5 mins to read

The next Act

Thu, 26 Aug 2010

If Heather Roy can “upstage” Rodney Hide and catch everyone at Parliament unawares with her sudden return, as we are told, then be ready for more surprises from Act.

While MMP exists, Act must, too. Otherwise the right will be leaving the electoral rort completely to the Maori Party. The strategy that puts and keeps Act in Parliament – Rodney Hide’s Epsom seat – cannot be abandoned.

It must also be remembered that many Act supporters must have given National their list voters to avoid a repetition of Don Brash’s narrow defeat three years earlier. That won’t necessarily be the case at the next election, such is Mr Key’s appeal to centrist voters.

Therefore it is reasonable to assume the Act vote was at a discount. This realisation seems to be behind Mr Hide’s speech this week to Epsom Rotary. Overlooked in the media coverage are a couple of points.

First, Act’s steadfast support for the National government and these priorities:

"To give New Zealand the safeguard of a Regulatory Responsibility Bill; a Productivity Commission; a 2025 Taskforce to show the way to lift New Zealand incomes; Resource Management Act reform; a review of the climate change policy; an inter-party working group on school choice; local government reform."

The second is the creation of the Auckland Council and how it will revolutionise local government. Among these are

"... strong regional governance, integrated decision-making, greater community engagement and improved value for money. It will streamline operations and reduce bureaucracy, through consistently delivered policies, lowered fees and costs, simplified paper work and improved customer service across the region."

Specific savings and much reduced bureaucracy that have already been achieved are outlined in the speech. They have not been given much publicity but are worth checking out. .

The man in waiting

Local media were miffed that Kiwi high flier Chris Liddell was passed over for the top job at General Motors when chief executive Ed Whitacre suddenly decided to step down from September 1.

His replacement will be another board member, Dan Akerson, the former head of AT&T and another outsider to carmaking business.

Mr Akerson has a fearsome reputation for asking tough questions at board level – I doubt he would have accepted advisers’ assurances about the $A100 million loan in the Feltex case.

In any case, Mr Akerson will continue kick the pedals at GM, which after two profitable quarters is already seeking new investors for an IPO as part of the first stage to cut its ties to the US government.

But rather than being “out of the running,” as the NZ Herald put it, Mr Liddell is even more critical than before to GM. That’s because, as again in the Feltex case, the company’s accounts may not match the figures.

Accounting for dummies

The General Motors IPO is not off to a good start because its accounts are notorious for being restated and running foul of the authorities.

But there is little to fear for Mr Liddell’s career. If he can sort out GM’s accounts, he should have no future worries.

Forbes' Detroit-based writer Joann Muller has been through the 734-page IPO document and found a key warning signal as early as page 25:

“We have determined that our disclosure controls and procedures and our internal control over financial reporting are currently not effective. The lack of effective internal controls could materially adversely affect our financial condition and ability to carry out our business plan.”

The company goes on to say:

“Until we have been able to test the operating effectiveness of remediated internal controls and ensure the effectiveness of our disclosure controls and procedures, any material weaknesses may materially adversely affect our ability to report accurately our financial condition and results of operations in the future in a timely and reliable manner. In addition, although we continually review and evaluate internal control systems to allow management to report on the sufficiency of our internal controls, we cannot assure you that we will not discover additional weaknesses in our internal control over financial reporting.”

Ms Muller observes that behind the legalese GM is saying it can’t guarantee its reported results are accurate and the auditor, Deloitte & Touche, agrees.

Ms Muller asks what’s the rush in going public? She then answers her own question:

"It might be politically expedient for the Obama administration, but America needs GM to be successful, and it only gets one chance to go public. If there are lingering doubts about the company’s chances for success, GM stock won’t fetch a good price, and taxpayers won’t be fully repaid. Why not give Akerson and Liddell a chance to get up to speed on the auto business, and to make sure GM’s finances are in order?"

Follow that taxi

New Zealand’s record as a pace-setter for deregulation may have gone off the boil but it still draws world recognition on occasional basis.

For nearly 60 years, the number of taxis in Quebec has failed to keep pace with population and income growth. Whereas in 1952 there were about 5000 taxis on the island of Montréal, regulations limit this number to 4445 today.

New Zealand’s experience with taxi industry deregulation has come to the notice of the Montréal Economic Institute, which has prepared a report that concludes:

“Restricting the number of taxi owner’s permits, as is currently the case in Quebec, usually results in higher fares and longer waiting times for consumers.”

The study, On the Road to Reform, shows that New Zealand reformed its taxi industry in the late 1980s and made price determination flexible. “Price declines ranging from 15% to 25% in constant dollars were subsequently observed in the country’s larger cities. Meanwhile, the number of taxis rose from 2762 in 1989 to 7181 five years later.”

[Today, according to the encyclopedia Te Awa, there are about 8000, with tougher standards leading to the cancellation of some licences.]

Similarly, in Ireland where limits were lifted on taxi licences, waiting times fell dramatically.

“In Dublin … the proportion of customers who waited less than 10 minutes to take a taxi rose from 58% in 1997 to 81% in 2008.”

The institute notes the price of a permit is more than $C200,000 in Montreal.

“As a result, high incomes from regulated fares and a relative abundance of customers are offset by very high costs. The people who benefit the most from this system are owners who got into the market early. They did not have to pay large sums for their permits, but they still benefit from inflated fares and reduced competition.”

To mitigate the effects of deregulation, the institute suggests drivers who paid high prices for their permits could be compensated.

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The next Act