Cunliffe David: Mixed Ownership Model Bill — In Committee Speaker Recalled In Committee 
Text is incorporated into the Bound Volume 
Cunliffe David: Mixed Ownership Model Bill — In Committee Speaker Recalled In Committee 
[Sitting date: 19 June 2012. Volume:681;Page:3079. Text is incorporated into the Bound Volume.] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 There is an old rule in politics that says that when we politicians are sick of saying something for the umpteenth time the folks out there in the real world are only just starting to pick up on it. I was reminded of that this week when I was going to my child’s school and a teacher grabbed me by the arm and said: “Have you heard what that Government is doing? They’re planning to sell off our energy companies. How can they possibly do that? Most people don’t want that to happen.” I said: “You’re absolutely right.” But there is no surprise on that one because that lot have had that evil plan in their minds for some time. This is a very bad idea for a number of reasons: firstly it makes no financial or economic sense; secondly it makes no strategic economic development sense; thirdly it is absolutely rubbish social policy; and fourthly ultimately the politics will come back and bite this Government where it hurts—in the ballot box. 
The essence of this Mixed Ownership Model Bill is in fact contained in the title to Part 1 “Provisions for companies to cease to be State enterprises and to become … companies”. These will not be State-owned enterprises any more. They will not have the social obligations. They will not have the Treaty obligations. They will not have the same obligations to be good corporate citizens. They will not have a no-surprises rule for the smiling Minister in the chair the Minister for State Owned Enterprises there who knows what he is doing to the public of New Zealand. They will not have the power to direct the reserve power that Governments use in extreme circumstances to put the national interest first. Do we believe that these companies should be sold? No. Do we believe that the Government has an obligation to the people of New Zealand to put their interests first? Yes. Why does this not make sense? Well the first reasons are so obviously financial. Privatisation makes the Government’s fiscal deficit worse. Let us say that again: it makes the fiscal deficit worse not better. Why? Because the Government saves about $260 million in borrowing costs and it loses $360 million in dividends on average. That is minus $100 million. What is hard for people to get about that? It is minus $100 million a year. That is how much the fiscal deficit will worsen as a result of this bill. 
But it is not as if the fiscal deficit is the biggest problem in the first place. The OECD the IMF and the rating agencies have all told us the same thing: it is private debt that is high not public debt. That shows up in the current account deficit and it shows up in our net international liabilities. So as a fair question—and I see Mr Ryall smiling to himself because he thinks he might know that answer to this one—what happens to private debt? Well it goes up. It goes up because there will be borrowing from foreigners who are investing in these companies to buy up their share of it and the dividends to those new owners will add to the current account deficit each and every year. So this is a lose-lose. Not only is the Government’s deficit worse; the country’s deficit is worse. There is no financial reason to sell. The third fact on the finance line is that the rate of return on the three energy generators is averaged around 15 percent per annum on a total shareholder basis. That is dividends plus capital gains at 15 percent which is pretty tidy. Mighty River Power is 43 percent which is wonderful. The Crown cost of capital is only 5 percent—probably lower at the moment and closer to 4 percent. Why would you sell an asset that is averaging 15 percent when you are borrowing at 4 percent keeping the difference and not having to tax people? The answer is that it has never been a financial decision. 
This is a political decision because the National Party is linked to people who will get very rich out of this: the ticket clippers the merchant bankers the lawyers and the accountants—the vested interests who are snuffling at the trough of the National Party. This is jobs for mates and it is wrong. It is wrong. It makes no financial sense. It is explainable only in terms of who gets what. Ah that brings us to the famous mum and dad provisions. Am I free to dine at the Ritz? That is one of the oldest issues in economic philosophy. Well if you are not regulated technically you are but not if you have no money! Mum and dad already own these shares. They are being asked to pay again for what they already own when they have no money. People in our constituencies are having trouble feeding their kids and there are 200000 children growing up in poverty. Will those families be able to go and buy a slice of Mighty River Power? Not on your nelly. Not on your nelly. This is not a privatisation to Kiwi mums and dads; this is a privatisation to some rich Kiwi mums and dads in the pocket of the current Government which is selling the birthright of all of us for its political gain. It is wrong. 
From an economic development point of view has nobody told these clowns we face a fossil fuel crisis in the next few years? Has nobody told them the price of oil will go up 50 percent in the next 3 or 4 years? And has nobody told these people that climate change is happening and that the price of carbon will rise? And was there ever a more stupid time to sell a controlling interest in your own energy system? You know we are blessed here. We have 70 percent of our energy produced by hydro. We have a 90 percent renewable energy profile on its way to 95 percent and I hope one day it is 100 percent. I hope one day that we will be able to stand up and say that we are carbon-neutral. Why would we prejudice that strategy by flogging off the engines of development to overseas shareholders who care nothing for “New Zealand Inc.” but care a lot about the dividends they can extract? Why would we do that? What value does it add to take perfectly well-run State enterprises and turn them loose as mixed-ownership companies? 
My colleague Clayton Cosgrove repeated the testimony of the chair of one State-owned enterprise—I think it was Joan Withers—who said: “We will not change behaviour if we are governing a partially privatised entity; we do best practice directing now. That is our legal obligation.” For there to be an upside the Government would effectively be saying that the current directors are not doing their job and are therefore culpable. That is rubbish. These are well-run companies. They turn a tidy profit for the taxpayer. It makes no strategic sense whatsoever to sell them. The counterfactual is Norway a country about our size. It created a future fund for its oil deposits. It has kept its State assets and it has become one of the wealthiest countries in the world. It would not be doing what this Government is doing. Nor would the Danes nor would the Finns whom Gerry Brownlee is so fond of. They invest in innovation they build their assets and they keep them. This makes no social sense; I will close with that. 
We have already noted that New Zealanders already own these companies. We have already noted that most New Zealanders cannot afford to buy them twice. We ask the question of why then is this happening. It is explainable only for the saddest of reasons. National went out on a limb to please what is politely called one of its own core constituencies in the language of the streets—their rich mates: the lawyers the accountants the Goldman Sachs and the Merrill Lynches of the world. Heard of them before? I wonder why that is. They are the people who describe their customers as muppets. This Government is selling New Zealand down the river—down the river—with an irreversible change because it has mistakenly thought that they would harbour a bit of money. But it will lose more dividends than it saves. The Government is creating a fiction out of a Future Investment Fund when we all know it has got capital anyway. One of the members opposite—I think it was Mr Goldsmith—asked how Labour would fund capital investment and the answer is that Labour’s last fiscals had net debt paid off before the Government’s own debt. We did it through tax reform that was pro-growth and fair and that plan would work.