Opposition parties hammer Key on asset sales

Written By: - Date published: 12:11 pm, February 9th, 2012 - 32 comments
Categories: david shearer, Parliament, privatisation, russel norman, winston peters - Tags:

Yesterday, the opposition parties worked together to hammer John Key on asset sales. He faced questions from four parties during one question; the breadth of opposition showed, and Key was stumbling. Some say Shearer should be taking a more leading role but, for mine, this was far more effective than Goff uselessly slogging out a primary and half a dozen sups without landing a blow. How’s that anti-asset sales coalition coming?

Here’s the video

and the transcript:

1. State-owned Assets, Sales—Prime Minister’s Statements

 

1. DAVID SHEARER (Leader of the Opposition) to the Prime Minister: Does he stand by his statement in the House yesterday, in answer to Oral Question No 2, that his Government is selling assets because “New Zealanders want less debt, more productive assets, and an economy that is going to function, not a load more debt”?

Rt Hon JOHN KEY (Prime Minister) : What I actually said was that one of the reasons National has 59 MPs and the Labour Party has very few is “because New Zealanders want less debt, more productive assets, and an economy that is going to function, not a load more debt, as Phil Goff was promising, and, I have no doubt, David Shearer is, as well.” I certainly stand by that statement.

David Shearer: Does he believe that his asset sale policy is not about paying off debt; it is just about not borrowing more?

Rt Hon JOHN KEY: I think there are a range of reasons why the mixed-ownership model makes so much sense. It is because I think the companies will perform better, it is because New Zealand will have less debt, and it is because we will have $5 billion to $7 billion to put into the Future Fund. So there are a variety of reasons to build out the capital markets, and, of course, there are now approximately 1.8 million KiwiSaver accounts—mums and dads who want to invest in real New Zealand assets. Those New Zealanders are dying to invest in New Zealand.

Hon Trevor Mallard: I raise a point of order, Mr Speaker. That was a very precise question about the repayment of debt. You might want to ask my colleague to ask it again. It was a specific question and very narrow, and it was not even addressed.

Mr SPEAKER: Order. I will hear briefly the honourable Leader of the House.

Hon Gerry Brownlee: I think it is pretty clear that the order of the day is a bit of disruption around this particular series of questions—

Mr SPEAKER: Order! That is a not a point of order.

Hon Gerry Brownlee: No, it is an observation. I apologise and I will withdraw as well. But to the point of order what I would say is simply that the Prime Minister’s answer in Hansard will bear it out when, I am sure, you read some of that later, as I know you do, that he gave a range of responses to the question that Mr Shearer asked. There is no reason why an assumption should be made that the strict one prescription inside the question was what had to be agreed to—not at all. He asked did he believe something.

Mr SPEAKER: I accept the point that the honourable Leader of the House has made. The question asked whether a certain reason was the reason for certain actions taking place and the Prime Minister pointed out actually there were other reasons as well. I think that is a perfectly reasonable answer.

David Shearer: Has the Prime Minister read comments by economic commentator Brian Fallow, that the asset sales are certainly not the solution to fiscal problems—in relation to his last answer?

Rt Hon JOHN KEY: No.

Dr Russel Norman: How is it fiscally rational to sell assets that Treasury tells us are earning 15 percent, in order to substitute for debt, which would cost us 4 percent?

Rt Hon JOHN KEY: All of that will be clear when the Budget Policy Statement is released on 16 February. But in broad terms the cost of funding of debt that would otherwise have to be incurred by the country if there was not the resources coming from the mixed-ownership model is actually slightly more expensive than the dividend return overall. Some years there have been super-profits earned by State-owned enterprises, but, in fact, they are embedded in the future price likely to be paid by investors.

David Shearer: Could he square his answer to supplementary question No. 1 with the latest Crown assets portfolio report, which found that 2011 dividends were a record for the last 5 years, and that the energy companies, quote: “have wider benefits to New Zealand” including “securing New Zealand’s future electricity supply”?

Rt Hon JOHN KEY: I have not seen that report but I do recall the year where there probably were the most super-profits, and that was the year when Meridian Energy sold Southern Hydro—so a bit like selling 49 percent in an exceptional time.

Rt Hon Winston Peters: Would the Prime Minister tell the country what more “productive assets”, to use his words, he has in mind than those four power companies he intends to sell to mum and dad investors who own them already, as do the KiwiSaver account holders own those companies already—what are the more productive assets he is talking about?

Rt Hon JOHN KEY: Well, firstly, I think it is an interesting point to recognise what the Crown balance sheet actually looks like, because at the moment it sits at $245 billion and over the next 4 years it will net increase by a further $22 billion. So New Zealand mums and dads, as he put it, in 4 years’ time under the leadership of this Government will have $267 billion.

