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Re:Cunliffe re:me re:his speech

Written By: - Date published: 10:30 am, December 3rd, 2010 - 20 comments
Categories: Economy, labour, privatisation - Tags: , ,

It was pretty cool that the next Finance Minister wrote a post about my post yesterday. Even if was to say I was dickishly misinterpreting him 😀 I’ve got a couple of points in reply but the biggest is why is Labour talking about (restrictive) privatisation and PPPs policies when there are much more important economic issues at hand?

Labour is not soft on privatisation. Our opposition to private prisons and SOE sales underlines that.  My recent speech explicitly ruled out any dilution of any Crown equity in any state asset or existing subsidiary.  That bright line test restates our strong “no sale’” policy that provides ongoing strong differentiation form National….

…The vital point of difference between National and Labour on this issue is that National is committed to the private sector first and foremost, while Labour is committed to providing infrastructure in the way that works best for New Zealanders.

Now, I admit that I painted Cunliffe’s mentions of privatisation and PPPs in broad strokes. And I realise that technically this wasn’t anything new (which raises the question of why Cunliffe re-announced it). But guess what? In politics your policies will inevitably be characterised by the media and interpreted by the public in simplistic terms. There’s a difference between National and Labour’s policies on SOEs and privatisation  – National: we might part sell SOEs, Labour: we might part sell new subsidiaries of SOEs as long as it doesn’t dilute equity in existing SOEs – but they look very similar to the casual observer. Especially since National could just adopt Labour’s policy, carve SOEs into ‘new subsidiaries’, and sell them off for the same result as its policy.

Labour has yet to be convinced of the value of PPPs for any particular project, but we are willing to weigh up the evidence. When considering the (de)merits of a potential PPP project we would take a range of critical factors into account.  I mentioned two in my recent speech:

“The project scale must be right and the PPP benefits must outweigh any increase in cost of capital”

Marty G and I should agree that this sets a high hurdle, because the Crown can always borrow at lower (sovereign) interest rates.  The offsetting benefits would have to be very clear, large enough in net terms (after deducting overheads like the cost of tolling), and not available by other means (e.g. non-PPP contracting) to clearly outweigh this cost of capital disadvantage.

Yeah, it does look like a tough test. But if it’s such a tough test that no, or virtually no, PPPs are going to pass the test why bother with the policy at all? The same with the ‘we might part-sell any future subsidiaries that SOEs create’. These aren’t exactly massive policies. So why talk about them at all, when the obvious result would be to over-shadow everything else in Cunliffe’s speech and raise concerns about where Labour stands? If it’s a nothing policy but bad politics, why go near it?

And, who’s to say if it’ll turn out being so tough in reality? The notoriously ‘pro-road at any cost’ NZTA, Treasury, and MED will be chomping at the bit for sell-offs and PPPs, and providing advice that everything will be fine.

It is also obviously necessary that whoever is evaluating a potential PPP for the state has to have the expertise and resources to really test the proposal and establish rigorous accountability.  I have not changed my view that setting a $25 million threshold for compulsory consideration of PPPs by all government departments, as Bill English has done, is ridiculous and bound to lead to bad decisions.

Yeah. I’m sure that New South Wales thought they had the expertise and resources to really test the PPPs that were put to them, and its cost them $4.6 billion so far.

David’s been working on some really good ideas. In fact, the rest of his speech (which inevitably disappeared in the shadow of his mention of privatisation) outlines some good left-moving economic concepts: investing in R&D with a focus on our clean-tech future, rather than tax cuts for the rich; bringing back apprenticeships and encouraging lifelong learning for workers;  monetary policy reform; restoring the Cullen Fund contributions; controls on foreign ownership of strategic resources; building Kiwibank as a true competitor to the Aussie banks.

He would be well advised to work on turning those into an implementable economic plan, and a communicable vision, rather than going anywhere near privatisation and PPPs. My view is that there are exciting changes Labour and the Greens could be running on that would be visionary, not mere tinkering, without being ‘revolutionary’ and scaring people off.

