Ohariu Citizens’ Select Committee Report

Below is the text of the Ohariu Citizens’ Select Committee’s submission to Parliament’s Finance and Expenditure Committee. The Citizens’ Select Committee also presented an oral submission on Wednesday the 2nd of May.

This Committee was established by voters in Peter Dunne's electorate because of concern that he was not properly representing this constituency. The gathered over 600 public submissions and this submission is based on them.

13 April 2012
Submission on the Mixed Ownership Model Bill.
To the Finance and Expenditure Committee.

This submission is from the Ohariu Citizens’ Select Committee C/- 6a Quetta St, Ngaio, Wellington 6035.

We wish to appear before the committee to speak to our submission.

We of the Ohariu Citizens’ Select Committee also represent 614 other submitters.

Analysis of submitter comments used in this submission completed by:
Sarah Free

Submission

We oppose the intent of this bill because:

asset sales do not make economic sense
these assets were built by past generations and belong to all New Zealanders
the Government doesn’t have a mandate to sell these assets
this proposal raises the question “ What about the future?”
asset sales create equity issues
history shows asset sales haven’t worked well in the past
asset sales create sovereignty issues.

The reasons are explained more fully below with an indication of the weight given to these by submitters to our Committee.
Background on Ohariu Citizens’ Select Committee

The Ohariu Citizens’ Select Committee was set up at a public meeting (attendance 45) on state asset sales in Johnsonville on March 1, 2012. The five-member Committee’s function was to invite brief statements or submissions from within the electorate and beyond about the sale of state assets and free trade and investment agreements. These submissions were invited via email and on the attached submission form. The Committee also decided to receive oral submissions on the evening of 22 March 2012. On that occasion ten people were heard by the Committee.

The intention was to receive all views on the proposed sale of state assets, and present a summary to Hon. Peter Dunne. This was then extended to presenting a submission on the Mixed Ownership Model Bill to this Select Committee. In the event, those supporting the Government proposals chose not to make submissions (one of the submitters was ambivalent) so this report summarises the arguments presented against the sale of up to a 49% share in the four energy companies named in the Mixed Ownership Model Bill and AirNZ.
Submissions received by the Ohariu Citizens’ Select Committee

Over the six week period from the establishment of the Committee, a total of 614 submissions were received and all bar one were totally opposed to the sale of state assets. Over 200 of those submissions contained comments and over 70 were a paragraph to two type-written pages.

As our Committee was established specifically to give electorate feedback to Hon. Peter Dunne, submitters were asked to record their electorate. 269 of the 614 submitters are in the Ohariu electorate and of the total submitters, an overwhelming number (536 of 542), who provided data, are of voting age.

Submitters were invited to opt to include their name to our final report. These 411 names are appended.

Main themes emerging from submissions

Of 614 submissions, 215 provided extra comment. Comments were analysed thematically, and the frequency of recurring themes noted. While some submissions made a single point, it was not uncommon for there to be at least two or three themes. Detailed analysis showed that several themes emerged as common concerns:

Asset sales do not make economic sense (57 mentions)

This was the strongest single theme to emerge with 57 submissions mentioning some variation of this point. A selection of typical comments is provided below.

“Such events in the past have led to the “family silver” being sold for amounts that are subsequently shown to be far too little. We will lose the continuing income from these assets.”

“Denies Government future dividend payments which will be worth more long term. Overseas companies will make profits from our investment, and hike prices to make return on theirs as well.”

“Aside from anything else, selling assets that earn more than debt costs to service is bad economics”.

“I understand the current income from these assets is not much less than their potential sale price. Once gone they cannot be recovered. These assets are key to our infrastructure.”

“Why sell a great set of assets for short term gain.”

“Why sell when we can lease them to create revenue”.

“Not financially good for NZ”

“Why flog off assets when it won’t change the debt problem because it is mostly private debt held by banks.”

“Infrastructure is key. It is illogical to sell it”.

“A country selling assets is like a fisherman selling his fishing rod”.

“Owning a whole golden goose that is laying pretty good eggs for prosperity is better than having about half the goose.”

