Remember when John Key said that rebuilding Christchurch wasn’t just that city’s challenge, it was New Zealand’s challenge? Yeah, well, now Gerry Brownlee and Bill English are pressuring the council to sell off its assets to pay for the rebuild. Green figures show the madness of that. This is a 20-year rebuild. The dividends over that period are more valuable than one-off sale revenue.
Brownlee sought a list of what Christchurch City Council owns and told it that: “Council must play a full role in the recovery by contributing as much funding as is financially sustainable without necessarily using rates as the sole or main financial variable”- ie.sell your assets. The Council has said no but, under the Brownlee Enabling Act also known as CERA, Brownlee has the power to sell the assets for them if they won’t.
Meanwhile, English is talking up the government’s massively unpopular asset sales programme as a model for Christchurch:
Dr Russel Norman: Is he aware that the Christchurch City Council is under pressure to sell the city’s assets to pay for the rebuilding of Christchurch, and does he think it is fair to ask a city that has been recently devastated by two earthquakes to sell its assets, rather than the Government raising a national temporary earthquake levy?
Hon BILL ENGLISH: That is really a matter for the city council. It has got financial obligations it needs to meet and choices about how to do it. I might say that New Zealand, as a whole, is in this situation, where meeting the cost of, among other things, the earthquake means that we are trying to avoid high levels of debt. We are actually looking at partial sales of some Government assets, which would help us through a difficult situation.
Of course, selling assets to meet rebuild costs makes no economic sense. The Greens’ numbers show that the Crown got $7.4 billion when BNZ, Telecom, and Contact were sold but they have paid out $21 billion since privatisation. Even accounting for inflation and including finance costs, it is undoubted that the government is worse off for these sales (not to mention that the government has had to repeatedly intervene in each of the banking, telco, and electricity sectors because of asset-stripping and high prices).
The lesson is pretty simple: in the long-run, the cost of privatisation always outweighs the gain.
Does it make sense for Christchurch to now sell off its assets, or would it be smarter to keep the assets and their revenue to help fund the rebuild and council services in the future?
The truth is that the right will seek any excuse to push for asset sales. The right see the purpose of capital as