The Dim-Post

December 1, 2011

Mandate

Filed under: Politics — danylmc @ 11:07 am

I’m mildly opposed to National’s asset sales policy, but the reality is that they campaigned on a fiscal plan that hinged on revenues gained from the sales of assets. It would be unethical to abandon that plan the second they’re re-elected. Also, this is a proportional democracy. If they have a majority in the house then government’s can pass whatever they want, no matter what the polls might say. We then hold them accountable during the subsequent election.

If Labour really wanted to queer the deal they could go nuclear: promise a pseudo re-nationalisation; if re-elected they will pass legislation returning ownership to the state, paying shareholders out on the value of their equity based on the share-price when it first went to market.

36 Comments »

  1. If Labour suggested queering any of the deals anything like that I don’t think it would matter who their next leader is.

    Comment by Pete George — December 1, 2011 @ 11:18 am

  2. It would be unethical to abandon that plan the second they’re re-elected.

    Ha!

    ….if re-elected they will pass legislation returning ownership to the state, paying shareholders out on the value of their equity based on the share-price when it first went to market.

    Or take the soft option and regulate the shit out of access and pricing a la Telecom/Chorus.

    The half sell option is bullshit – a sop to the electorate; you either go whole hog or do nothing. A full sell would have been worthwhile if (a) market conditions were better (b) price regulation was signaled as part of the deal.

    Under the current strategy the taxpayer will be in the worst position possible – a gift to fund investors on depressed price, no expected change in regulation, massive previous capital investment over the last 2 FYs now benefiting the private sector and guaranteed bailout potential if it all goes tits up when ‘cost out’ bites in 10 years time.

    Comment by Gregor W — December 1, 2011 @ 11:19 am

  3. queer the deal…man date…it’s ok if you want to come out of the closet.

    Comment by Ross — December 1, 2011 @ 11:23 am

  4. ‘It would be unethical to abandon that plan the second they’re re-elected.’

    *laff*

    ‘The Government has shut the public out of plans for the largest open-cast mining project on New Zealand conservation land, after earlier declaring the public would have input on major mining proposals.’

    That happened on the first working day after the election.

    Comment by Peter Martin — December 1, 2011 @ 11:44 am

  5. ‘It would be unethical to abandon that plan the second they’re re-elected.’

    It’s a world of dynamic ethics we’re operating in!

    Comment by nommopilot — December 1, 2011 @ 12:04 pm

  6. If Labour really wanted to queer the deal they could go nuclear: promise a pseudo re-nationalisation; if re-elected they will pass legislation returning ownership to the state, paying shareholders out on the value of their equity based on the share-price when it first went to market.

    I agree with Gregor W’s take on this. We lose strategic control of the assets when National sell them. If the next Labour government tries to re-assert that control by regulating the electricity sector, the private investors will scream bloody murder. Committing to the appropriate regulations now means that investors can take that into account when they do their due diligence.

    Spiking Key’s asset sales is simply a pleasing side effect. Announcing the outline of a future regulatory scheme is vital to being able to enact the necessary regulations.

    Note that any regulation announcement will only reduce the price of the sale if the price is predicated on some combination of ripping New Zealand consumers and businesses off and harming the environment. If the privatised companies aren’t going to do either of those things, then Labour’s regulations won’t affect their profitability.

    Comment by pete — December 1, 2011 @ 12:18 pm

  7. This business about the public having no right to expect their views to be taken into account between elections is just establiahment bullshit.

    Comment by Con — December 1, 2011 @ 12:30 pm

  8. MAD applies here. Nuclear deals goes both ways. Labour (and inter-alia, National), will have to consider carefully which issues they go nuclear on. Asset sales is one.

    Comment by Chris — December 1, 2011 @ 12:45 pm

  9. @ pete

    This losing strategic control argument is bollocks. The govt has the ultimate power to regulate. It gives you all the strategic control you need. Private and public sector companies call on that when it suits them and govts play ball or get heavy handed when it suits. cf the way they dealt to Telecom, the way they guaranteed Genesis some gas for their Huntly plant, the way they intervene in planning regs to smooth the way for irrigation and windfarms from private players.

