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51% swindle averted

Written By: - Date published: 12:43 pm, June 21st, 2012 - 31 comments
Categories: assets, privatisation, Privatisation, scoundrels - Tags: , , , ,

It looks like the Nats’ attempt to pull a swindle on the meaning of “51% ownership” has been averted. For those who haven’t been following the story, the Nats have, of course, promised to retain 51% government ownership of the state-owned assets they are partially flogging off. But back in April Vernon Small alerted us to an attempt to pervert the meaning of 51%…

Loophole allows sale of over 49pc

A loophole in the law covering partially privatised state assets will allow much more than 49 per cent of the value of the companies to be privatised, providing the extra shares do not carry voting rights.

The Government has pledged to retain 51 per cent of the four energy companies it has put on the block, starting with Mighty River Power later this year.

But a “minor policy decision” by ministers, revealed in a Cabinet paper released last week, shows that the 51 per cent limit, as well as the 10 per cent cap on individual shareholdings, will apply only to voting shares.

The Cabinet has agreed “the 10 per cent and 51 per cent restrictions should be calculated on the basis of voting rights rather than the total percentage of all securities held (including those with non-voting rights)”.

The wording in the Mixed Ownership Model Bill, which has had its first reading in Parliament, would ensure control of the companies remains with the Government.

But it would not prevent the companies – with shareholding ministers’ approval – issuing or selling non-voting shares, diluting the taxpayers’ slice of the dividends and profits the companies generate.

As I wrote at the time, this wasn’t a “loophole”, it was a simple lie, as the Nats had clearly promised to retain 51% of income (not just “voting rights”). Now, however, I’m pleased to report that the Nats have backed off from this attempted swindle. Vernon Small again:

Government U-turn on SOE sale cap

The Government has backed down on a move that would have allowed it to sell more than 49 per cent of partially privatised state assets, providing the extra shares did not carry voting rights.

Fairfax Media highlighted the loophole in April and it is understood that sparked a backlash from United Future leader Peter Dunne. It is understood the Government made a U-turn after Dunne dug in his toes, arguing the wording in the Mixed Ownership Model Bill would breach his party’s support deal with National.

Last night SOE Minister Tony Ryall moved the amendment to the Bill, which changed the requirement on the Government from retaining 51 per cent of the shares with voting rights to 51 per cent of all shares.

This is excellent news. Full credit to Vernon Small for his excellent reporting of the issue, and Peter Dunne for making a stand. United Future’s Dunedin North candidate Pete George says he alerted Dunne to the issue, and has some more background on UF’s involvement here.

Peter Dunne could, of course, do so much more. He could vote against the legislation to flog off our assets, and kill the move dead. The overwhelming majority of Kiwis are against the sales. There’s “growing frustration” in Dunne’s own electorate at his support for the sales. The overwhelming majority of submissions to the select committee were opposed, and the Nats have terminated the process early to force this unpopular measure through. If they are successful, if the assets do get sold off, it will be because Dunne let it happen. Hey Peter – why not be a hero instead?


31 comments on “51% swindle averted”

  1. Te Reo Putake 1

    Hero? Hairo!
    The sad thing about Dunne’s intervention on the rort is that he will probably now say that he has done more than he promised. Which would be true, because he promised nothing and allowed the misconception that he opposed these sales to flourish, instead of being open and honest. He has made a minor, though important change, which doesn’t stop the theft of the lesser portion of the assets, but at least stops the damage from being worse.
    But that’s not enough. If he truly believes he is serving the best intersts of the majority of Kiwis, he should stop ignoring the message middle NZ is sending him and vote down this needless and shortsighted legislation. He won’t though, because, at heart, he’s a Tory, not a centrist.

  2. Kotahi Tane Huna 2

    Dunne has put his foot down because he had no choice: his quisling nature having been utterly exposed by his weasel words around the sales. The only reason he even raised it is because of the pressure he has been subjected to.

    Keep the pressure up: he’s weak and has no values worth speaking of.

  3. Ed 3

    Does that still leave the loophole whereby subsidiary companies can still be sold off so that the government is left owning 51% of a cashed up shell?

    Even selling 49% of the operating subsidiaries will reduce the ‘effective’ government ownership of current assets being far less than 51%.

    Does it stop the company finding another company to ‘manage’ the assets for them – giving a long term management contract that effectively moves a significant portion of the income to a separate player – again leaving government owning 51% of a lower income stream.

    The issue of non-voting shares was discussed a long time ago, it is indeed good that when it became obvious that the government were trying to slip this one through ‘under the radar’, it got picked up by newspapers. It is sad that we have to be so vigilant and distrustful of our own government

  4. This is excellent news. Full credit to Vernon Small for his excellent reporting of the issue, and Peter Dunne for making a stand.

    I agree, Dunne and UF have done what they said they would, kept National honest and kept to commitments made before and after the election, including on the Confidence & Supply agreement.

    Peter Dunne could, of course, do so much more. He could vote against the legislation to flog off our assets, and kill the move dead.

    But that is trying to get him to do the opposite, to get him to ignore not just commitments to allow limited part assets sales go ahead, but also to throw out the whole C&S comitments and bring down the government.

    People that expect him to stand on principle when it suits them but want him to throw principles aside with much bigger repercussions involved when it doesn’t say much for the principles of those asking him to do a complete u-turn to suit their demands.

    Of course some want see the government crash – they don’t care about democracy and reasonable coalition practice, as long as they get their way.

    • r0b 4.1

      You think defeating the asset sales legislation would bring down the government? Steady on. It would make them do their sums again, move their targets, maybe even make them reverse their tax cuts to the rich. But I see no reason to believe that it would lead to terminal instability.

