SOE bonds: raiding the piggybank to pay for tax cuts for the rich

Written By: - Date published: 7:20 am, August 24th, 2010 - 8 comments
Categories: privatisation - Tags:

Yesterday, Eddie wrote about the OIA papers we (eventually) managed to get from Treasury about the Nats privatisation agenda, where bond issues are to be used in place of outright asset sales.

The papers go on to describe two debt issues that have already taken place – these were to fund expansion of NZ Post and Kiwibank. These are very different from bond issues that Treasury is talking about forcing on SOEs. Borrowing to fund expansion when the return on that expanision is expected to be greater than the cost of borrowing is fine and dandy but the papers the Treasury prepared for the government suggest that the money raised in the bond issues would go to the government instead.

No doubt the money will go to fund more unsustainable tax cuts for the rich, or fill the half billion dollar hole caused by the last round of cash for the elite.

The SOEs will be left carrying a huge debt burden that they must pay off rather than return profits to the taxpayer.

On the Government’s books, this will show up exactly the same way an asset sale does. The privatisation of the profit stream will gut the value of the SOEs – the Crown’s net capital assets will take a hit in return for a one-off boost to its operating revenue, which will then disappear on tax cuts.

It’s the conversion of capital wealth to consumption – like taking apart your house to use the scrap for firewood. The only difference between what the Nats are planning and a straight out asset sale is that in this case they leave the frame of the house standing.

To put it another way, it’s like Dad selling off the family silver and spending the earnings down the pub, but keeping the box and telling us we’ve lost nothing.

John Key and Bill English said they have neither requested nor seen official advice on privatisation. That is a lie. Even just the papers we’ve seen, let alone the eight Treasury says are still under consideration, show that privatisation is very much on the government’s agenda. They’re just trying to work out how to sneak it past us without a public backlash.

8 comments on “SOE bonds: raiding the piggybank to pay for tax cuts for the rich ”

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  1. Bored 1
    24 August 2010 at 7:35 am

    Seems to me you have rumbled a deeply cynical plot to sell off the silver whilst bribing the Nact voting part of the electorate to turn a blind eye and take the gains. Which basically shows what a huge pack of coniving rotten eggs we share our community with.

    • bbfloyd 1.1
      24 August 2010 at 12:33 pm

      yes.. and the scary bit is that they all think that they are being reeeeeally clever when they get away with stealing from our kids.

  2. lprent 2
    24 August 2010 at 9:05 am

    What I was fascinated about when I read these weeks ago was the pattern of removed words. I must find time to write a post.

    But it is certainly a struggle to get the papers released

  3. tc 3
    24 August 2010 at 9:07 am

    No surprises here….this is what you get with the type of thinking that helped bring about the GFC from Sideshow and his mates.

    Watch out for the old ‘sale and leaseback’ using such classic excuses as ‘more effective use of capital’ and ‘strategic fit’ or my personal favourite the nact dangle ‘allow mum and dad Kiwi investors etc etc’…..selling snow to eskimoes never looked so good.

  4. Bunji 4
    24 August 2010 at 10:26 am

    The only increase to ACC’s budget for the year was $2 million to investigate privatisation of the work account. (Source: an MP)
    “John Key and Bill English said they have neither requested nor seen official advice on privatisation” – I’d like to see how they justify saying that.

    capcha: ambiguous – what John & Bill’s lying isn’t.

  5. Pascal's bookie 5
    24 August 2010 at 4:53 pm

    Here’s a crazy idea.

    How about the baked ideological little beans in our department of the treasury give ministers policy advice on how best to achieve what kiwis say they want, instead of political advice about how to do what said kiwis don’t want? Seeing said kiwis pay their high wages and all, seems fair enough.

  6. David Lloyd 6
    25 August 2010 at 11:32 am

    Why don’t they privatise Treasury?

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