation. More radical left-wing parties might even threaten that there would be no compensation afforded to those giving up the shares.

New Zealand First has come out and clearly stated with characteristic chutzpah that it "is committed to buying back the shares at no greater price than paid by the first purchaser" – see: NZ First Committed To Buying Back State-Owned Assets.

This receives a strong endorsement from No Right Turn – see: NZ First steps up on asset theft who makes the point that "for all its rhetoric, Labour has refused to do this, putting the interests of the 1% ahead of those of ordinary Kiwis".

Similarly, the Greens have credibility problems, with it being reported that the party "will not commit to a policy of buying back state-owned assets" –see: Greens undecided on asset buy-back policy.

Labour’s inconsistency over the renationalisation is highlighted by the fact, according to Tony Ryall and David Farrar, just a few years ago Labour favoured privatising the state-owned Spring Creek Mine, which was sold to foreign interests – see David Farrar’s Labour’s 2007 asset sale. Farrar argues that this illustrates that "many in Labour’s caucus don’t believe a word of what they say on asset sales".

But, equally, one might ask just how strongly National and its rightwing supporters believe in the partial privatisation programme? Right-wing blogger Cathy Odgers has outlined her problems with National’s asset sales programme in a thoughtful blogpost, Asset Sales Bogey Needs Picking.

Her main criticisms are that National is not really using the proceeds of the sales for retiring public debt but instead to invest in public services (ie, to make government bigger) and that National has failed to put forward a credible philosophical argument for reducing state involvement in trading companies.

She also warns, perceptively, that the eventual share float will be a no-win situation because the government will be damned if the share price rises too much and damned if it drops.

Another right-wing blogger, Cameron Slater, suggests that National was wrong to ever down this path because "New Zealanders don’t want asset sales to begin with" and that the government is silly to taunt Labour with the line that "our asset sales are not as bad as your asset sales" – see: National winning the battle but losing the war.

The government continues to water down its privatisation programme – the latest example being a decision to drop the "provision that would have allowed the government to sell its stake in the companies below 51% as long as it retained a majority of shares with voting rights – see Adam Bennett’s Sweeteners on offer as asset sales inch closer.

The proposed "loyalty scheme" for domestic purchasers of the shares is another example and this is receiving renewed scrutiny. The Greens say that it will reduce the sale proceeds by perhaps 6%, which will be essentially transfer to wealthy share buyers – see: RNZ: Loyalty shares defeat sell off purpose: Norman.

And questions are being asked about why the Government is being so unclear about whether the "loyalty scheme" will actually go ahead. One theory is that such an offer is unconstitutional – see The Standard’s Nats’ unconstitutional looters’ bonus.

All in all, the whole state assets sales debate is a classic case of compromises being made on all sides, with the usual large doses of parliamentary play-fighting thrown in.

Jane Clifton has been covering this well, with her latest being: Key fires Mallard digs back with interest. And an amusing piece of tit-for-tat can be seen in the Trade Me auction John Key for sale as reported in TV3’s For sale - one Prime Minister, $1 reserve.

Other important or interesting political items today include:

• Patrick Gower argues that two politicians have emerged from the recent ACC saga looking like potential future leaders – see: Crusher Collins vs Andrew Little: a leadership battle? Indeed, Little will be delighted with this story: TV3 News names a new Labour leader. Meanwhile, Judith "Crusher" Collins has finally claimed her first boyracer victim, with the help of "Trasher Tolley" – see: First boy racer car crushed in Lower Hutt. None of these more tangential stories should, however, overshadow Little’s latest allegation – see Adam Bennett’s ACC minister put pressure on bosses to make complaint – Labour.

• Ongoing political discussion about the alternative ways of funding ACC is nicely updated by Vernon Small’s Funding issue brews in ACC's cauldron. And Andrea Vance has written a good piece about how the minister has dealt with the recent ACC saga – see: Collins may be what ACC needs. ACC issues will be kept alive by revelations about the lengths that the agency is going to in order to cut costs – see: Bonuses for cutting long-term ACC claimants – Greens.

• Hone Harawira sounds like he’s listening to his party on gay marriage. He says that he will vote in favour of legislation promoting marriage equality if his Mana Party asks him to – see Claire Trevett’s Harawira seeks party direction on gay marriage. For an outline of what some other politicians said last year about gay marriage, see: NZ politicians on gay marriage (on the record).

• The latest major public service restructure is reported by John Hartevelt in Corrections to dump 130 staff.

• John Key’s stance on the age of entitlement to National Superannuation is challenged today by Brian Fallow in PM's stance on super mostly specious spin.

• Do New Zealand schools discriminate against children with special needs? A Secondary Principals Association survey says "yes", and it blames a lack of resources – see RNZ’s Schools admit lack of funding forces discrimination.

• Jock Phillips has blogged about the latest Te Ara encyclopedia section: Government and Nation launched.

• Finally, Patrick Gower’s latest Firstline review of the week in politics is also recommended viewing: Patrick Gower on the week in politics.

Bryce Edwards

NZPD Editor (bryce.edwards@nzpoliticsdaily.co.nz)