Mallard Trevor: Debate on Crown Entities Public Organisations and State Enterprises — In Committee 
Text is incorporated into the Bound Volume 
Mallard Trevor: Debate on Crown Entities Public Organisations and State Enterprises — In Committee 
[Sitting date: 29 June 2010. Volume:664;Page:12239. Text is incorporated into the Bound Volume.] 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I will take a call on this debate and start by complimenting the Minister in the chair the Hon Simon Power. He has been relatively precise in this debate. I think that in his sartorial elegance he looks the part of Attorney-General already. It is good to hear someone who is beginning to get his head around some of the issues that face State-owned enterprises. I make it clear as the previous Minister for State Owned Enterprises that I know that these issues are not simple; the power pricing one is a classic one. I am the first to accept that probably right from 1999 or even from 1998 when some policy decisions were made by the Labour Party and then Labour Government we did not get it right. My view is that when in late 1998 to early 1999 there was a signal of the privatisation of Contact Energy the Labour Party then should have made it clear that we would reverse that move and bring it back into State ownership—we would have refunded the money to the people who had bought it—and then the policy issues about energy would have been a lot simpler. It is clear that most people know that the conflict between being a regulator and being an owner has been one that has bedevilled Governments of both sorts. 
I want to make it clear that there are two ways of sorting that matter out. One of them is the way of National. Clearly the energy companies as the most valuable are sitting at the top of the National Government’s sale list. Those companies form the group about which Mr Whitehead at the Finance and Expenditure Committee indicated that public perception testing was going on in relation to privatisation—and you know that is the right of the Government. It is the right of the Government to test public opinion as to whether the energy companies should be sold. But I am hopeful of getting Labour policy to a point where we make it clear that if at any stage there is any privatisation then that will be reversed. People will have their money refunded but we will get back to the point of having a coherent policy. 
I think there is work to be done on energy policy generally as well as in the area of State-owned enterprises. As the Minister knows I have some sympathy for the State-owned enterprises and for the possibilities they have as businesses that need further capitalisation. I accept the point of view of a number of Government members that further capitalisation is not always the highest priority for a Government at a particular time. I myself have promoted approaches that would involve subsidiaries of State-owned enterprises being involved in joint ventures and I think that that is a positive approach. For example—and I know that the Greens would not be happy with this—we can see whether we can ever crack the coal-based hydrogen fuel cell approach which works now. There is no doubt that it works; between the Coal Research Association and Industrial Research Ltd we see it happening. 
There is a no-emissions hydrogen production that goes into a battery that can drive a car. It happens in New Zealand; it happens in my electorate already. The trouble is that it is too damn expensive. But over a period of time I am sure that as research goes on we can reduce that. But the question then is whether we want to have all of that production and distribution within a State-owned enterprise or whether there is room for partnerships at the subsidiary or subsidiary of the subsidiary level where that approach can be taken. I want to make it clear that I do not think coal is sexy—I am not with Mr Brownlee at all on that—but I do not want to rule out its use at some stage in the future. But even if people do not like that example or do not want to take that approach there are within Meridian for example three or four areas where a subsidiary is currently generating electricity within boilers. It is a really good world-leading technology that Meridian owns and something that almost certainly will not be properly developed in New Zealand because we do not happen to run most of our home heating through boilers. But the ability to generate electricity within a boiler system and then recycle it back into the grid is something that has a lot of potential. It is likely to be most used in the north-east United States and within Europe. 
But I think we need to look for partners so that we keep some skin in the game rather than do what we have too often done in the past which is sell off that technology and lose all further rights to it. We should use the intellectual property we have in order to develop and have an ongoing return for New Zealand—and eventually to the taxpayer—without our having to put a hell of a lot more money into a risky European - North American venture. If we put it in as intellectual property and lose that is not the end of the world. But if we have a potential for getting money back then that is something that should be done. 
In a similar way I think we need to keep on being innovative in relation to the way we finance some of the other State-owned enterprises. I was involved as far as Kiwibank was concerned in what was effectively their second-level capital arrangements. The bank has in order to fulfil its prudential requirements what is effectively preference capital. Therefore it is not debt and it means that the bank can lend more. 
Chris Auchinvole 
: They need more money. 
Hon TREVOR MALLARD 
: Well it does need more money but I think that it is probably getting to about the limit of that. But the Government can look for a good return going forward and a good return not only for Kiwibank—because I am sure that it is there—but more important for the economy through having an efficient working New Zealand bank and one that I hope can move into some other areas. I think there is room within the business area now for there to be some further lending on the part of Kiwibank. I think that the margins and if you like the conservatism in lending which is a result of having decisions made in Melbourne rather than in Auckland or Wellington on New Zealand business lending is something that is holding our economy back. That is not something that can be changed immediately but over a period of time it could be changed if Kiwibank continued to grow in a reasonable way and in a careful way within the market. But as Mr Auchinvole has pointed out it needs capital to do that. 
My view is that it could be a win-win situation if the Government decided to put some of what are some very clear unexpected and unbudgeted surpluses into that area. It is one of nil net fiscal cost because there is an asset that sits with the investment with the money it is putting in. Maybe as education spokesperson I could argue for another use. I think education is an investment as well but in this case we have an ongoing asset that sits alongside the money so it is nil net in that sense. I think from the Government accounts point of view and from the way people overseas look at it and the way we are rated it would be seen in a positive way as opposed to an area that would be seen as negative by rating agencies if in fact it added to the deficit. But this sort of investment would not do that. 
Chris Auchinvole 
: Back to Meridian! 
Hon TREVOR MALLARD 
: Back to Meridian. It is fair to say that Meridian is a well-performing State-owned enterprise. It would certainly not be for sale under a Labour Government. I am one of the people who will be pushing for National’s policy to sell to be matched with a policy to take it back. 
Report noted.