To sell, or not to sell
2011-01-28 00:00:00.0
AUTHOR: Peter Dunne
I have always been wary of people – politicians especially but not solely – who see issues in absolute terms. One of the things I have learnt in life is that there are seldom unequivocal right or wrong answers to a particular question, and that, unless one simply wants to live on the basis of adherence to blind prejudice, the real test is to find the best outcome in each case.
I was reminded of all this by this week’s debate about asset sales, spurred by John Key’s plans to sell shares in some public utilities after the election. For a moment, we were right back in the heady days of the 1980s’ and 1990s’ debates, with all of their attendant language (“selling the family silver”, “Richardson era economics” etc) being tossed around once again.
It is tempting to join this debate on that basis and fling around all the same old arguments once more. It is tempting to remind Phil Goff that more assets were sold under the fourth Labour government than any subsequent government. Or to taunt John Key with the failed railways privatisation, or the disastrous restructuring of the electricity sector. But it is all a little pointless, and adds nothing to the “debate” we are all supposed to be so much more capable of having now.
As I see it, the nub of the issue is what is the best way to expand the capital base of certain government owned trading and commercial organisations so that they can compete effectively in today’s business environment. Should that investment be directly from the government (and if so, how should it be financed – higher charges, higher taxes, more borrowing)? Are we as taxpayers prepared to accept any or all of the above solutions as the price of retaining New Zealand ownership (“sovereignty” to some) of our assets? And, for a start, do we even agree with the proposition that they need to expand and grow, or are we quite happy to leave things as they are?
If we accept the capital expansion argument, but do not like the idea of more government money going into them, what alternatives are there? The most obvious one is simply to sell the whole lot, lock, stock and barrel to the highest bidder. Apart from the ACT Party no-one is seriously suggesting that. So, what are we left with? Share floats of minority holdings, aimed at local investors, and with some controls about limits on overseas ownership come to mind here. That seems to be what John Key is talking about. In this regard, it is worth noting that groups as diverse as New Zealand First (up to a maximum stake of 24.9%) and Labour’s finance spokesperson (for subsidiary investments of state companies) have floated similar concepts in the recent past. Aside from the assumption that “ma and pa” investors would be interested in such investments in sufficient numbers to make it all worthwhile, the fundamental question to be resolved here is whether there can be sufficient safeguards put in place to ensure that this does not become too easy a path for overseas control of assets as “ma and pa” are quickly made offers they cannot refuse by voracious overseas pension funds, for example. I would have thought, however, that some form of Kiwi Share arrangement, akin to that developed at the time of Labour’s Telecom sale, could be developed to overcome that prospect.
As the debate unfolds over the next few months, these are the issues to focus on, not the re-run of the 1980s and 1990s arguments too many seem keen to substitute for rational analysis. Have your say on this through the current poll on the UnitedFuture website.