Parker David: Debate on Crown Entities Public Organisations and State Enterprises — In Committee 
Parker David: Debate on Crown Entities Public Organisations and State Enterprises — In Committee 
[Volume:673;Page:19319] 
Hon DAVID PARKER (Labour) 
: 
 Meridian Energy is of course one of the three Government-owned electricity generation companies that the Government says it will if re-elected sell half of. 
Katrina Shanks 
: No that’s not true. 
Hon DAVID PARKER 
: I beg the member’s pardon— 
Hon Member 
: 49. 
Hon DAVID PARKER 
: Forty-nine percent of—half. If the debate was between 49 percent and 50 percent we probably would not be having it. The real debate here is about why the Government is proposing to do this and in the context of this debate what is wrong with the performance of this company in its current ownership structure. The answer to those questions is that there is nothing wrong with the company’s performance and its current structure. Indeed Treasury in its papers released with the Budget said that it is unlikely there will be a material improvement in the way in which this company operates as a consequence of half of it being privatised. 
The financial review report from the Commerce Committee shows that in the year under review the net profit of Meridian was $184 million. It paid two dividends: one of $89 million followed by a final dividend of $68 million—a total of about $150 million in dividends in one year alone. It makes no sense to sell these companies and Meridian is a good example of why that does not need to occur. Why then is the Government doing it? It is doing it because it has got New Zealand into a situation of a $16.7 billion deficit and its members have given themselves the excuse that as a consequence of their own conduct in putting forward unaffordable tax cuts in earlier Budgets they need to do this and that they are justified in doing it. 
I want to deal with one of the other issues. Government members say this is going to improve capital markets in New Zealand to give ma and pa investors and KiwiSavers more choices of what to invest in. The point is firstly that these assets are already owned by New Zealanders through the Government. Every New Zealander owns them not just the top 10 percent who so profited under the National Government’s tax cuts that they received 42 percent of those income tax cuts and therefore are disproportionately likely to be the people who can buy these assets if they are flogged off. But the underlying principle that the Government has to sell well-run Government-owned assets in order to help the private sector is wrong. Are we really so depressed about the ability of New Zealand’s private sector to generate good investment opportunities that we have to sell to the private sector what already exists on the Government’s balance sheet? What a narrow vision of New Zealand’s economic development in the future! 
Changing who owns these companies will not change the productive output of New Zealand’s economy one iota. The companies will still be producing electricity. The only thing that could change to the detriment of our productive sector is that electricity prices will go up. Why do we know that? We hear the Government saying for a start that the private sector is always better at running businesses and it quite rightly points to the fact that there is an increased private sector discipline to maximise shareholder returns. Well we agree with that. 
We agree that private ownership of assets does increase private sector disciplines to maximise shareholder returns. That is why on average Contact Energy and TrustPower charge more for electricity than the State-owned enterprises. That is why if these companies are privatised we will see maximisation of shareholder returns in two ways. Yes we will see further trimming of costs to a minor extent although I have to say salaries and those sorts of overheads are a minor proportion of total costs in these sorts of companies. But the other side of that same coin is that if we accept that private sector disciplines minimise costs so as to maximise shareholder returns they also maximise prices. It is two sides of the same coin—minimising costs and maximising prices. 
That is particularly problematic in this area because we know from reports of the Commerce Commission that the market is not competitive. A report produced under the auspices of the Commerce Commission that came out in May 2009 found that in the period under review New Zealanders on average had been overcharged—