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 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.