These assets were built by past generations and belong to all New Zealanders. (32 mentions)

A second very strong theme was that the SOE’s (power company assets in particular) were built by past New Zealanders for the good of the country and belong to all New Zealanders. This idea was explicitly expressed by 32 submissions but was implied in several other submissions. The following is an illustrative selection of comments along these lines.

“Why would you buy something you already own?”

“Generations of citizens have worked towards creating these assets as a legacy for future generations”,

“They are not yours to sell They were built by past generations of New Zealanders”.

“Sale of NZ’s energy resources is betrayal of the generations of taxpayers who created them for the nation’s benefit”.

“The current value of the power stations was hard won through the pockets of the people”

“I don’t think it’s right to sell things owned by all New Zealanders”.

The Government doesn’t have a mandate to sell these assets. (21 mentions)

Closely aligned to the theme that the assets belong to all New Zealanders was the theme that the government did not have a right to sell them without public approval. Several submissions referred to past opinion polls that showed that the sale was opposed by a large majority.

“…to also make a decision such as this with a very slim majority in parliament, one vote, is not in keeping with the ideals of democracy particularly when the decision has widespread public opposition and cannot be easily reversed”.

“Look at the polls, National may have won the election but even National Party voters don’t all support asset sales”.

“The will of the electorate is clear. Government shouldn’t fly in its face”.

“Our power companies are strategic assets which form part of the core infrastructure of New Zealand. They are owned by the people of New Zealand, for the benefit of the people of New Zealand and no Government has the right to sell assets owned by the people.”

“They belong to New Zealand, not National”

One submission went into quite some analysis around the National Government’s claims that it has a mandate for the sale. The analysis is repeated below:

“The NZ 2011 elections had the lowest voter turnout since 1887. The breakdown of registered voters at the 2011 election is:

25.8% did make their feelings known

35.3% voted for parties who stated they were opposed to selling assets.

36.37% of registered voters voted for parties who supported selling public assets. (National and Act).

2.56% voting informally or for parties that are not represented in Parliament

In the light of the small basis of expressed support for selling the countries assets (36.37% of the electorate), and the small difference in those voting for or against asset sales (1.07% of the electorate), the ethical and just basis on which to make such an important decision within a democracy simply does not exist.”

The submitter further noted that there is a moral responsibility on a government, within a democracy, to reflect the wishes of the people and to not make major changes without a convincing majority of the voting population.”

What about the future? (53 mentions)

Frequent concern was expressed around how the sale of these assets would affect wellbeing in the future. The words “shortsighted” or “short-term” were often used.

“I’d rather pay more tax and keep our assets for future generations.”

“I believe this is giving away vital already publicly owned infrastructure which can never be recovered and is an example of short-term gain at the expense of a long-term vision … It is a disappointing shortsighted move which later generations will have to live with”.

“Selling these assets gives money for short term gains. Leave these investments for our future generations”.

“Think of the bigger/longer picture”.

“What about me and my jobs & investments? What about my school? What about my NZ? What about looking after my parents & grandparents who paid taxes?”

“Short term solutions do not provide long term stability.”

“It’s a short-sighted stupid solution which will make NZ poorer”.

“Keep it NZ owned, protect our assets & the land we pass to our children”

“What will we have left?”

“We are moving into a period where we can expect energy scarcity and possibly global food scarcity as well as a need for as-yet unpredictable adaptations to respond to climate change. To sell our energy and food growing assets to private owners seems to me to betray the vital interests of New Zealanders now and in the future. It is almost certain that these assets will end up in the hands of people outside New Zealand. They cannot be expected to have any interest in the well-being of New Zealanders. The latter point is also relevant to the care for nature required in the management of such assets. Respect for the integrity of nature is tenuous even when the management is in the hands of New Zealanders . We should fully expect such respect to dwindle greatly if far off interests solely in profit (sic) should have power over these assets”.

Several (21) submissions in this category were specifically concerned with how selling energy assets would lead to price rises or would compromise the government’s ability to respond to future challenges or use energy assets more effectively. There are also specific suggestions made of alternative policies.

