1. Hon PHIL GOFF (Leader of the Opposition) Link to this
to the Prime Minister
Does he stand by his statement that dividends from State-owned enterprise energy companies help pay for services like doctors and hospitals, and can he confirm that the dividends earned last year from the four companies amounted to $732 million?
Rt Hon JOHN KEY (Prime Minister) Link to this
Yes. The Government will spend in excess of $70 billion this year on a whole range of services, including doctors and hospitals. It will fund this spending in a whole range of ways, including direct and indirect taxes, excise fees, and State-owned enterprise dividends, and through increasing debt. To the second part of the member’s question, yes.
Why is he intending to sell off shares in profitable companies whose profits remain entirely in New Zealand and are used to benefit all New Zealanders?
Because the Government wants to acquire $33 billion worth of assets over the next 5 years, and it is the Government’s view that that is an efficient way of doing it. It is also the Government’s view that it will actually increase the performance of the said State-owned enterprises.
How much of the profits and dividends from Contact Energy, a company once wholly owned by New Zealanders—I use the Clyde Dam for an example, which was built and paid for by New Zealanders—are now sent overseas to foreign investors, and is it in excess of $100 million a year?
I do not know the answer to that question. But I do know that had Contact Energy not been sold, that debt, which was also from overseas, would have had those dividends going overseas. There is also a very important difference between—[ Interruption] Well, actually we owe a lot of money overseas. But the second important issue, of course, is that there is a fundamental difference between Contact Energy and what the Government is proposing under the mixed ownership model, which is that, at a minimum, 51 percent control would be held by the Government. There are also 1.65 million KiwiSaver accounts. There are also the Crown financial institutions, and a wide range of other New Zealanders who would like to buy shares. So it is the Government’s view that the majority ownership would stay in New Zealand.
When the Prime Minister told the House yesterday that Contact Energy was owned “by a very wide range of Kiwi mums and dads”, was he aware that in fact 80 percent of the shares in that company are owned by 1 percent of shareholders—mainly corporates—and most of the shares are now owned overseas?
Yes—and I apologise for rushing out the full answer; I did not want to deter the member from being able to ask another question. But in the interests of making sure there is clarity, let me read out the whole quote. It is from Pattrick Smellie and says “One of the least defensible criticisms of the Key”—[ Interruption]—well, they do not want to actually hear it, but we will go through it—“Government’s partial privatisation plans have been regular references to Contact Energy as an example of a privatised company which lost control to foreigners. Yet nothing could be further from the truth. The reality of the Contact share register is it remains possibly the most widely held share by domestic New Zealand investors.” Eleven years on from the float, in fact, Contact Energy’s shareholders have shown a high degree of loyalty to the company, to the extent that Edison Mission Energy’s attempts to take 100 percent were roundly rebuffed in the early 2000s. Pattrick Smellie says “What it shows is that many small-scale investors have piled into privatised companies like Contact precisely because they want to retain … as much New Zealand ownership as possible.” If the member wants to ask me that question every day, I will look forward to reading out the answer every day.
Chris TremainYes, I have seen at least two policies. The first is that we should hang on to these dividends at all costs because they raise hundreds of millions of dollars for the Government’s coffers. The second is from this statement to the Labour Party conference, and says: “That’s something we got wrong in the last government. … It’s not right that last week a power company paid $230 million in dividends to government. … We will not demand excessive dividends coming back into state coffers”. The confusing thing is that these two diametrically opposed policies come from the same person: the current Leader of the Opposition.
How can the Prime Minister possibly be right in saying Contact Energy is owned by a wide range of Kiwi mums and dads, when most of the shares are owned offshore, and when 80 percent of the shares are owned by 1 percent of the shareholders, the big corporates? How could he possibly be right?
As I said earlier, Contact Energy was privatised in a completely different way from what the Government proposes. The proposals are that there will be 51 percent control, that Kiwi mums and dads will be put at the top of the queue, that we will allow the 1.65 million KiwiSaver account holders to have an opportunity to invest, that we will make sure the Crown financial institutes have an opportunity to invest, and that the proposals will go partly towards fulfilling the Government’s plan to have more Kiwi ownership in the form of the New Zealand Superannuation Fund. There are big, fundamental differences between that proposal and Contact Energy, but if we want to go and look at privatisations that were hocked off in a very poor way, let us go and look at what occurred when that member was a Minister in the Labour Government.
Is it correct, as reported, that TrustPower and Contact Energy, which are now privately owned, have increased their prices since 1998 by 180 percent—
Hon Parekura Horomia—180 percent, which is much higher than the rate at which the State-owned enterprises increased their prices, and how does he explain why the private companies have increased their prices by such a higher rate?
I cannot be sure of those facts, because one never knows when they are presented by that member, but—
I raise a point of order, Mr Speaker. As you will be aware, that answer obviously reflected on the integrity of the questioner. I can table the document that was reported in the paper that said that.
Mr SPEAKERI think the member’s point was well made. The Prime Minister does not need to answer the question in that way, and doing that will always lead to disorder.
I cannot be sure of those facts. I certainly cannot be sure that they are correct, nor have I ever seen them in the past. But I make the point that the bulk of those increases were made under a Labour Government.
Is he prepared, personally, to guarantee that if his sell-down of shares goes ahead as he has signalled, it will not result in a much higher rate of price increases than would otherwise have occurred, and that significant shares in those companies will not end up very quickly offshore?
Firstly, it is important to understand that the majority share ownership will be held by the Government, so that is the first point. Secondly, what controls the increase in price is, of course, the regulation of the industry. I make the point once more that in the 9 years of a Labour Government electricity prices rose by 72 percent. I also make the point that about a week or so ago there was a significant price hike in relation to hedges—
I raise a point of order, Mr Speaker. This is all very interesting, but I asked a specific question: whether he would guarantee that the sale would not result in shares going offshore and prices rising much faster. He has not addressed that question yet.
The member needs to reflect a little on that point of order. The Prime Minister is giving an explanation of how the market works for electricity prices. Giving an assurance that prices will not increase is not necessarily within the Prime Minister’s power. He is trying to explain to the House how the prices in the electricity market work, and that is a pretty sensible way to answer such a question, I would have thought.
I reflect on what happened a couple of weekends ago. We saw a significant price hike, and I make the point that that is a matter for the Electricity Authority to investigate—and it is doing so. But that price hike took place with three primary players: Genesis, Mighty River Power, and Meridian Energy. They are all 100 percent State-owned enterprises. The prices in the electricity sector are controlled by regulation, not ownership.