For the last few months, the Standard has been politely asking Treasury for their papers on the sale of Crown assets. To say they weren’t keen to share would be an understatement. After several OIAs and numerous deadline extensions we’ve managed to get a few papers dating back to the early days of the National government. You can read them here(9.6mb) but these are some of the key passages:
“While recognising Government policy, and the broad political support for retaining state control and ownership of current commercial assets, we think better performance will be achieved by moving towards greater private sector involvement in SOEs. There are a range of options for achieving this while retaining 100% government ownership.”
” put pressure on SOEs to increase their gearing (which as a side-effect will result in greater dividends being paid to the Crown). The way that Ministers think about SOE gearing and special dividends may link to the wider Crown balance sheet management issues that Ministers are interested in”
“There are strong arguments for the Government to put pressure on SOEs to increase their gearing ie encouraging SOEs to borrow more from the private sector and pay special dividends to the Crown.”
“Higher debt levels put increased pressure on SOEs to perform, by committing a fixed part of their future cashflow to debt servicing”
“Higher debt levels do put SOEs under greater financial stress and increase the chance they will require additional capital from the government”
“Shareholding Ministers and SOEs are likely to have different perspectives on the appropriate balance. SOEs will favour lower than optimal gearings as that increases the SOEs operational flexibility, and reduces the likelihood of having to ask shareholders for additional capital.”
“Without sustained and effective pressure from Ministers, SOEs will tend to err on the side of having too little debt on their balance sheets . We suggest that if persuasion continues to be ineffective Ministers should consider directing an SOE or SOEs to pay a special dividend.
Ministers have never directed an SOE over dividends in the past. Such a direction could undermine the Board’s accountability.”
Genesis, Meridian, Mighty River Power, NZ Post, Landcorp, and Solid Energy. Together, these six SOEs make up about 87% of the total SOE portfolio.”
And, from the cover letter:
“There are an additional eight documents covered by your request that I have decided to withhold in full [because they are] still under active consideration“.
It’s clear that this is the first stage of the privatisation agenda others have posted about on the Standard. The Government knows it is politically impossible right now to sell public assets straight out, so it is looking at how to sell the value while retaining the company. They’re calling it “private sector ‘involvement'” but it also provides significant new cashflow to the private sector, so it is privatisation in all but name.
Forcing SOEs to fund special dividends and take on private sector debt by issuing bonds effectively privatises the profit stream of public assets, while leaving the companies nominally in public hands. It’s like selling the pearl, leaving you the oyster shell, and telling you that you’re no worse off. With that privatisation ‘private sector involvement’ comes comes an imperative to maximise short-term profits – leading to asset stripping, and the risk that SOEs will need bailouts in the future. This is just what happened in the 1980s, when the bailouts led to outright sales.
The eight withheld papers tell us the Government is actively working on this privatisation programme right now. One of the most disturbing aspects of this is that two of those papers examine why New Zealanders are opposed to privatisation. Treasury is just telling to government how to sell our assets, they’re trying to work out the propaganda for it too.
Is this surprising? No. This is National doing what National does. But let’s not pretend their goal is not to cut the value out of our public assets and give to their wealthy mates. National is the party of privatisation. Their branding might change but their fundamental ideology does not.