PS. remember the post last week where we talked about what we want the economy to do? I am working on posts coming off that, the idea being to talk about policies that Left parties could really run on, not Utopian visions.

20 comments on “Re:Cunliffe re:me re:his speech ”

  1. ghostwhowalksnz 1

    Australian states arent a good comparison as their projects allow tax breaks for ‘private’ consortiums that aren’t available to state governments funded projects. eg Depreciation writeoffs.

    The tax breaks of course come from federal government revenue. This isnt possible in NZ as there is only one layer of government involved unless you take with one hand to give with the other.
    I doubt most National & ACT Mps even understand it, let alone Farragoblog and others

  2. BLiP 2

    talk about policies that Left parties could really run on, not Utopian visions.

    Lets adopt the Yuan as our trading currency. ASAP.

  3. Draco T Bastard 3

    Yeah, it does look like a tough test. But if it’s such a tough test that no, or virtually no, PPPs are going to pass the test why bother with the policy at all?

    That’s the question that I was asking – why go to the added expense of going through the PPP test if nothing’s, and it will be nothing, will pass it? It’s just more throwing away of taxpayer money. Far simpler to just say no privatisation and no PPPs.

    In fact, the rest of his speech (which inevitably disappeared in the shadow of his mention of privatisation) outlines some good left-moving economic concepts:

    It did it’s just such a pity that Labour still thinks that private and profitable provision of government services is in anyway viable. All we have to do is look to the telecommunications in NZ after 20 years of such privatisation to know damn well that it doesn’t work.

    • Lanthanide 3.1

      “That’s the question that I was asking – why go to the added expense of going through the PPP test if nothing’s, and it will be nothing, will pass it? It’s just more throwing away of taxpayer money. Far simpler to just say no privatisation and no PPPs.”
      How do you know that nothing will pass the test unless you actually carry the test out? Also, in carrying out the test, you mind find that the test itself is flawed and needs to be improved. What you’re suggesting here is pure ideology, not science or proper factual investigation of what might be best for the country.

      Now, done properly, such a test would be applied in stages, from more broad and general to more detailed and specific as each stage is passed. As soon as a particular PPP suggestion fails one of the early stages, it should be nipped in the bud to save taxpayer money – no point doing further study if you’ve already gathered sufficient data to show the idea won’t work.

      • Draco T Bastard 3.1.1

        It’s not ideology at all – it’s reality. Private provision of public services must cost more or be not done as well as they have to make a profit and they really can’t do it any better than the government who would be hiring the same expertise.

        • Colonial Viper

          The only thing is that the public provider must have an ethos of innovation, operational excellence and results oriented management focus.

          Of course we can see that this is quite possible in some of the brighter SOEs out there.

          Its helpful if Govt doesn’t treat the operation or service as a revenue generator too.

  4. Herodotus 4

    From Davids speech, that there have been no commentary either here or on Red Alert about the entire speech, just the PPP aspect. Which surprises me, especially as Marty believes that David is the Finance Minister in waiting. Perhaps the speech has all the nice chocolaste coverings or min detail and platitudes that sound great but have a hollow filling.e.g. “..National’s policies are not socially responsible, nor capable of enduring solutions..” this maybe true but the same is applicable to Labour as well, so what has changed??? A new young freash face. How will a low wage economy, paid just enough to survive be enabled to save???
    “They said they would not raise GST to fund a deficit, but raised it anyway.” and lab said that it was not appropiate, BUT will keep this increase. Agree in rhetoric but support in action 🙁
    “We have seen where the old approach gets us, debt, hollowing out, rising inequalities, loss of economic control, bubbles and unproductive investments, low wages” So what is this new approach …details. It is not as if Nat are going to covert these ideas for themselves. There is less than a year for an election and we are not given the due courtesy of examining this new approach. Just faith that another experiment on NZ could work.
    There is alot of “We can” how about we will. Some very son the surface strong comments but when examined they are written in a very passive format. NZ caanot go ahead with passive comments we requier a plan.
    Hope everyone has a great weekend 😉

    • Colonial Viper 4.1

      “They said they would not raise GST to fund a deficit, but raised it anyway.” and lab said that it was not appropiate, BUT will keep this increase. [DIS]Agree in rhetoric but support in action 🙁

      I presume this is what you meant.

