Asset sales likely nail in coffin of fair society

There is no doubt, as Prime Minister John Key is fond of pointing out, the mixed-ownership model that he and his party are proposing for their partial sale of state assets can work extremely well.

You only have to look as far as Air New Zealand, a successful company majority-owned by the Government and partly in private hands.

The problem is not with the model; it is with the targeted assets.

At present, the Government owns 73.4% of the shares in the national air carrier; Mr Key and the National Party would sell down that share-holding to 51%. Would that significantly affect the performance of the company?

Arguably, it is running pretty well now, so quite probably not.

So why do it?

The answer seems to be to give a slice of the company to "mum and dad" investors, a phrase that is repeated as a parrot-like mantra, and to free up some cash.

Same goes for the state energy generators, Meridian, Mighty River Power, Genesis and Solid Energy. The argument is not so much about operational savings, since it is generally acknowledged that these SOEs function towards the top end of the efficiency scale; rather it is, again, about giving you and me and Bobby McGee a slice of the share-owning pie.

Oh yes, and using the once-only sale dividend to invest in the things governments already invest in - like schools and roads and irrigation systems.

In addition to using the example of Air New Zealand to bolster his arguments, on TV3's leaders' debate on Monday evening, Mr Key compared the proposed partial sale to that of Trade Me by Fairfax. But Air New Zealand and, more especially, Trade Me, are inappropriate comparisons.

Power generators are strategic state assets guaranteed to return consistent dividends. They deal in a currency not only necessary to underpin economic growth in this country, but also critical to the comfort and health of every citizen. They are also already in the collective ownership of all New Zealanders.

To jeopardise control of these assets - and there is no pretending that large tranches of accumulated share-holdings, as there will surely eventually be, won't hold considerable sway over policy and strategic direction - would seem to be, at best, short-sighted.

New Zealand is not oil rich; it cannot mine vast tracts of the country for minerals without tearing its natural beauty - already one of its greatest and most profitable assets - to shreds. But it does have the potential to own significant additional reservoirs of renewable generation and, potentially, to provide cheap energy to industry and agricultural endeavour, assisting competitive advantage in the process.

In principle, shareholder equity may be a fine thing; but in practice, the ultimate effect of a sell-down in shares of state energy generators will be an upward pressure on prices. The prices that ordinary New Zealanders already pay for their electricity are a scandal when set against the average wage, the old-age pension and the general standard of insulation in, particularly, older and lower-value housing stock, inhabited by a great many of the poorer members of our society.

And the opportunity a partial sale of these assets will provide for those celebrated "mum and dad" investors?

Who exactly are they? Who are all those "mum and dads" with money to burn in their bank accounts, just waiting for an opportunity to plunge their substantial savings into blue-chip energy shares?

Possibly, they are a bit of a myth - if the intention is to suggest they are widely spread across the populace.

More likely they are the same people to whom Mr Key and his Government gave generous tax cuts; they are the people who already live in well-insulated houses in the better suburbs; they are the people who can afford to take an annual holiday in the sun; they are the shareholders of a society that those wrapped in blankets wearing doubled-up jumpers and two pairs of socks to watch TV in the refrigerator-like climes of their mildewy living rooms would barely recognise.

The partial sale of state energy assets will be great for those who can afford a piece of the action. But it could also have the unfortunate effect of bolstering a socially corrosive trend: privileging the "haves" at the expense of the "have-nots".

As such, it would be another nail in the coffin of a disappearing dream - that of a society that still values some modicum of fairness and equality.

 - Simon Cunliffe is deputy editor (news) at the Otago Daily Times.

 

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