Rt Hon Winston Peters: I raise a point of order, Mr Speaker. My question was very precise. It asked the Prime Minister to tell the country what the more productive assets are —in his words—he has in mind for the people who already own those power companies he intends to flog off.

Hon Gerry Brownlee: I raise a point of order, Mr Speaker.

Mr SPEAKER: I will hear the honourable Leader of the House.

Hon Gerry Brownlee: This is every question getting challenged, which is not a good circumstance for the House to get itself into, but I would have thought that if he was asking the question about what productive assets—

Rt Hon Winston Peters: No—more productive.

Hon Gerry Brownlee: —mum and dad New Zealanders are going to have—more productive; whichever way you want to put it—the Prime Minister was outlining quite considerable increases in the assets they are going to have. Perfectly reasonable.

Mr SPEAKER: Order! The member should not be adding that kind of opinion into a point of order. But the member asked about matters to do with assets. The Prime Minister was actually answering in a very rational way about the balance sheet and he had not finished yet. I think the Prime Minister should be given the opportunity to finish.

Rt Hon JOHN KEY: So firstly, the proposition that the member makes is factually incorrect and he should know that. It is $267 billion in assets, not $245 as today. Secondly, if you want my view, $1 billion being taken out of some of these assets and put into 21st century schools to educate the future of our young kids is actually more important than owning 100 percent of Meridian.

Rt Hon Winston Peters: I raise a point of order, Mr Speaker. Now look, I did not enumerate any figure as to the assets; he made it up himself. The second thing, I asked for the more productive assets. That means, in a commercial scale of things, what would be more productive than the 15-plus percent assets of the four power companies—

Mr SPEAKER: Order! The member is now seeking to debate the matter.

Rt Hon Winston Peters: No.

Mr SPEAKER: I apologise to the member; I am obviously stupid, but if talking about returns on assets is not debating the matter, then forgive me. But the member asked a question about the more productive assets, the Prime Minister answered in relation to the whole balance sheets and actually talked about the assets that are important to the Government, and he talked about school assets. That was the Prime Minister’s answer to the question. It is not for me to judge that answer. It is definitely an answer to the question.

Rt Hon Winston Peters: Would the Prime Minister tell us what the commercial rate of return is for the school assets he proposes for this country?

Rt Hon JOHN KEY: There is a number of dividends that come from having schoolchildren educated in 21st century schools, and if the member does not know that—

Rt Hon Winston Peters: I raise a point of order, Mr Speaker. I asked him what was the commercial rate of return—not a whole lot of social valuations, but the commercial rate of return—and I am asking you to make him answer the question.

Mr SPEAKER: The member cannot expect an answer to be exactly what he would like the answer to be. If a member asks a question like that, the Minister in answering it will give what the Minister sees as being a rational answer. I believe the Prime Minister was giving a rational answer to the question asked. Question time is not about members being able to elicit from Ministers exactly the answer they want. They ask questions, and the better the question, the better the answer. That is the way it works. Members need to think about their questions.

David Shearer: Given his answer to supplementary question No. 1, has the Prime Minister read the Treasury report that found “little evidence to suggest privatisation would significantly improve the financial performance of many of the SOE companies”?

Rt Hon JOHN KEY: Yes, and where I would draw some difference of opinion would be in the potential opportunity of many of these companies. If we go and take a look at Mighty River Power as a good example, here is a company with world-class geothermal technology looking to take that to the world.

Hon Trevor Mallard: Why can’t they do that if they’re in Crown ownership?

Rt Hon JOHN KEY: We are a capital-strapped Government, so we are not going to invest in that way, but others might. Interestingly enough, when that monkey over there making all that noise was in Government, he was actually proposing they do exactly that, because he wanted to float the offshoot subsidiaries on the stock exchange. He promoted it, but now he is in Opposition, he just goes like this.

David Shearer: Is it his intention for the Crown to indemnify the privatised companies and shareholders for their losses resulting from Treaty issues?

Rt Hon JOHN KEY: I think the member clearly demonstrated yesterday he does not have an answer to who owns water, and today he does not understand the Treaty, which is a compact between the Crown and Māori.

Hon Trevor Mallard: I raise a point of order, Mr Speaker. I think it was a very clear question about whether it is the Government’s intention to indemnify those companies for any losses that they suffer. That was not addressed. In fact, the answer was offensive.

