The Mendacities of Mr Key # 12: No More Asset Sales (Kind of)
On 25 February 2014, Dear Leader John Key announced to the nation that his government’s asset sales programme was over;
Like so many of the Prime Minister’s promises, that “Key Committment” did not last long. Not even a year.
As Fonterra’s payout to farmers collapsed and weakening exports to China’s slowing economy began to impact on the government’s tax-take, Bill English’s much-heralded promise of a Budget surplus sank deeper than the m.v. Rena in 2011. English promised almost exactly a year ago on 16 May 2014;
“It’s a real surplus and it follows a string of improvements in deficits starting at $18 billion four years ago, this year about $2.5b and next year a surplus of $370 [million], and then bigger surpluses after that.”
Barely three months after the 2014 elections, Treasury had bad news for English and the National government;
Treasury this morning delivered a body blow to the Government’s hopes of returning to surplus, saying it now expects a deficit of over half a billion dollars for the June financial year.
At this morning’s Half Year Economic and Fiscal Update, Acting Treasury Secretary Vicky Robertson said despite solid growth in the economy, the Crown’s finances would take a hit from lower than previously forecast tax take.
That had seen Treasury change its forecast operating balance before gains and losses (Obegal) for the 2014-15 year from a slim surplus of $297 million to a deficit of $572 million.
Treasury said softer outlook for economic drivers of the tax such as lower dairy prices and interest rates had seen the expected tax take for the year fall by $600 million.
In the same Herald report, English and Key were both frantically doing their best King Canute impersonations since King Canute took a day to go to the beach;
But Finance Minister Bill English was this morning still clinging to the hope Treasury is wrong and the books will indeed be back in black this year as he and Mr Key have promised for some years.
“I’m hopeful we will,” Mr Key told reporters this afternoon.
“The view of the Minister of Finance is that we can still achieve that surplus. There’s a lot of different factors moving around here at the moment.”
By 2 May of this year, even National’s spin-meisters had run out of steam, and on TV3’s ‘The Nation‘, English was forced to admit that the world was indeed round and not flat; money-printing pixies did not exist; and dreams of a budget surplus were a Tory fantasy;
“No, I don’t call it a failure. It is what it is, and that is for the 14/15 year, we budgeted $370 million surplus. It looks like it will be a $500 or $600 million deficit, and the surplus will be the next year. So we’re on track.”
So “the surplus will be the next year“?
The Minister had better be hoping that the Christchurch re-build; the Auckland housing boom; and renewed growth in China’s economy, will continue to stimulate the economy. Otherwise, that “500 or $600 million deficit” will balloon into $1 billion or $2 billion or…
National’s expensive, multi-billion dollar 2009 and 2010 tax cuts may not have been such a clever move after all.
English, though, is not about to surrender. His government’s policies may be predicated on tax revenue from re-building a semi-destroyed city; an unsustainable housing boom in Auckland; and waning dairy exports – but National’s Finance Minister has other ideas up his sleeve.
In his 2 May interview on ‘The Nation‘, English committed the government not to cut spending;
Lisa Owen: “Okay. Well, before on The Nation, you said that the Government would not make any cuts to reach surplus. Is that still your plan?”
Bill English: “That’s right. We’re not going to make any specific extra decisions now just because our tax revenue’s a percentage point – 1 percent down.”
English has committed the government not to “make any specific extra decisions now just because our tax revenue’s a percentage point – 1 percent down”.
It’s just a shame we can’t believe a word of what he says. The cuts had begun long before English uttered his lies to Lisa Owen.
The story unfolds…
16 May 2014…
National’s “economic whizz-kid” had promised the country a “$372 million surplus” – as well as “an increase to paid parental leave from 14 weeks to 18, free doctors’ visits and prescriptions for children under 13, extra money to ease the cost of early-childhood education, eligibility for paid parental leave extended, and the existing parental tax credit to rise“.
Labour’s social policies had been nicked by National. English basked in political glory. Sceptics were ignored. The country went to the polls four months later.
20 September 2014…
And then reality began to reassert itself.
16 December 2014…
National’s core policy; it’s raison d’être; it’s reputation amongst New Zealanders who are only vaguely politically conscious – is it’s so-called “reputation for fiscal prudence and responsible economic manager”, and it was rapidly being sucked down a flushing toilet of indebtedness. If it couldn’t deliver on it’s promise of returning the books to surplus – as Labour’s Finance Minister, Michael Cullen, had done between 2000 and 2008 – then what good was it?
English looked at his options to cut spending, and to raise money without creating headlines that shrieked “panic” or “broken promises”.
