Most Kiwis won’t be able to afford to pay to buy what we already own when National sells our assets. When they sold Contact, only 5% of us got shares. You know who will buy the shares. Not your working families. Not Key’s new army of the unemployed. It’ll be the people who won big from National’s tax cuts. Now, to add insult to injury, Key is looking at making you and me pay a bonus to these people if they keep the shares.
Here’s how it’ll work, based on the Queensland Rail experience.
National sells half of Mighty River for half its value -$1.9 billion (it doesn’t get the 15% ‘gain on sale’ that Treasury invented to make the asset sales numbers look less awful). 30% of the shares sold go straight offshore. Half the remainder go to institutions (to provide what Treasury calls ‘pricing tension’ -ie enough demand to get the price you want) and the rest get purchased by ‘mum and dad’ investors in $2,000 lots.
$670m in $2,000 lots is 335,000 lots. So, only 7% of Kiwis end up buying shares in Mighty River. And it has to be small percent like that – even if you made it $1,000 lots and only ‘mum and dad’ bought any of the shares, that’s still only enough lots to go around for 43% of us (if 43% of us had $1,000 sitting around to buy shares we already own).
So, these 335,000 mum and dads hold on to their shares for two years and get a ‘loyalty bonus’ from the Government of one more share for every 15 they own. That’s $45m worth of bonus shares. Where’s the money coming from? Ultimately, from the people who pay taxes and didn’t buy shares …. that’s most of us.
Russel Norman points out that, if National spin came true and the assets sold for a total of $6b, all to mums and dads who held on to their shares, then we would be forking out $360m to that small elite of share purchasers, by way of a thank you to them for taking our profitable and strategically vital companies off our hands.
Key seems very keen on these loyalty bonuses, although he has had no advice on them. Isn’t that unbelievable? National is embarking on a multi-billion sales programme and, with only a couple of months to go, hasn’t even begun to consider how a loyalty bonus would work.
But nonetheless, Key is keen to shell out hundreds of millions of dollars to reward those few Kiwis who buy shares in his asset sales. And that just means the economics of the sales get even worse. They were already going to increase the government deficit by $100m a year, now add a few more hundred million to the tab.
And, for what, exactly, again?
Oh yeah, so that the capitalist elites that National represents can control the profit streams of our lucrative and strategically vital power companies.