Hon Gerry Brownlee: The question carried an inference which, under strict Standing Orders, would make the question out of order. The Prime Minister’s response was appropriate, and because he was inferring there would be losses because of the Treaty of Waitangi, that is not a factual position at all.

Mr SPEAKER: I think we have had enough on this issue. I accept the concern that the answer was perhaps unnecessarily unhelpful, but it did actually answer the question in that the Prime Minister’s answer was arguing that in fact because the Treaty of Waitangi is a matter between the Crown and Māori, the Prime Minister would seem to be arguing that there would not be therefore losses to private companies as a consequence. If members think that is not a very good answer, ask the Prime Minister in even more detail about it; that is what question time is about. The answer may not have been the greatest answer, but I am sure the Leader of the Opposition is capable of asking further pointed questions to dig into it further.

Te Ururoa Flavell: If the Government has the duty of active protection and upholding Te Tiriti o Waitangi, why would it propose the removal of section 9 of the State-Owned Enterprises Act, which in effect lets not just investors, but the Government, off the hook.

Rt Hon JOHN KEY: The Government has absolutely no intention of removing section 9 from the State-Owned Enterprises Act.

Dr Russel Norman: Is the Prime Minister telling this House that Treasury are wrong, when in their 2011 Crown Ownership Monitoring Unit report, they report that these companies are earning a total return for the Government of 15 percent per annum on average over the last 5 years?

Rt Hon JOHN KEY: No, what I am telling the country is that the dividend flow is broadly in terms of the forgone interest payments that would be required if debt was secured, remembering that the Government will always retain 51 percent or more of those dividends because of its investment, and that there may be some other super-profits earned, but they are captured in the value of the company and will be in the valuations.

Dr Russel Norman: What would the Prime Minister’s advice be to someone who received financial advice from an adviser who told them they should sell assets returning 15 percent in order to pay down debt that cost them 4 percent?

Mr SPEAKER: I am not sure about the Prime Minister’s ministerial responsibility; however—

Dr Russel Norman: I’m seeking an opinion.

Mr SPEAKER: I do not want to prevent the Prime Minister from being able to answer the question where he is asked an opinion.

Rt Hon JOHN KEY: If it was like that I might tell them not to do it, but that is not the case, because in this case, the value difference the person is talking about is off some pretty ropey numbers I might say to start off. Just to give you an idea, that same valuation unit he is talking about moves Solid Energy’s valuation from $475 million in 2007 to $2,954 million in 2008. I know they had a good year but it was not quite that good; and secondly, any other kind of change is implied in the value that would be paid by shareholders.

Big mistake by Key at the end there. Dissing the very valuations that his sale revenue forecasts are based on. If the real values are lower than that, then the companies’ rates of return are even better.

32 comments on “Opposition parties hammer Key on asset sales”

  1. james111 1

    Yes watched Russell Norman really struggled with the return 4% & 15% that he was claiming, was prepared to accept the changed accounting numbers that had revalued the energy companies owned by the state up 2.8 billion in one year.
    Key handled Shearer, Mallard, Norman and Winston with absolute ease. If you call this a hammering you must have been watching something else to me. It was even a gentle tapping. Winston was made to look a complete fool by the speaker for not getting his question right. Really looks like a spent force.The opposistion will have to do much better than this im not sure they have the talent to do it. Shearer looks weak ,and unassured. When it comes to numbers Key can easily answer anything he asks him. Financial literacy is a great thing to have.

    • KJT 1.1

      You think Key is financially literate?

      Facepalm.

      Being a successful gambler does not make one “financially literate”.

      • Salsy 1.1.1

        +1. Selling unethical, overvalued derivatives to pension funds and hard working families ( mums and dad investors in fact) in the full knowledge they are worthless is criminal, not clever.

        • Fisiani 1.1.1.1

          If you call that a hammering you could be done for misrepresentation. Has the mixed ownership progromme been stopped? No Has it been slowed? NO

          Has it been impaired. NO.
          can you define a hammering cos that aint one

          [lprent: I think that you really need to learn some law. Misrepresentation is a quite specific offence and damn near impossible on this site.

          You have been up to your old trolling habits of meaningless statements again over the last few days. Start saying something sensible and engage with more than stupid slogans or you’ll get the boot again, and I’d be doubling up on time period. It is your choice. ]

    • james 111 you have no comprehension whatsoever about the figures yet you form these rabidly strong views on the merits of the situation.  Obviously you think Key is tougher and therefore he is right and the others are wrong.
       
      You are trolling.  I think we should all ignore you from now on.

    • Draco T Bastard 1.3

      Winston was made to look a complete fool by the speaker for not getting his question right.