      • You_Fool 4.1.1

        Except if the NAct’s throw their toy’s out of the cot over being denied their “mandated” policy and growth plan…. So no worries as we know they are all grown adults…

    • KJT 4.2

      Yes. We do want to see this bunch of thieves and fools crash. Before they do too much more damage.

      We cannot afford to give them free rein until 2014. The destruction is already almost unfixable!

      Pete. You fool. Legislating against the wishes and best interests of the majority of New Zealanders, IS NOT DEMOCRACY.

  5. jack 5

    I don’t see how that will bring the government down. Infact, wish there were independent mp’s to vote their beliefs rather than vote the party line. Only 1 vote and that could change the direction of New Zealand. There should be binding referendums to keep this from happening, prevent parliamentary dictatorship.

  6. Georgecom 6

    “that sparked a backlash from United Future leader Peter Dunne”

    Talk about over statement. ‘Backlash’ from Peter Dunne. Please.

    Best thing is to drive into Dunne over the next 10 days and try and give him the backbone to at least delay the legislation until the referendum has been had.

    • There’s no certainty there will be a referendum, so that’s a futile tactic.

      The MOM part sales are National’s policy, you have to convince them not to go ahead if you want to stop it. If there’s a compelling reason to do that it has been buried under a mountain of misinformation.

      • Crashcart 6.1.1

        Are you really going to try and say that there has been no evidence that the MOM is not only poorly formed policy but bad economics?

        They want to push this through and they haven’t even sorted the bonus scheme they want to implement. All the figures show that the lost revenue will out strip the monetary gain from the sales inside of 10 years.

        Voting this down now won’t destroy the government. It will force them to go back and actually do it properly if they want to make it happen rather than half ass rush it through. UF needs to get some back bone. National knows that they can’t go to the poles with the feeling against them as bad as it is at the moment so they sure as hell won’t break with UF over this.

      • Georgecom 6.1.2


        Suggest you take me at my word that there will be a referendum. We have only just started to organise for this. Every where the petition goes Pete, it gets signatures.

        Certainly will have the number for it. Only thing that will stop it is if the Government screws the scrum. Won’t put it passed them trying, however, a petition of that magnitude will be silly for the Government (and I include Dunne in that) attempting to subvert it.

        Best thing Dunne can do is gracefully take a couple of steps backward and declare that he will not make a final decision until the referendum is had. Otherwise he risks taking a bath on this one. Seriously Pete, he risks a soaking

        • Pete George

          Seriously I don’t think you have thought through what a farce this would make of the democratic process.

          If what you suggest was done we would enter an era of major policy being hamstrung by the threat of a possible referendum some time in the future. Would a Green/Labour government be happy to go along with that? Get real.

          • KJT

            Can’t have the citizens of NZ having a say in major policies that affect them. That would never do.

            Politicians may not be able to rush through badly thought out and inadequately discussed and researched policies. Shame!

            Pete. You are totally confused about what the word Democracy means. Rule, by the people. Not Cabinet!

            It does not mean that thieves, in parliament, can plunder whenever they like.

            And. A lot of past Labour policies would also have been a lot better held up until more thought is applied.

            It has already been proven that asset sales lose us more than we gain. Anyone still supporting them is either deluded or venal. Which are you?

            • Pete George

              I think you’re the one who is confused.

              You are totally confused about what the word Democracy means. Rule, by the people.

              CIR. For the citizens. Not Green Party. Not Labour Party. Not National Party. Citizens.

              • KJT

                Aren’t the Green party citizens?

                They are collecting signatures so citizens can have a vote on something which most are opposed too.

                You haven’t answered my question on why you are supporting theft?

                • Aren’t Cabinet citizens?

                  You obviously don’t get the supposed purpose of CIR.

                  • KJT

                    I thought it was democracy. Of course politicians have limited their effectiveness so much that they are derisory, but at least we may be able to show our disgust this time.

          • tracey

            you are over reacting. Just how many referendums have stirred nzers? If anything its a strong message that if a referendum can get, say 500,000signatures then it is a matter beyong ordinary policy which concerns them. The test is how many would vote in the referendum. Id rather see a few million spent on this part ofvdemocracy than 120m paying consuktants and pr to sugar coat a significant policy. I agree that the majority arent always right but some issues warrant an outlet for we of the great unlistened to.

          • Georgecom

            Pete, if the other Pete wanted to maintain his political chances for 2014 he’ll do as I suggested. This issue has that much potential to seriously damage the Government. Dunne is pissing against the tide. A strategic retreat will have him delaying things until after the referendum.

      • Draco T Bastard 6.1.3

        If there’s a compelling reason to do that it has been buried under a mountain of misinformation.

        Ah, no, it’s been said loud and clear – you just don’t want to listen because it would mean the you and your Hair God are wrong.

      • I think a 17% return from SOEs is fairly compelling?

        As is the fact that asset sales worsen our current account when profits are remitted overseas.

        And the notion that state assets belong to us, the people – not National nor individual investors.

        Three good reasons.

  7. The Greens referendum is a farce, and a waste of taxpayers money.
    I always though that 51% was unanimously higher than 49% ?

    • Te Reo Putake 7.1

      Do you not read the replies to your comments, Fortran? For the 3rd time, minority shareholders can and do have have influence bigger than their shareholding suggests. As Fairfax has just found out, 18.9% is more than enough to take control.

      • Pete George 7.1.1

        Not if one other entity has 51% and is the Crown.

        • KJT

          Shareholders can and do take major shareholders to court for not acting in the best intere4sts of all shareholders.

          An indicative paper from NZ’s supreme court gives a strong indication they would have to rule in the minority shareholders favour if non commercial decisions reduce their share values or dividends.

    • tracey 7.2

      i think you will find those percentages amount to a majority not unanimous at all

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