“Government policy is important to achieve innovation to accommodate smart grids and higher levels of renewables”

“…will lead to higher power prices as no real competition…. We will lose the chance to have a co-ordinated approach to electricity generation”

Much better to keep as SOEs & use the dividends to encourage & develop very high tech niche industries to grow NZ.

A much better approach for leveraging national benefits from our energy companies would be for the state owned energy companies to foster and develop relationships with New Zealand energy , IT, engineering companies and research facilities to research, develop, trial and build energy initiatives. These kinds of initiatives will maximize New Zealand’s capability to move to higher levels of renewables within the country and to develop niche products that could be sold across the world to support renewable energy use.

Equity Issues (23 mentions)

A common concern was around the ownership of assets passing into the hands of a privileged few, versus common ownership.

“At least at present profits go to NZ Govt rather than into multinational coffers overseas. “Mums and Dads” investors is the most ingenuous phrase to come out of Key’s mouth. Its all about the rich getting richer.”

“Only the well off can afford to buy shares, thus widening the income gap even further.”

“This is going to concentrate wealth into the hands of the few if it goes ahead”.

“Public ownership, and the dividends that come from that are better for the community than the short-term gain of sale”.

“I think ownership of strategic, public assets and utilities should stay in NZ ownership, and the best way for that is to retain state or local government ownership. That way all the benefits of ownership are retained for all New Zealanders”.

“When can we be 1 land, 1 people”

“Power is an essential service. Sale leads to profiteering at the expense of the poor”.

“These are strategic assets – they should not be available to leverage private profit (vulnerable to price gouging) potentially compromising larger public good”.

“Down with capitalism. Where is my tribe?”

“I believe it will benefit the few at the expense of the many and is not in the interests of the social good.”

History shows asset sales haven’t worked well in the past (20 mentions)

Many submissions were clearly concerned about the fact that the asset sales of the 80s and 90s had not resulted in good outcomes for New Zealand.

“This is a shortsighted approach that has been tried before and failed. Attempt to make the books look good in a false manner. Hidden in the promise of retaining majority ownership – look at the Railways debacle!!”

“We must learn from the mistakes of history (recent history) NZRail, AirNZ, BNZ, Telecom, etc.”

“The asset sales of the 80s and 90s were an abject failure (eg Railways, AirNZ) and this Government has buried its head in the sand if it thinks this round of part-asset sales will be any different.”

“I’ve campaigned in the past against privitisations but also against free trade agreements and the tariff reductions that destroyed so many of our valuable local industries. When will we learn as a nation to invest in ourselves in every way?”

“Previous governments have sold publically owned assets with poor results, AirNZ, Rail. This current one thinks the profits going out of the public purse will bring better standards of living to all New Zealanders. Yeah right. Mum and Dad are busy paying off large mortgages not buying mighty energy shares (sic) that they already own”.

“We will end up doing the same as last time, buying back at a higher cost, and then spending more to upgrade them again”.

“I am sick of my tax dollars being spent on selling taxpayer-owned companies & then buying them back a few years later.”

“We have only just bought our stuff back, leave it alone”.

Sovereignty Issues (24 mentions)

This was explicitly mentioned in 24 submissions but implied in many others. There was a strong sense that this was not just about money, but we would be losing control over NZ’s resources and our ability to determine our own future. Concerns were also expressed about the eventual transfer of shares into foreign ownership, which was seen by most as inevitable.

“We are a proud nation of people, to take away what is jointly ours forever … is surely not in line with our nation’s identity”

“Our energy resources and national airline are public resources created by the people of New Zealand to serve the interests of the community at large. It is an outrage that the government is proposing to privatise these organizations by selling shares to private individuals who will gain effective ownership and control, notwithstanding the residual government shareholding”.

“It is essential that the state continues to maintain ownership and control of the energy assets so that our security of future supply- and the economic future of the country- is not made dependent on the whims of the share market and the foreign owners who will quickly pick up all the available shares.”

“We need to retain these important strategic assets in NZ-ownership, so that we can all benefit from them, rather than just share-owners, so that the benefits can stay in NZ, and so that we can influence their strategic direction”.

