Privatisation of state assets in 2011 looked like a safe bet... until yesterday when Bill English hinted at a 'run better' rather than a 'sell-off' strategy
National's promise not to sell any state assets in its first term was always a two-edged sword for John Key's leadership of the National party.
It was the foundation on which New National was built and set apart from earlier versions of the blue brand; indeed, when pundits list his defining calls as leader and talk about his rejection of Winston Peters and his embracing of the Maori Party, his rejection of his party's beloved privatisation is often omitted. On the other edge of that blade, however, the clear time limit glinted and caught the eye. It has always seemed to say, 'once you get to know me, like me, and are used to me as a centrist, I will to return to my right-wing ways. Come 2011 all bets are off'.
A time limit always hints at expediency, suggesting a promise made out of political calculation rather than conviction. And it implies another promise; that in 2011 when the time limit on the first promise ends, the alternative is not only possible once more, it's a certainty.
'No privatisation until 2011' always meant that privatisation would be a defining issue of that year's election. Key would be under pressure from those on the right of his cabinet to seek a mandate for privatisation. At the very least, they would want the opportunity of partial privatisation along the lines of Air New Zealand, which is owned roughly three-quarters by the state and a quarter by private interests.
That desire is driven in part by purely ideological beliefs and the ACT-like theory that the private sector always manages business better than the public sector (a belief that endures even in the face of a global recession that proved otherwise). But the more considered arguments are that it would give sound, local assets for property-obsessed Kiwis and the Super Fund to invest in and provide some fresh fruit to our wilting stockmarket.
And while none of that has changed, an interesting new interpretation of Key's 2011 promise emerged yesterday in Guyon Espiner's interview with Bill English on TVNZ7's now infamous 'National's First Year' programme last night.
Espiner asked the Finance Minister if he would commit to no partial privatisation while he was in the job. English wouldn't make that promise, saying instead that the government hadn't considered changing that policy "yet". It was the kind of evasion you'd imagine. But what he said next was fascinating:
"Instead of focusing on just a few assets that could be potentially sold, we're looking at all the government's assets. The government has about $150 billion worth of assets it holds on behalf of the taxpayer. The vast bulk of those it will always own and we're looking hard at managing those better because if we can manage those 10 percent better that's a lot more capital available for schools and hospitals and the other public services we want."
He said the performance of SOEs was being "tidied up", but that he wasn't looking for more aggressive commercialisation from them. Rather, he was referring to other state assets.
"The rest of the assets the government owns need to be run better on behalf of the taxpayer, we shouldn't be allowing them to rundown, we should be managing them for the longer-term benefit, not short-term gain."
English didn't spell out which assets he's talking about, but his words put a new light on how this government is looking at state assets. Remarkably, there's more than a hint of Jim Anderton in those words. English seems to be suggesting that the one-off, short-term profit of a sale doesn't make as much sense as running the government sector more efficiently and effectively for the taxpayer.
He certainly didn't rule out some sales and he's not exactly embracing the 'public good' argument. But he seems to be talking about the public sector running the state's assets better, rather than hocking them off. It's the sort of language we used to hear from the fourth Labour government in its first term, before the then plain Roger Douglas went ferrel.
There's still plenty of room for debate about what running these assets "better" means and one or two sentences a new policy doth not make. However, the hint in those words is that a 2011 fire sale may not be as inevitable as it once looked. Given that the words were spoken by English, who's assumed to be to the right of Key and pushing for a more Treasury-like approach to the economy, it's especially interesting.
Given that Key listed his guiding principles this week as "equity, fairness and predictability", could it be that the right of the National party is disappointed when it comes to privatisation policy for the 2011 election?
Comments (5)
Rather surprised it has taken this long for this particular penny to drop.
It's been bloody obvious to anyone who didn't have some pre-conceived ideological/tribal commitment to wetting themselves over 'privatisation' every few days that National isn't about to go down that route.
