Norman Russel: Questions for Oral Answer — Questions to Ministers 
Text is incorporated into the Bound Volume 
Norman Russel: Questions for Oral Answer — Questions to Ministers 
[Sitting date: 19 July 2012. Volume:681;Page:3747. Text is incorporated into the Bound Volume.] 
2. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
 to the  
Minister of Finance 
: What has been the total cost to date of extending and implementing the Government’s asset sales programme which it calls the Mixed Ownership Model? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 As I said in answer to a similar question last month the total amounts of the contracts are commercially sensitive because the Government intends to renegotiate those contracts for each partial share offer. I can confirm that about $1.1 million has been paid out so far pursuant to communication marketing market research and advertising services. But I would say to the member that the Government has been quite open about the potential costs of the programme. These are expected to be about 2 percent of the total programme proceeds which by any market standard is quite low. Other share floats generally have costs somewhere between 3 to 7 percent of the total proceeds. 
Dr Russel Norman 
: Does the figure of $1.1 million so far include all the costs of the asset sales policy including contracting for advertising and communications banks and sharebrokers legal advisers independent advisers policy work conducted by the Public Service and activities not covered by the appropriations within Vote Finance such as pre-sale preparation by the energy companies work conducted by Government departments other than Treasury and the Waitangi Tribunal hearing costs? 
Hon BILL ENGLISH 
: No it does not. It refers to the amount that has been paid out under the kinds of contracts that the member has referred to in the past. I must say though that a good deal of the Public Service activity has been very useful because it has shown up aspects of the operations of the companies that can be improved. In the case of Maori rights and interests it has flushed out a number of issues some of which should have been resolved some time ago and have not been and others of which have been publicly discussed. So that expenditure I would regard as pretty useful even if there was no sale. 
Dr Russel Norman 
: I raise a point of order Mr Speaker. The primary question that was put down was general. It asked what has been the total cost to date. It did not refer just to the contracting costs around advertising and communications. It also referred to all costs including the Public Service work. The Minister has just confirmed in his answer there that his answer to the primary question did not include those other costs yet this was a question set down on notice. It did not specify just advertising and communication. It was very broad. 
Mr SPEAKER 
: Order! I listened to the Minister’s answer very carefully. What he said was that some of the costs relating to certain contracts were considered commercially sensitive and he did not believe it was in the public interest to identify all of those. In respect of the departmental costs it is possible the Minister interpreted those the way many would—that the departmental officials have to be paid anyhow and there is no particular additional cost depending on what work they are doing. It is not often in costing projects like this that the departmental costs are included. If the member had wanted that to be included in such a figure maybe he should have been more specific in the question. 
Dr Russel Norman 
: Can the Minister of Finance then provide us with the true cost including departmental costs of preparing the asset sales programme and implementing this policy agenda from the Government? 
Hon BILL ENGLISH 
: Depending on what the member means by “the true cost”. We can certainly provide over time the direct costs of the share float. I suppose if we were going to take a broader view of what the costs are then we would need to also weigh that up against the benefits of improving the operation of the companies and getting on and resolving outstanding Maori claims that have been brought to the fore by this process because those are clearly benefits to the Government and to the country. 
Hon Clayton Cosgrove 
: Given that the Prime Minister has conceded that there could be a delay in the float of Mighty River Power does he think that it is wise to continue spending hundreds of thousands of taxpayers’ dollars and potentially millions on the asset sales process when a change in circumstances such as a legal challenge could mean that much of the work would have to be repeated and/or amended costing the taxpayer further hundreds of thousands of dollars or potentially millions of dollars? 
Hon BILL ENGLISH 
: As the member will know the statements made by the Prime Minister indicate that it is possible that the share sales could be delayed. That is yet to be proven. We have not had the conclusions of the Waitangi Tribunal. We have not had anyone rebut the Government’s proposition that the sale of shares does not compromise its ability to deal with iwi claims. So we have yet to see whether there can be successful claims in the tribunal and then yet to see whether there can be a successful court action. The likelihood of that is there. It is probably low. We are proceeding with the pre-sale process. 
Dr Russel Norman 
: Has the Minister sought any official advice on the impact on the asset sales revenue of the uncertainty created by potential court action over water rights; if so what advice has he received? 
Hon BILL ENGLISH 
: I do not think we have asked specifically for that advice. There has been some discussion about it. One indication of the potential impact on value I am advised is that there has been no change in the share price of TrustPower or Contact Energy both of which are operating in the same markets as the State-owned enterprises and are potentially interested in the same kinds of claims. We have confidence that the process we have been involved in for the last 2 or 3 years of discussing these matters with Maori is a process that can lead to a solution and that tribunal claims and court actions are unlikely to make solutions more achievable. 
Dr Russel Norman 
: Does the Minister concede that there could be a cost on energy companies as a result of the recognition of iwi rights to water—that there would be an impact on the profitability of those companies were such recognition to be followed through in the courts or through an agreement between Crown and iwi—and that that should be factored into how much he thinks he is going to raise by selling the companies? 
Hon BILL ENGLISH 
: No I do not concede that. The member is asking these questions as if these issues are all new. In fact they are not. One of the first actions of this Government was to renegotiate the Waikato River settlement which was a settlement of freshwater claims related to the river which has more dams on it than any other river in New Zealand. That settlement did deal with Tainui’s rights and interests and had no impact on the operation of the electricity companies that have dams on that river. 
Dr Russel Norman 
: Does he agree with the Prime Minister that as many as three asset sales could occur in the coming year or two in light of Forsyth Barr research showing that the asset sales would need to be spread out over 5 years to let the capital markets absorb them and to maximise the revenue to the Crown? 
Hon BILL ENGLISH 
: People will have their own views about it. It is our view in the light of the fact New Zealanders are saving more than they have in the last 20 or 30 years and are paying down debt because of record low interest rates that there will be a large pool of cash and demand for these floats. The Government as it goes will make decisions about the timing of them but we are a bit more optimistic than Forsyth Barr. 
Dr Russel Norman 
: Given that the Government has stated that sales would not go ahead if market conditions were unfavourable has the Government determined what conditions would be unfavourable; if so what are they? 
Hon BILL ENGLISH 
: No we have not determined what conditions would be unfavourable. You can imagine various scenarios—some positive some negative. The fact that interest rates are the lowest they have ever been is probably tending to increase the value of utility companies on the one hand; on the other hand if there was some serious meltdown in Europe and financial markets shut down then clearly that would be negative. But those are judgments we would make closer to the time. 
Dr Russel Norman 
: Given the risk created by uncertainty over water rights the cost of an accelerated sales programme and the continuing volatility in sharemarkets is not the fiscally responsible course of action for the Government to suspend asset sales at this time? 
Hon BILL ENGLISH 
: Not for those reasons on their own. The fact is that all of those conditions apply regardless of the sale. Maori are asserting rights and interests in water. Whoever owns those companies those rights and interests would need to be resolved. If there is uncertainty generated by those claims then there would be uncertainty for State-owned enterprises or for 51 percent Government-owned State-owned enterprises. So the fact that Maori have made claims makes in that sense no difference to who owns them. If there is uncertainty there for the private investors there is uncertainty there for the Government. Those claims are ones that we are focused on resolving as we have resolved a number of them in the last couple of years and we are continuing to discuss the outstanding claims. 
Rt Hon Winston Peters 
: If he is so confident of New Zealand mums and dads having sufficient savings to take up the share offer why on earth is he floating these shares on the Australian market? 
Hon BILL ENGLISH 
: Well we are not.