“Keep NZ in NZ, owned by NZers, managed by NZers. We know best! Down with John Key’s ideas! I should never have voted National”.

“Keeping assets in NZ hands is a fiction-private shareholders can and will sell to whomsoever they please.”

“SOEs are part of New Zealanders’ identity. If there is too much influence from other foreign owners, iconic companies such as AirNZ may lose the Kiwi flavour that makes it so unique.”

“Selling state owned power companies like Mighty River Power includes selling national water and geothermal resources that do not belong to the government.”

“I am particularly concerned about the sale of shares in, for example, Solid Energy which would mean the people of NZ would lose some of their power to limit dangerous & damaging coal/lignite extraction & would compromise our ability to face up to future international obligations”.

“Foreign ownership of power companies could mean that NZ will lack the legal ability to convert to renewable energy! This is a huge deal if we are to avoid catastrophic climate change.”

The proposed Trans Pacific Partnership agreement was specifically mentioned in four submissions. For the writers of these submissions Sovereignty issues were intensified by the uncertainty surrounding the proposed TPPA and what that might mean:

“I am particularly concerned …. Even small overseas investors in the power companies may soon be given the power to sue the Government under the TPPA if they think the government is acting against their interests.….”

“TPPA: It is an attempt by corporate America to intervene in the lawmaking process of sovereign countries to allow access for goods and services such as unlabelled GE foods, over-priced medical care, and as we see in Australia tobacco products stripped of health warnings. There is no evidence whatever that this agreement will bring any tangible trade benefits to this country”.

“I am particularly concerned also on the impacts of TPPs, both on these potential developments, and on current holdings. I am concerned at the potential undermining of NZ sovereignty. The evidence to date suggests very real grave negative consequences for NZers, and the secrecy of negotiations, and the non- and mis-information that abounds cannot give anyone confidence that these deals will benefit NZers of even have no impact. Rather we are likely to be severely disadvantaged, economically and socially”.

Peter Dunne MP

Parliament Buildings

Wellington

ohariu.mp@parliament.govt.nz [ohariju.mp@kparli2amentj.govts.nzi]

8 June 2012-06-08

Mr Dunne

Re Your response to report from Ohariu Citizen’s Select Committee

We have waited hopefully for a considered response to the questions arising from the important issues identified by the nearly 600 people whose submissions opposing the partial sale of the 4 energy companies and Air NZ you have read.

In your immediate response you pointed out that about a third of the Ohariu submitters were not on the electoral roll. I trust you are as concerned about this as we are, given that it is less than 12 months since our last election suggesting many people are effectively disenfranchised. We ask you to consider, and represent the interests of, all in your electorate including those not on the roll.

On behalf of those who took the trouble to write you submissions, would you please answer these questions that were in our original letter to you?

Could you please explain any economic advantages to selling even a part of our state owned assets when the return to the NZ Government on this investment is above the cost of borrowing money for the projects the Government wishes to spend the sale money on?
How does your claim and the Government’s claim to have a mandate to sell these assets fit with survey results that show consistently that the majority of New Zealanders are opposed to the sales?
How exactly, in your view, does the sale of state assets address pressing problems of inequalities in New Zealand, when a significant proportion of the population will not be able to purchase shares.
History shows asset sales haven’t worked well in the past and current indications are that privatised energy companies do not provide cheaper power to consumers. Indeed the opposite seems to be the case, so how would you ensure that partial sale of these energy companies doesn’t result in increases in power charges to ordinary Mums and Dads
As demonstrated by the open letter from jurors, with the outcome of secret TTPA negotiations uncertain, any sale of state assets could result in significant sovereignty issues. How can you guarantee that the New Zealand Government now or in the future will be able to pursue a policy agenda to benefit all New Zealanders without the undue influence of minor shareholders overseas?

These issues need to be clear before Parliament can reasonably vote on the second reading of the Mixed Ownership Model Bill.

Recent events demonstrate that Ministers of the Crown can back down and retain or even gain mana with the electorate. We implore you to listen to over 60% of the electorate who say they do not wish their state assets to be even partially sold and abstain or vote against the MOM Bill.

ends

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