2. Hon PHIL GOFF (Leader of the Opposition) Link to this
to the Prime Minister
Why does he want to sell shares in State-owned enterprises?
Hon SIMON POWER (Minister for State Owned Enterprises) Link to this
The member is getting ahead of himself, as no decision to sell shares has been made. The Minister of Finance and the Minister for State Owned Enterprises have asked Treasury for advice on whether extending the mixed-ownership model can meet the five tests the Prime Minister has outlined before—namely, retaining majority control, prioritising New Zealand shareholders, providing good investments, using capital to purchase other public assets, and protecting consumers. As the Prime Minister said in his speech last month, the Government is interested in making smarter use of its assets, which will both reduce our reliance on debt and provide savings opportunities that are an alternative to the housing market.
Was the Prime Minister justified in selling Kiwi assets in order to reduce Government debt when he has admitted that New Zealand has one of the lowest Government debt rates in the world—because Labour repaid it—and that “We don’t owe very much.”?
Yes, the Prime Minister is very happy with the equation of debt being included in the five considerations that Treasury will take into account before a final decision is made in this policy area.
Did the Government’s December Investment Statement show that total shareholder returns from all of the State-owned enterprises exceeded 15 percent, on average, over the last 5 years while the average 10-year bond rate was around 6 percent, showing that investments comfortably exceeded the cost of capital; if so, why does it make any sense to sell off those assets to repay debt?
I believe that the December statement did indeed reflect the first figure the member referred to. One of the interesting things about the total shareholder return model is that it does not require one specific type of valuation to be carried out, meaning that a mixed matrix of valuations would apply across those State-owned enterprises. Interestingly, one of the things that is not taken into account when we are talking about the cost of borrowing is that the missing component, as the former Minister for State Owned Enterprises well knows, is the component of risk.
Did Treasury tell the Government that selling the State-owned enterprises would not significantly improve their financial performance?
I cannot recall exactly the reference the member makes, but I would also remind the member that the final policy in this area has not been confirmed yet, until the five tests are met.
I seek leave to table an excerpt from a Treasury paper, Crown ownership of commercial entities, which stated that there is little evidence to suggest that privatisation would significantly improve the financial performance of many of the State-owned enterprise companies.
Mr SPEAKERDid Treasury tell the Government that foreign corporates would end up with a cornerstone shareholding in the State-owned power companies within a decade if they were sold?
Well, it may have, except I would say this: it is impossible to have a cornerstone shareholder offshore if the Government retains 51 percent of the companies.
How much of the $700 million paid by the three State-owned power companies to the Government in the last year was used to meet any social services or purposes beyond reinvestment in those companies, thus helping the New Zealand taxpayer, who is a shareholder in those companies?
I would not have an exact figure as to what proportion of that income was used for those specific appropriations or votes that the member refers to. If the fundamental question the member is asking is why forgo the dividend in that situation, then it is a fair question for the member himself to answer. He pondered on radio the week before last why the Government would forgo $700 million in dividends and, in the very next sentence, said that it was collecting too much in dividends.
With regard to the Minister’s last answer, has he considered that privatisation prevents the Government from returning some of those dividends to the electricity consumer by way of a reduction in price or rebate?
That question may well have applied to the 72 percent increase in power prices over the 9 years that that member’s Government was in charge. I also note that that is now the third position I have heard today about dividends. The first was to ask why we would give them away, the second was that they were too much, and the third is that we should not collect any, to offset power prices.