Parker David: Urgent Debates — State-owned Energy Companies Sales—Delay of Mighty River Power Sale 
Text is incorporated into the Bound Volume 
Parker David: Urgent Debates — State-owned Energy Companies Sales—Delay of Mighty River Power Sale 
[Sitting date: 11 September 2012. Volume:683;Page:5066. Text is incorporated into the Bound Volume.] 
Hon DAVID PARKER (Labour) 
: 
 I rise to take a call in this urgent debate which has been granted by the Speaker on the basis of there being an important decision forced upon the Government essentially and that is to delay its asset sale programme. I want to reflect on some of the justifications that have been given by the Government in respect of its underlying programme for asset sales and to try to show to the House and those who are listening how bereft of vision this Government is for the development of our economy in a way that works for working New Zealanders for those who need to earn a living in our country for those who in increasing numbers sadly at the moment because of the lack of hope in our own country are departing for greener pastures in Australia—or at least more profitable means of sustaining themselves in Australia. 
The Government at the last election said that it had to proceed with the asset sales because of debt problems yet it is now saying that even though it cannot proceed at the same pace with asset sales that does not pose a problem in respect of its management of debt. I find those two propositions inconsistent. I think National was always wrong in saying that the sales were about Government debt because of course the New Zealand Government books are some of the best in the developed world with very low levels of Government debt even after 4 years of deficits under this Government. The prior Labour Government of course is partly responsible for that because we ran Budget surpluses for 9 years in a row reducing Government debt from 48 percent of GDP—I see Tony Ryall laughs but it is true. We reduced gross Government debt from 48 percent of GDP to 18 percent of GDP and net Government debt to zero—or it was zero until they changed the method of measurement and then revised it to slightly above zero. But anyway net Government debt was close to zero and gross Government debt was down to 18 percent. So the country does not have a Government debt problem. 
We do have a private debt problem. It is notable that the most central or most important part of the Government’s vision for this 3-year term does nothing to address the problems of New Zealand’s private debt. Indeed there are a lot of other steps that the Government could take to improve the economic outcomes for New Zealand but one of them is not asset sales. 
By the time of the election we had Opposition parties saying that asset sales made the Government deficit worse but the Government denied that at the time of the election. It is a matter of record now and I think it is somewhat shameful record. We are meant to have transparency of accounting processes in New Zealand in advance of an election where the Government is forced to opened its books so that the public can see what the true state of affairs is. On the opening of the books in the pre-election period on this occasion Treasury allowed the Government to book the proceeds of asset sales without accounting for the loss of revenue that would accrue to the Government as a consequence of the sale of partial shares in some of these power companies and other State-owned assets. 
Andrew Little 
: Unbelievable. 
Hon DAVID PARKER 
: As Andrew Little just said it was unbelievable. It really was unbelievable that Treasury was willing to sign off as fair accounts that showed capital coming in from the sale of State-owned assets so as to reduce future debt and future interest costs without showing the loss of revenue to the Crown that followed. It was absolutely abysmal practice and something that both Treasury and the Minister of Finance who signed off that pre-election fiscal update as well should be ashamed of because it really is a dropping of standards of public accountability. They are meant to be better in New Zealand. 
After the election by the time of this first Budget in this 3-year term of the Government the Government finally came clean through the Budget Economic and Fiscal Update which was released on 24 May this year. In it for the first time the Government acknowledged that its finances its deficit—its Government deficit; the operating balance before gains and losses—had gone backwards as a consequence of asset sales not forwards because obviously the price at which the private sector is willing to acquire assets the rate of return that it expects that is implicit in the price it is willing to pay the rate of return that it expects is more than the Government’s cost of funds. Treasury explicitly says that in the Budget Economic and Fiscal Update. It says that the proceeds of sale from the sale of interests in these State-owned enterprises is not enough to cover the forgone profits which are a combination of retained earnings and dividends. The forgone share of profits is more than the Government saves on interest. So it did not need to do it from a Government debt perspective. It persists because of no other reason than ideology. 
The other reasons that Government members push in favour of asset sales are similarly flimsy. They say that the sales will increase people’s investment options in a way that will improve capital markets. Well at one level that is true. It is true that there will be another investment that is available to people in the private sector either privately or through their investment funds like KiwiSaver funds and the like. But really is our private sector so inept that the only way that we can improve capital markets is to sell through public capital markets what the Government has created? Is that really the vision that this Government has for the development of the New Zealand economy—that the only way we can improve the New Zealand economy is to sell what the Government has already created? What a backward uninspirational unaspirational vision that is of private enterprise in New Zealand. 
I am a believer in general in the efficiency of capitalism. I want most businesses to be run by the private sector rather than by the Government. But I certainly think that with infrastructure assets especially those that have monopoly characteristics—as we have in the electricity industry where we do not have a perfectly competitive market—it is in the interest of New Zealanders that those assets remain in State ownership. If there are monopoly rents being extracted—and I think there are in a lot of these infrastructure industries—then it is better that that monopoly rent effectively gets recycled through the tax system for the benefit of everyone rather than existing for the concentrated benefit of what are essentially the most wealthy people in society who end up owning a disproportionately far greater share of those assets over time in addition to overseas interests. The idea that we improve capital markets by allowing them to trade what the Government has already created is wrong and it is especially wrong when it comes to industries where there are monopoly rents extracted. 
If we think that this is not the case here let us reflect on the fact that New Zealand’s electricity prices have increased at far greater than the rate of inflation for many many years now including under both the Labour Government and this National Government. Let us reflect also on the analysis that was done by Molly Melhuish of Grey Power. I heard the Greens claiming credit for that. Actually it was Molly Melhuish of Grey Power who did that analysis and it has been made public by Opposition parties other than the Greens. The Greens have been singing that same tune as well. She showed that the average amount that is charged by State-owned enterprises to a domestic consumer is $265 per annum cheaper. That gap will narrow through privatisation of these shares. There is nothing clearer. If you increase the private sector disciplines it will not relate to just cost minimisation; it will also flow on to price maximisation and that gap will narrow. 
If this Government was serious about economic growth it would be doing things like introducing a capital gains tax so that people invest on the basis of the profitability of the investment rather than a tax bias. It would be improving the depth of the capital markets so that there is more money for businesses to expand and grow jobs and through universal KiwiSaver. It would be doing things to help control the rapid increase in our exchange rate rather than having the Reserve Bank focus only on inflation. It would be taking meaningful steps to improve the outcomes of our economy rather than having as the central part of its vision a policy such as this which is failing. Reflect on the fact that at the last election the most important part of the National Government’s vision for this 3-year term was asset sales and they are now held up.