28 January 2015…
So much for Key’s assertion that “the truth is there aren’t a lot of other assets that would fit in the category where they would be either appealing to take to the market or of a size that would warrant a further programme”.
Truth and John Key parted company a long time ago. Key’s announcement that up to 8,000 State houses could be sold came only eleven months after his earlier committment to New Zealanders that no further state assets would be sold.
13 April 2015…
John Key denies there is a housing crisis in New Zealand;
“No, I don’t think you can call it a crisis. What you can say though is that Auckland house prices have been rising, and rising too quickly actually.”
21 April 2015…
National’s broken promise flew in the face of committments made prior to last year’s general election, as then-Health Minister, Tony Ryall said;
Free doctors’ visits and prescriptions for children aged under six will be extended to all children aged under 13 from July next year, Health Minister Tony Ryall says.
“Budget 2014 is investing $90 million over three years from 1 July 2015 so primary school-aged children can go to a doctor for free, any time of the day or night, and get their prescriptions free as well,” he says.
“National brought in the policy of free GP visits and prescriptions for children under six, including free after-hours visits. Thanks to our prudent management of the health budget, we are extending this policy to all children under 13.
“This is what careful financial management can deliver to Kiwi families.
Note the one missing word – “all” – from Key’s Facebook statement. Otherwise, the statement is identical to the National Party Facebook page. Someone in the National Party’s politburo obviously wasn’t keeping track of re-writing their election promises.
Green Party Health and ACC spokesperson, Kevin Hague, hit the nail on the head when he demanded;
“If one in ten kids have to pay up to $38 to go to the doctor when they have an accident, then that visit is not free and that’s a broken promise. It begs the question: what other promises are the Government going to renege on this year in a bid to save a bit more money? This shows how desperate the Government is to reach a surplus that it’s trying to pinch pennies from injured children.”
30 April 2015…
Attempting to justify the transfer, English announced;
“Over half of the new houses will be sold to help offset construction costs, and the remainder will be retained as social housing. Our bottom line is that there will be at least as many social houses in Tāmaki as the 2800 there now.”
As with previous promises, National’s assurances cannot be relied upon. Ministers will utter soothing reassurances one day – and weeks, months, or years later will find justification why they had to retract.
National ministers simply cannot be trusted to keep their word. Even if 7,500 new homes are built, there is no guarantee that “half of the new houses will be … retained as social housing“. National will find a reason to sell them.
English further stated;
“The Government owns one in 16 houses in Auckland and we need to do a better job with them for the sake of tenants and aspiring homeowners, as well as for the neighbourhoods they live in and the wider city…
…This transfer of ownership of HNZC properties and the responsibility for tenancy management to TRC will enable faster construction of warm, dry and safe houses that better meet people’s needs.”
His comments are a repetition of National’s spin that NZ Housing properties are ‘badly run down and in dire need of maintenance’;
Finance Minister Bill English has confirmed the Government will need to spend $1.5 billion upgrading state houses as they are sold to social housing providers.
Mr English conceded many state houses were not up to standard and had not been properly maintained.
He said the cost of deferred maintenance had risen to $1.5 billion and that the matter had been raised during discussions with social agencies considering buying state houses.
“They’ve highlighted that. So part of the benefit of the process we’re going through is that these agencies are going to apply a very tight scrutiny to the state of the houses that maybe they might be looking at buying.”
Mr English blamed the former Labour-led Government, saying it had focused more on building new state houses than on maintaining existing homes.
English’s apportioning of blame to the previous Labour government is disingenuous.
The sole reason why Housing NZ has not been able to maintain it’s properties is that it has had to pay dividends from income (rent paid by low-income/beneficiary tenants) to successive governments. According to National’s Building and Housing Minister, Dr Nick Smith;
“The average dividend under the 5 years so far of this Government has been $88 million. The dividend this year  is $90 million…”
Fairfax reported Nick Smith as stating;
Smith said the dividend had been been fairly consistent in the past several years – $71m in 2010, $68m in 2011, $77m in 2012 and $90m in 2013.
Four years worth of dividends – $306 million – were paid to the government’s Consolidated Fund. No wonder Housing NZ is unable to maintain it’s properties.
National was brutal in it’s expectations of huge windfalls from Housing NZ;
The letters reveal that on six occasions ministers asked for dividends to be hiked, or paid faster. In March 2010, Maurice Williamson wrote: “I expect . . . a significantly higher annual return to the Crown.”
Phil Heatley, when he was housing minister, asked that in 2011-12 and 2012-13 the dividend be $45m higher than that forecast in the 2011 Budget. Later he revised expectations upwards, to $251m over three years.
In July last year, Smith said “dividend levels should be significant enough to represent a challenge”.
