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NRT: The problem of SOEs

Written By: - Date published: 3:36 pm, June 20th, 2013 - 7 comments
Categories: activism, business - Tags: ,

A second repost (with thanks) from I/S at No Right Turn. This time on SOEs.

The problem of SOEs

Fifteen years ago, Nicky Hager exposed how state-owned enterprise Timberlands West Coast was spending millions of dollars of taxpayer’s money to fund political operations against its owners, the people of New Zealand. The core problem? An SOE that behaved as if it was a private company, with no democratic responsibilities. Fifteen years on, it looks like Solid Energy had a serious case of the same disease.

In retrospect, the spying on protestors should have been a warning sign. But its only since the company’s collapse that we’ve seen how deep the rot went: a refusal to accept Treasury oversight, and now news that they spent $48,000 hiring lobbyists Saunders-Unsworth to advise them on how to bullshit Parliament:

High-profile lobbyists were called in to help Solid Energy bosses dodge questions from media and opposition MPs about the coal miner’s financial woes, and the advice was also shared with Treasury and ministers.

The company’s $389 million debt was revealed earlier this year, and its bosses sought advice from government relations and lobbying firm Saunders Unsworth before fronting up to a parliamentary select committee in March.

Newly appointed chairman Mark Ford told the committee he was unable to answer questions on the state-owned company’s fall from financial success, saying he had not been there at the time.

However, Labour has obtained documents showing Saunders Unsworth advised Solid Energy’s bosses to keep responses to MPs’ questions as short as possible.

“The longer you talk, the more likely it will be that you trigger a range of questions that will not be pleasant,” the advice said.

As with Timberlands, this displays a fundamental misunderstanding of the relationship between an SOE, Parliament, and the people of New Zealand. These people are supposed to work for us. And that means being monitored by Treasury and fully and frankly answering any questions Parliament asks. Failing to do so isn’t just a contempt of Parliament; its an attack on the entire idea that government entities are accountable to Parliament, and through it, to us.

Sadly, Ministers appear to have colluded in this. That’s disturbing too. Ministers are supposed to be the first layer of oversight on SOE’s, not enablers of their anti-democratic behaviour. By approving Solid Energy’s behaviour, Tony Ryall and Bill English have failed in their fiduciary duty to Parliament to represent our ownership interest of these companies. And that’s just not acceptable.

7 comments on “NRT: The problem of SOEs”

  1. karol 1

    I/S makes very important points about the role of SOEs. Though, maybe it shows that this hybrid form of organisation, a government service that operates like a business, is based on a contradiction in terms.

    I also thought this bit of advice from Saunders-Unsworth was interesting;

    The documents show Solid Energy’s bosses were given advice on dealing with “problematic” Labour MPs Clayton Cosgrove and David Cunliffe.
    The advice was also shared with Treasury, and the offices of Finance Minister Bill English and State-Owned Enterprises Minister Tony Ryall.

    • Draco T Bastard 1.1

      Though, maybe it shows that this hybrid form of organisation, a government service that operates like a business, is based on a contradiction in terms.

      Governments provide services that are paid for through taxes and they do so because it is the most cost effective and efficient way to provide those services (has to do with economies of scale and the simplicity of taxes). Running a business to make a profit is contrary to that with the profits actually being regressive taxes.

  2. AmaKiwi 2

    In a private company the owned, English and Ryall would never tolerate this by their employees.

    How do we fire these people? Their hypocrisy is nauseating.

  3. Ad 3

    Ministers both left and right have been far too coy about using their ability to hire and fire Directors. Firing – or not reappointing – sends a strong cold wind into members of golf clubs and Manufacturers Associations right acros the country of the kind of direction they are seeking. “Serve at the pleasure” being the operative phrase.

    Also poorly used is the Letter of Expectation to guide SOI formation to the Chairs. Mayor Brown uses this to good effect with his CCOs. Mayor Cull is getting into this as well.

    Nor should the threat of full absorbtion be taken away. SOE’s are of course legislated entities. Queenstown Lakes for example has dissolved all of their CCOs over the last 6 months.

    Dunedin is about to release the results of a major review of theirs, and wouldn’t be surprised if there are fewer after that.

    Auckland seems likely to conduct a similar review next year, should the current Mayor get in and the balance of power about the same.

    Not sure why hiring lobbyists was a broblem – if Ministers didn’t like it the Shareholder Giude and the Letter of Expectation would simply state a “must not act against stated government policy”. After all an SOI has to be agreed by both the SOE Board and the shareholding Minister.

    What’s really missing however is a Treasury unit with sharp teeth. COMU is pretty watered down, and really needs the power to recommend specific disciplinary actions to Ministers. Plus some good attack-dog public servants in there.

    Finally, there has to be a common direction for them all. There is no equivalent of the Auckland Plan for SOE’s to have collective policy targets. Just delivering dividends is poorly insufficient. All SOE’s must be to be told to give effect to a common governmental strategy. For God’s sake don’t call it a vision, but something for the common good besides money.

    Sorry about the rant – this field of NZ politics really pisses me off.

  4. Problem with NRT and liberals in general is they think that things are supposed to work for the people.

    The whole point of SOEs is to corporatise them, bring in private sector people to run them then flog them. This includes running them into the ground. All that is solid melts into air.

    The point is to get the state out of any monopoly or part thereof that is potentially profitable as the bosses are desperate for every last tonne of shit to glob off.

    The left is mired in illusions that the state can step in a fix things up in the name of the people.
    Once such delusion on the liberal left is Keynesian economics.

    Yet Keynesian state aid died in the 1970s. Capitalism is in terminal decline beyond redemption.
    Capitalism is the crisis. Face it. From from Palestine to Syria to Ristanbul to Sao Paulo people are standing up.

    Good interview with Michael Roberts that spikes lots of delusions about how capitalism works.
    “Contours of the Crisis: an Interview with Michael Roberts”

    • Draco T Bastard 4.1

      The point is to get the state out of any monopoly or part thereof that is potentially profitable as the bosses are desperate for every last tonne of shit to glob off.


      The capitalists are determined to become even bigger bludgers on the working people and they do that by ‘buying’ up the commons so that people become ever more dependent upon the bosses.

  5. Rich 5

    Most of the SOEs could usefully be converted into true worker or worker/customer co-ops, where each employee (including long-term contractors) or retail customer has an equal share and receives and equal dividend and vote to elect the board and CEO. This would give them accountability to the people with a real stake in them, and ensure that any excess profit would go back to the customers and workers.

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