I wrote about this over a year ago in NBR - 19th Sept 2008, if you want to look it up.
They can't afford to - for financial as well as political reasons. Roughly $500 million in dividends is not to be sneezed at.
And the "no asset sales this term" has always been more of a sop to the pro-privatisers than the anti-privatisers.
Ah well, we're not all so brilliant and unhindered by ideology Rob! Perhaps it's the presence of so many pro-privatising MPs in cabinet, perhaps Bill English's values expressed when party leader, perhaps the time limit on the promise, perhaps the concrete action on ACC and water services, perhaps the government's repeated unwillingness to rule it out... all rather good grounds for doubt I would have thought.
But hey, maybe you were right a year ago, and full credit if you were.
Tim: I'd never claim brilliance - I've just learned a thing or two about looking at things as they are, rather than as I'd like them to be.
I firmly expect greater private sector involvment in some areas, but your comment about "a 2011 fire sale" having once been "inevitable" to me just showed...well, I know Labour and the Greens and people close to them tend to make this prediction on an almost daily basis but it has always struck me as a bad case of predicting your opponents will do something utterly stupid in the hope this will come true.
As you would probably guess, I don't have a huge problem with privatisation in principle
And I certainly can't see a problem for greater involvment of private providers across a range of government services - again, in principle.
The largest public/private partnership in this country's history was initated by the last government, and that is the Cullen Fund.
If we're happy to let the private sector manage a fairly large chunk of our state-funded pension (and we seem to be: people on the Left have grizzled National stopped handing the private sector $2.6 billion a year to manage on the government's behalf) I fail to see any principled objection to letting them run roads, or things like school or hospital buildings.
Rob, it may just be me, but I'd be a little bit wary of claiming superior sight to others quite yet. You know enough about politics to realise how much can change in the next couple of years; we're in the first year of a new government that's acting in the wake of a global recession. You're speculating, just like the rest of us at this stage. Events may follow the course you predict, but it ain't as clear cut as you make out.
Did you, for example, anticipate that the government would alter its election promise and widen its review of ACC beyond the workers' account to encompass the whole shooting match? Or were you looking at that as you'd like to see it?
As for the Cullen Fund, sure, public funds are being invested in private markets, but that's extending the definition of a PPP more than a little. It seem to me a bizarre comparison, so can't let you get away with that.
Tim...I'm not claiming superior sight (and its not really the issue even if I were and I wonder why you keep suggesting it). Just querying the whole presumption of your piece, contained in the first line about privatisation having been a 'safe bet' until now as well as the later comment about a 'fire sale' being inevitable.
I hear this on a daily basis from Labour and Green politicos but when it gets repeated as political analysis I have to wonder why. Because I just can't see it.
And, as noted, I don't have a problem (in principle) with asset sales: I just can't see anything much happening in that area except perhaps at the margin.
To your points on the Cullen Fund:
Your first point is quite wrong. The government is collaborating with a whole bunch of selected private sector partners. [listed here: http://www.nzsuperfund.co.nz/external_investment_managers.asp?pageID=2145846741] Its contracting them to invest the money. Some of the world's largest financial services firms are involved. They're not doing it for free. Those contractors tender for the work to the Guardians of the Fund, which chops and changes them from time to time. All the Guardians do is set the strategy and then the different providers are contracted to invest the money.
How is that not a public/private partnership?
Second point seems a little incoherent to me.
The third point: don't see how an act of parliament makes any difference either way. And, as noted above, the government is handing money, if not to Merrill Lynch itself, then certainly to 'somesuch' to manage. As for being on the government's books or not - the days PPPs could be shuffled off the books (a major reason some governments, eg Labour in the UK, have been so keen on them) are gone. The new IFRS accounting rules won't allow that. That's a good thing - it should improve the risk assessment of such projects before they start.
Fourth point: NZ superannuation, which the fund is set up to help pay for, is very much a public service.
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