      The issue is that the Govt is already borrowing $250M per week to finance its spending. You cut GST back to 12.5% and that number will go up to very close on $300M per week, unless LAB propose to raise other taxes or chop back $2B worth of Government spending.

      Hard to do, harder to sell it in an election year.

      Yeah you too mate hope you get some good sun.

      • Herodotus 4.1.1

        Thanks CV you read my intentions !!!
        This $250m borrowing- I am still unsure of how much of this is refinancing existing debt.
        I am sure that should Lab get back in there will be movement in the top tax bracket and an aligment of tax rates corp, trust, etc Otherwise Lab yet again appears to tax the rich but yet again enable mechanisms for the really rich to escape this.
        If the Cullen fund is to be topped up and ongoing contributions and other “We can” actions are acted upon and the nil net govt debt achieved there is going to be somewhere that all this money comes from. Anyway GST is regressive and very very bad. If it is then act on the rhetoric otherwise there is reason to write on the hollow red men version.
        Perhaps David and co are the answer but I would like to see some evidence of this.

  5. tc 5

    Great post and you’ve hit the nail as far as I’m concerned with…”In politics your policies will inevitably be characterised by the media and interpreted by the public in simplistic terms”

    Keep the message simple, clear and repeat right through till election 2011, the MSM have shown their blue hands and the swinging voters are heavily influenced by the dross feed to them as if it’s fact.

    Cunliffe’s a bright lad and a future leader but the ACC and other issued showed the MSM can’t grasp anything other than a 10s soundbite…….the nat’s mastered this in 2008 so Labour needs to do the same.

    We know they’ve got a plan/vision/ability to deliver it….now dumb it down so the MSM can’t F it up by extracting a sentence from a 3 paragraph answer, make the answer a 10s soundbite Labour.

    • Craig Glen Eden 5.1

      yup have to agree tc this is the challenge.

    • ak 5.2

      Onto it tc. It’s the marketing grail that Labour has yet to suck.

      The middle governs: forget the rest.

      35% will vote NACT next year even if Key goes on a crack-fuelled nun-raping bender and machine-guns a kohanga for intellectually-challenged puppies.

      40% will vote Lab/Green even with Goff.

      The one-in-eight will decide our fate.

      And they’ll vote on the vibe: the vibe from the Scribes.

      The 10-second bite: what’s for tea tonight?

      From cordon Blue:

      “My dad died too”

      “I read just like you”

      “Those maoris get frack-all”

      “Bennies up against the wall”

      “Pansy nicked two hunny”

      “I’m a genius with money”

      And from the BBQ:

      “We’ll sell the farm too”.

      • just saying 5.2.1

        “The middle governs: forget the rest”

        Forget the ‘many not the few’ crap – this is the real NZLP mantra.

        I’m surprised you imagine they need reminding when they’re yet to do anything else

        • Colonial Viper

          Time to make NZ a country for the many not the few. No more patience with two New Zealands, one on easy street where a $40 bottle of bubbly at the supermarket is an impulse buy, and one where a few more dollars have to be found from somewhere to pay the power company before its cut off.

          The children of this country, living in poverty, growing up in poverty, in a country where your chances are so much better if you are born into a family with wealth at its finger tips. Into a rich family which is not despised or stigmatised by the so-called leaders of the country because of money.

          Bring on the Battle of 2011, its time to make the wealthy and purely self interested few eat a serving of humble pie.

  6. Craig Glen Eden 6

    just saying: I dont think AK is saying that policy has to be pitched at the center,but the message/ sound bite has to be.

    • just saying 6.1

      The “message” is the policy to date. Maybe changing the rhetoric would indicate that things have changed. Or is it a secret change? We can all tap our noses knowingly and whisper to each other “they don’t really mean that”.

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