A price to pay for asset sale delay

Any economic competitive advantage the John Key-led Government believed it would gain by partially selling-down state-owned assets, as the rest of the world struggled with debt repayments, is fast disappearing.

The decision by Mr Key to delay the partial float of Mighty River Power until between March and June next year is a decision he was forced to make by threats of legal action by the Maori Council and a possible loss of support from the Maori Party in Parliament. In this case, a minority has forced its will on the majority, and to what ends?

The Government has decided to undertake a short period of consultation with iwi on the "shares plus" concept raised in the Waitangi Tribunal's interim report.

In essence, shares plus refers to the idea certain Maori interests would be given particular rights and powers in relation to the company, above and beyond the rights of other shareholders.

Shares plus could be likened to preference shares in other companies, where the preference shareholders essentially get veto rights over the operation of an enterprise and are first in line for payouts - be they dividends or first call on remaining monies if companies fail.

Mr Key says the Government's current view is that the shares plus idea should not be progressed. But it is early days. Not many investors would have foreseen the delay of the Mighty River Power float until next year when more than one million voters ticked National to win at the last election.

The Maori Party's three MPs, and a former Maori Party MP now chairwoman of the Maori Council, have done what the combined forces of Opposition parties failed to do with their threats of a citizens-initiated referendum and street protests - they stopped the sale process.

Given the ease with which Mr Key arrived back from the Pacific Islands Forum and smoothly changed tack on the asset sales programme, no-one should yet rule out a shares plus option for iwi if the sales programme eventually proceeds. Mr Key is a pragmatist and if his legacy is to be the Prime Minister who stimulated the economy through the partial sale of this country's energy companies, then he is sure to find a way through. Mr Key is a deal-maker and there is a suggestion the delay, and some consultation, will look better for the Government if court action eventually ensues.

Among all this turmoil, a decision will hopefully emerge that might lay better foundations for the future of the country. A ruling and agreement on whether or not anyone owns the country's water resources surely must be the aim of the delay.

Mr Key was firm in some aspects of agreeing to a short period of consultation instead of the lengthy process of a national hui, called for by the tribunal.

The Prime Minister believes the shares plus suggestion can be addressed in other ways. It is not in the national interest for any group within Mighty River Power's potential 49% minority shareholding to be given such rights.

If the shares plus concept existed, it was likely to make the company less attractive to investors, which could be reflected in a lower sale price, to the detriment of taxpayers.

However, one thing that is completely missing from any of the arguments for and against the sale is the ongoing programme the Government has to pay down debt and return the country's fiscal accounts to surplus.

Without the proceeds of the partial sell-down, previously set at between $5 billion and $7 billion, the Government will need to continue borrowing to fund the planned improvement in health services, education, welfare reform and employment growth.

Put simply, this country cannot afford to borrow more than it earns. It did previously and the results are still visible. Economic growth, while strong compared with some other parts of the world, is not sustainable based on borrowing.

If the Government cannot use the proceeds of the sale process to pay down debts, New Zealanders might need to get used to further slimming down of the public service, less welfare and higher living costs. It is a choice not many will want to consider.

 

 

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