    The biggest irony is that for strategic control to be of any use you have to have a strategy. One time we had that in energy it almost bankrupted the country, the next time we got the laughable 90% renewable target which quickly sank alongside closing the gaps, top half of the OECD and the world’s first truly sustainable nation. Giving govt strategic control could be worse than the illness you are trying to cure.

    Comment by insider — December 1, 2011 @ 12:46 pm

  10. Employing the nuclear option would be an interesting start for the new Labour leader. I guess the “Markets” wouldn’t like it either so the impact on the dollar and exchange rates could be quite dramatic.

    Comment by TerryB — December 1, 2011 @ 1:05 pm

  11. “This losing strategic control argument is bollocks. The govt has the ultimate power to regulate.”

    Ever heard of the TPP? while we’re not allowed to know what our government’s signing us up to, what’s been leaked suggests that companies will be able to sue our government in a secret offshore tribunal for projected losses due to law changes affecting their investments in NZ businesses. They are, as we speak, signing away that “ultimate” power without any scrutiny from public, media or even parliament outside of cabinet.

    Australia is already being sued under a similar process after regulating how cigarettes are packaged.

    Comment by nommopilot — December 1, 2011 @ 1:06 pm

  12. @ nommo

    I suspect insider is meaning ‘strategic’ in that the physical assets themselves are jurisdictional; while they may be rorted to maximise shareholder value short term, a power generator cannot be phyically asset stripped as such and that the State can always evoke the ‘primacy of parliament’ at it’s leisure to impose regulation.

    The whole FT issue re trans-border capital protection (and loss offsetting) does raise some important legal and transparency issues though.

    Comment by Gregor W — December 1, 2011 @ 1:18 pm

  13. Yes of course I meant exactly that🙂

    trans border agreements are only worth the value govts attribute to them. We can withdraw. But what’s wrong with govts being held to account if their behaviour goes against what they have agreed to and disadvantages companies who made investmetns in good faith? We did it to the Aussies over apples.

    Comment by insider — December 1, 2011 @ 2:58 pm

  14. Although it might be relatively difficult to asset strip a generator, you can:
    – increase short term profits by reducing maintenance/research/development.
    – increase profits by reducing service in non/less profitable areas.
    – sell off fuel rights.

    And while the government *can* regulate to prevent owners taking certain actions, you would be a naive fool if you thought that the current/pending government would actually do so. And even if it did government regulation is almost always a *response* to problems. It will only happen *after* problems have occurred.

    Comment by Richard — December 1, 2011 @ 3:24 pm

  15. “But what’s wrong with govts being held to account if their behaviour goes against what they have agreed to and disadvantages companies who made investmetns in good faith?”

    Perhaps that they’ve signed up to these agreements without any public disclosure or consent and thus committed future governments to sanctions in the event they wish to make changes. There is a big problem with the potential for the privatisation proposals (which WILL, despite the government weasel words to the contrary, go to offshore investors eventually (speshly solid energy)) and the potential for us to be restricted from regulating these industries by agreements like the TPPA and China free trade. It could make the taxpayer liable for large sums.

    Just for instance: Chinese interests buy Solid Energy, Government tries to regulate/restrict lignite extraction in the face of huge emissions bills, government is sued for compensation by Solid Energy’s new owners for lost earnings…

    Comment by nommopilot — December 1, 2011 @ 3:40 pm

  16. Chinese interests buy Solid Energy, Government tries to regulate/restrict lignite extraction in the face of huge emissions bills, government is sued for compensation by Solid Energy’s new owners for lost earnings…

    Will that happen before 2014 or even 2017? If not, then it’s not a concern for the present government.

    Comment by TerryB — December 1, 2011 @ 4:10 pm

  17. An awful lot of perhaps and maybes and just for instances in there. We could imagine this fantasy, where a NZ company buys a shareholding in a chinese dairy company and the local managers conspire to cheat on ingredients and poison customers, but when the police finally come the NZ board director also ends up in prison with the possibility of a bullet in the head but is released due to the FTA rules. Could happen. Concessions and protections can go in more than one direction.