      What I got from that was that according to the Speaker it was perfectly fine for the minister to lie and misdirect in answering a question.

      When it comes to numbers Key can easily answer anything he asks him. Financial literacy is a great thing to have.

      I’d prefer someone who was economically literate. Of course, Key isn’t even financially literate. He is, after all, selling assets with a 15% return to save a 4% cost.

      • Richard Christie 1.3.1

        “I’d prefer someone who was economically literate. Of course, Key isn’t even financially literate. He is, after all, selling assets with a 15% return to save a 4% cost.”

        Yes, but it’s not about financial or economic literacy. It is all about enriching a certain class of citizen, and to boot, not necessarily citizens of of this nation.

        • Carol 1.3.1.1

          Yes, but it’s not about financial or economic literacy. It is all about enriching a certain class of citizen, and to boot, not necessarily citizens of of this nation.

          Indeed, as David Beatson argues having looked at the Iwi consultation document.

          http://www.pundit.co.nz/content/asset-sales-%E2%80%93-where-are-mum-and-dad%E2%80%99s-shares

          Everyone should read the iwi consultation paper on the Governnent’s plan to convert the four energy sector State-owned enterprises into “Mixed Ownership” businesses with 49% of their shares in private hands. The paper raises issues that go far beyond the current hot topic of whether the new businesses should carry the Treaty of Waitangi obligations that currently apply to them in state ownership.

          The consultation paper is as important for what it doesn’t say, as it is for what it does. The iwi consultation document contains no reference to the Government Ministers’ widely touted pre-election expectation that between 85 and 90 percent of the shares sold will be in New Zealand ownership, or to its soothing statements that it will be creating a sound opportunity for the sorely-tested “Mum and Dad” investors in the country.

          • Puddleglum 1.3.1.1.1

            Yes, and the documents Beatson comments on make it quite explicit that the government will lose significant controls that it currently possesses in relation to SOEs when the mixed ownership model is put in place.

            The 51% shareholding – with the government simply having the rights of a majority shareholder under the Companies Act – ensures reduced control, as I argued here. (Sorry about the document images not coming through on the post – still a newbie!)

            A close read of the various Treasury documents and memos during this process is very revealing of what the government was not hurrying to tell us.

            John Armstrong also seems to realise the point, and its political risks:

            All this and the state would still retain control through its majority 51 per cent shareholding.
            The latter factor – state control – is the most crucial in political terms. But it will prove to be a myth.
            It is a myth that John Key and Bill English were naturally keen to perpetuate in the run-up to last November’s election.
            Ownership and control are not the same thing. Key, in particular, has confused the two, perhaps deliberately. Moreover, the rights of minority shareholders will have to be taken into account” 

    • tc 1.4

      Dude, the stand up routine’s coming along nicely. Given up your day job yet, that’s if your old enough to have left school yet.

    • aerobubble 1.5

      Money is sloshing through the world looking for hard assets to buy into, because so much of the western world is underwater in debt. So Key is selling hard assets owned by Kiwi Tax payers even when those assets return more than the cost of borrowing. You have to put it in terms even a homeowner can understand, would you allow government to sell you house even if the rental (after costs) is higher than the cost of borrowing. No, you wouldn’t, and anyone with any fiscal rectitude knows what Key is up to is off the wall craziness. Key is actually trying to rubbish the free trade system because it hurts NZ when government can’t do bum deals to foriegners but can make bum deals for kiwi tax payers. Key is fermenting a movement against free trade that allows tax payers to sue government when their government is too favorable to foriegner investors at tax payer expense. I mean how dishonest have people to be not to notice how lobbiest get politicians to pass legislation that makes them heaps of cash at tax payers expense, asset sales provoke Nationalistic sentiment in the population to stop the free trade scheme (or better open the way for tax payers to sue lobbiests and companies that ‘help’ politicians to push anti-free trade legislation. If it does not come to pass we will all be owned by a global elite who will demand a fair go for themselves while plowing their profits into lobbying national government to do the dirty on tax payers.

      • Bored 1.5.1

        Money is sloshing through the world looking for hard assets to buy into, so true. The worst bit is the larceny that is quantative easing whereby the banks create credit (fractional banking) secured by nothing but governments agreeing to stand the debt obligation. Or just printing cash as has the Bank Of England this week.

        The net result is that the cash that is going to be used to buy the NZ state assets will be basically created out of thin air, for which we will giive solid assets in return. Thereby transfering our sovereignty. Meanwhile Key borrows more and more NOT for social welfare etc but to be able to continue tax cuts that he used to bribe his way to power.

        We the electorate allowed this to happen, we voted for a swindling cheat. My contempt for those of us who chose to impose their venality on the other half of us knows no bounds.