    I repeat, if the govt knowingly signs up for something then reverses it and harms people or organisations, why should they not be held liable? What is more important is that that ability is given to all NZers as well.

    Comment by insider — December 1, 2011 @ 4:17 pm

  18. I repeat, if the govt knowingly signs up for something then reverses it and harms people or organisations, why should they not be held liable? What is more important is that that ability is given to all NZers as well.

    The problem is the “knowingly” part. If our politicians sign up to some shady secret deal, why should we be held accountable?

    Comment by pete — December 1, 2011 @ 4:31 pm

  19. It’s called representative democracy pete. Sorry if that comes as a surprise to you.

    Comment by insider — December 1, 2011 @ 4:52 pm

  20. @ Richard

    Agreed, hence my position that the current position of half ownership is the worst strategy imaginable, effectively leaving the public picking up the tab when (rather than if) the asset value is degraded.

    …or best possible outcome if you are BlackRock.

    Comment by Gregor W — December 1, 2011 @ 4:55 pm

  21. “It’s called representative democracy pete. Sorry if that comes as a surprise to you.”

    I’m glad that you’re fine with our government signing agreements they have no mandate to sign on our behalf, insider. I personally find it a bit shit.

    Comment by nommopilot — December 1, 2011 @ 5:07 pm

  22. “I’m glad that you’re fine with our government signing agreements they have no mandate to sign…”

    And nicely leading us back to the original debate, eg, what constitutes a mandate.

    Comment by Hugh — December 1, 2011 @ 5:35 pm

  23. Mornington Crescent!

    Comment by insider — December 1, 2011 @ 5:38 pm

  24. I have no problem with National going ahead with partial asset sales…though to say they have a mandate is straining credibility. About a third of eligible voters voted National – hardly a ringing endorsement. But were they to backtrack now, they would appear weak. They campaigned on asset sales, so I would be surprised if such sales didn’t take place.

    Comment by Ross — December 1, 2011 @ 5:58 pm

  25. There is nothing wrong with signalling now that our assets will be re-purchased. Then anyone can invest with all the information in front of them. It fits well with the no-suprises premise behind government economic policy that reigns.

    Comment by Andrew R — December 1, 2011 @ 6:06 pm

  26. Richard (on stripping generators): “increase short term profits by reducing maintenance/research/development.”

    And generators tend to put quite a lot of money into research right now where it matters for them, and some of them have major parts of the economy and population relying on them, even if you don’t count the power they generate. eg. If Mighty River Power makes a mistake about predicting sudden rainfall and doesn’t open or shut the gates at the right time, they could either flooding lots of people living slightly above the agreed maximum height of Lake Taupo, or flooding lots of people living tiny amounts above the agreed maximum height of the Waikato River. For all the people and businesses affected and everyone who relies on them, it’d be a bad thing to mess up.

    Comment by MikeM — December 1, 2011 @ 6:10 pm

  27. There is nothing wrong with signalling now that our assets will be re-purchased.

    There might be a few problems if Labour were ever in a position to be taking back those assets from iwi.

    Comment by NeilM — December 1, 2011 @ 6:48 pm

  28. I don’t think that Labour will be able to campaign on re-nationalising these assets next time round.

    I think Key is right and the shares will mostly be bought up within NZ by super funds, iwi and small investors.

    Labour would have to borrow money and annoy quite a few people to get those shares back via legislation. Without legislation they would have to borrow more and pay more.

    My bet is that National will make some sort of change to the tax system along the lines of a CGT or land tax. So taking oxygen away from Labour there as well.

    Maybe some other issues will spring up but Shearer probably has the most to gain from voter fatigue with the incumbent party and/or a major collapse in the economy and with the way things are in Europe that’s certainly a possibility.