    • johnm 1.6

      Key was floundering he had to have fat boy Brownlee step in and the Speaker Lockwood another RWNJ confuse things. He was got as the Rubbish Ideological self serving Hawaii resident nitwit he has been shown up to be. Go back to sleep kiwi sheeple.

    • I’m nor sure what you were reading, James, but Russell came across understanding the rate of reeturn vs the cost of borrowing quite well.

      Personally speaking, I qwould rather keeop an investment that was giving me a 15% return, rather than sell it; lose the dividends; and then have to borrow the same amount at 4%. Makes fairly sound economic sense to me…

      • james 111 1.7.1

        Frank you have the same problem as Norman not understanding, as the true rate of return isnt 15%. As the energy sector revaluation is wrong. Which throws out all of the % return figures

        • Bored 1.7.1.1

          Jimmy Dipstick, you would not understand reality if it ran a truck across your head. I doubt it would even do any damage. You will however experience along with the rest of NZers how it feels to be road kill splattered across the economic history of this fair country. All the while you and pillocks like yourself will be the cheerleaders of your own demise. Fool.

          [lprent: This comment seems to me to be quite excessive in comparision to the point of it. Calm down or have a holiday. ]

          • AAMC 1.7.1.1.1

            nicely put! +1

          • Te Reo Putake 1.7.1.1.2

            Spot on, Bored. The post the other day about the corelation between low IQ and conservative values didn’t specifically mentioned racists, but I think it’s safe to assume that James is functioning at around the intellectual level of road kill.

            • Blue 1.7.1.1.2.1

              If a low IQ, and Conservative values are correlated, then please explain to me why left wing voters are invariably from the poorly educated low paid and unemployed strata of society. Surely it can’t be that they have the “low IQ”?. BTW the only racists I’ve ever had the misfortune to meet wear overalls, live in state houses , and vote Labour.

        • Draco T Bastard 1.7.1.2

          But the “true rate of return” is greater than 4% thus we still get to lose no matter which way you and your masters twist and turn the truth.

    • Winston was made to look a complete fool by the speaker for not getting his question right.
      Not really, Winston doesn’t necessarily want the question answered. His points are made almost as well (and to his credit, they are well made) with the question remained unanswered.
      Frank gives a good overview of how the technique works in comment 3.2 below.
      Winston’s theory is that shit sticks. And it does. And it will continue to do so.

  2. ianmac 2

    Well done Opposition. I bet Mr Key was a bit less sure of himself. And a lot less his usual smug self.

  3. ianmac 3

    I see that Mr Peters has another of the dreaded questions “Does the PM have confidence in all his Ministers?” Q12. Wonder why it has been put last?

    • aerobubble 3.1

      Greens, Labour, both have more MPs than NZF?

    • Ianmac; Peters is up to something. That question is a classic opening gambit,

      1.Ask the PM if he has faith in all his Ministers,

      2. PM has to say “yes”, or else be made to look as if he lacks faith in his own Ministers,

      3. Peters reveals some scandal that one of Key’s Ministers is engaged in,

      4. Minister is forced to resign; Key ends up with egg on his face, appearing that he lacks sound judgement when appointing Ministers.

      The game’s afoot, Watson!

  4. johnm 4

    Good on Winston and Russel Norman. They have shown Key to be the Rubbish he undoutedly is. Shearer came over as a paler shade of the same Rubbish. Poor New Zealand with such Rubbish leading them.

  5. foreign waka 5

    Reading through the article I pick up bias by the Speaker, evasion of real answers and no real reply to the question of “more productive” assets, a ROI loss to the NZ public and is it his intention for the Crown to indemnify the privatised companies and shareholders for their losses resulting from Treaty issues? I belief we will not hear anything that might enlighten us despite the assets belonging to the NZ public. Just wondering who is putting pressure onto whom to make this happen? It all reads like the Bogias from down-under.

  6. QoT 6

    No, what I am telling the country is that the dividend flow is broadly in terms of the forgone interest payments that would be required if debt was secured, remembering that the Government will always retain 51 percent or more of those dividends because of its investment, and that there may be some other super-profits earned, but they are captured in the value of the company and will be in the valuations.

    That is so not even English.

    • Draco T Bastard 6.1

      It’s a misdirection designed to make it sound as if selling off of profitable assets is a good idea.

  7. The Chairman 7

    Listing our current SOEs sets the wrong investor incentive.

    It’s our export sector that requires further investment.

    Listing SOEs will rob our exporters of that potential funding while robbing the nation of its potential to grow and generate new wealth.

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