    Comment by NeilM — December 1, 2011 @ 7:52 pm

  29. News from Europe suggest that “markets” will be non existent in the very near and foreseeable future.
    Of course our brilliant dynamic duo will say selling as the market is in a nosedive is brilliant.

    They will make so much money none of us will ever have to pay taxes again.

    Yeah Right!

    Comment by peterlepaysan — December 1, 2011 @ 9:15 pm

  30. “I’m mildly opposed to National’s asset sales policy, but the reality is that they campaigned on a fiscal plan that hinged on revenues gained from the sales of assets.”

    Absolute rubbish. The effect on the governments fiscal position of asset sales is almost vanishingly small. Total capital is $6b, annual return in the order of $250m, difference between return and savings on interest <$100m. In the order of 0.1% of government revenue. Really a footnote in the government finances. I wouldn't be uncomfortable with treasury being given the independence to determine asset holding strategies, with sign off from the minister. Why it had to dominate an election campaign is beyond me.

    Comment by Swan — December 1, 2011 @ 11:03 pm

  31. There might be a few problems if Labour were ever in a position to be taking back those assets from iwi.

    Excellent point.

    Also: “buy back at purchase price” = “no downside risk”. Better to commit to regulation.

    Comment by pete — December 1, 2011 @ 11:45 pm

  32. To buy back the assets (even at the rate sold) requires money that the state does not have. The money has already been ploughed into other state assets such as schools, hospitals, etc.

    So where will Labour find the money?

    Increase taxation, borrow or sell of other assets?

    Or Labour could also just re-nationalise them without compensation!

    That would be interesting!

    No, the threat of re-nationalisation is hollow, no money to realise the plan so no threat and more egg on face.

    The sale to IWI is the masterstroke that will cement the asset sale policy that Labour cannot undo.

    Comment by Gerrit — December 2, 2011 @ 5:33 am

  33. Further to what Swan said – it surprised me how much Labour gambled on their anti asset sale campaign, particularly because there argument was to a different degree to what National proposed. It must have been brainwashed into them, David Clark is still reciting the same lines when saying what he will work for (against) in parliament.

    Apart from that, a generally negative campaign based largely on one negative anti-policy got the expected negative result for Labour.

    I hope they can turn their leadership campaigning from negatives about either camp to what would be positive for Labour’s and New Zealand’s future.

    Comment by Pete George — December 2, 2011 @ 7:52 am

  34. @ Ross – very partisan view of a mandate, very easily just goes the other way:- about a third of eligible voters voted for the parties that opposed to asset sales, i.e. Labour/Green/NZ First – hardly a ringing endorsement for not doing it. Deciding based on your own biases what those that didn’t vote at all think is hubris.

    In the end, just slightly more people voted for a government that includes in their policy platform the sale of shares of fully government owned assets, than those that voted for parties that as part of their policy platform, opposed it. Even this does not determine the actual support of this specific policy, as there are very likely those that voted National that did not like that specific policy but decided their dislike was not enough to not vote for National, and just a s likely a Labour, Green or NZ First voter who agreed with the asset share sales but voted for their party of choice for environmental, immigration, pro-union, etc. reasons.

    In the end, each government, by becoming the government (whatever the specific election process), has a ‘mandate’ to enact the policies that it campaigned on. Where they arguably don’t have mandate is if they campaign on one policy and enact something different. The argument of do they have a mandate is only being bought up by those who voted for an opposition party as their own personal choice of the next 3 years of government will not occur.

    Comment by Stephen — December 2, 2011 @ 9:14 am

  35. “We in America do not have government by the majority. We have government by the majority who participate.” Thomas Jefferson

    Same applies in New Zealand.

    Comment by Pete George — December 2, 2011 @ 9:58 am

  36. Stephen, I’m not sure where hubris comes into it. The fact remains that roughly a third of eligible voters voted National. I did say that if National didn’t follow through with this policy they would appear weak and I’d be surprised if they backtracked. I also said I didn’t have a problem with National going ahead with asset sales, so I suspect we’re in agreement.

    Comment by Ross — December 2, 2011 @ 11:38 am


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