These demands from National ministers were placed on a government department charged with housing the poorest and most vulnerable in our society. Williamson, Heatley, and Smith were content to bleed Housing NZ and let tenants live in cold, damp, miserable conditions.
Williamson, Heatley, and Smith – National’s 21st century slumlords.
As with Solid Energy, National exploited government departments and SOEs such as ACC, as “cash cows”, with which to balance their books to return to Budget surplus. (see: Solid Energy – A solid drama of facts, fibs, and fall-guys )
It is also worthy to note that National Ministers are employing spin when it comes to state house sales. English and other ministers use the term “transfer” and not sale.
On 6 May, Bill English stated that houses would not be sold “unless tenants get better services and taxpayers get fair and reasonable value“.
On TVNZ’s Q+A on 10 May, Minister for Social Housing, Paula Bennett, admitted that her government was selling state housing;
Corin Dann: “But the point is, they are going to get these houses, they’re going to be sold these houses, aren’t they? You say transfer but it’s a sale of houses at a discount, right?”
Paula Bennett: “Well, I’m sure it’ll be less than the market value, yes.”
These are sales, not a transfer. “Transfer” implies a change of ownership without cost or exchange of money. There is Big Money involved in state house sales.
[Incorrect information deleted. – FM]
6 May 2015…
The Government has announced it will begin selling off up to 1600 state houses in Tauranga and Invercargill to social housing groups.
There are 370 state houses in Invercargill and 1250 in Tauranga and it’s understood all of them could be sold if buyers come forward.
Only vetted and registered community housing providers will be able to buy them and, depending on their negotiations with the Government, they may not have to pay the market price.
There is nothing to stop private developers from acquiring state houses through back-door means, as this report on a landlords website explained;
The state houses will only be available for sale to registered Community Housing Providers (CHPs).
However, Housing NZ Minister Bill English said that registered CHPs can partner with other organisations to acquire and develop social housing.
“Any transfer of houses will not affect the rent tenants pay or their eligibility for subsidised housing, and properties transferred as social houses will also have to stay as social housing unless the Government agrees otherwise. In both Tauranga and Invercargill, Housing New Zealand owns a significant number of houses so there is potential for more than one organisation to acquire houses for community ownership.”
This means there could be scope for private investors to get involved in the provision of social housing – either by becoming a registered CHP or by partnering with a registered CHP.
Speaking on TVNZ’s Q+A on 10 May, Minister for Social Housing, Paula Bennett confirmed that private investors could “partner” with Community Housing Providers to purchase state houses; re-develop the properties; and sell new residences at a profit.
On 6 May, English assured the public;
“Any transfer of houses will not affect the rent tenants pay or their eligibility for subsidised housing, and properties transferred as social houses will also have to stay as social housing unless the Government agrees otherwise.”
Of course National will agree. This is a wholesale sell-off of state housing. Why wouldn’t they agree to new owners on-selling these properties for a profit? Otherwise new owners would be stuck with old, dilapidated properties, requiring expensive repairs, and soon getting into deep debt.
This is privatisation, by stealth, through the back-door, using intermediaries. This is a whole new level of government subterfuge.
It also exposes John Key’s assurance – that state assert sales have ended – as a lie.
Finance Minister Bill English is desperately scrabbling for every dollar he can claw back. Miserly does not even begin to aptly describe this government’s actions.
It seems that the tax cuts of 2009 and 2010 are being paid for by paperboys and girls; sick children; welfare beneficiaries; and Housing NZ tenants.
It remains to be seen what further cuts in social spending Bill English has planned. His reassurances on 2 May 2015 – that there would be no cuts to social spending – are to be treated with the same contempt as other promises, assurances, and committments that have been made, and broken, by John Key, Bill English, et al.
Governments are at their worst and most dangerous, when desperate. And this is a desperate government.
Karol, writing for The Standard, has more on this issue. See: “Key Govt asset stripping state housing‘.
Registered community housing provider, Habitat for Humanity Invercargill-branch chairman, Stephen Falconer, is an enthusiastic cheerleader for National’s covert privatisation programme. He told the Otago Daily Times on 7 May;
“We’re a private organisation, essentially, and we think that private enterprise can actually do a better job than Government on most things.”
Because private enterprise has done such a stirling job thus far in meeting demand for housing in Auckland, Christchurch, and elsewhere?
It is disappointing that an ostensibly community organisation like Habitat for Humanity has bought into the government narrative, complete with parroting neo-liberal cliches that “private enterprise can actually do a better job than Government“.
If it were true that “private enterprise can actually do a better job than Government“, then why does Habitat for Humanity exist?
Social Housing Minister Paula Bennett is interviewed by Corin Dann on TVNZ’s Q+A. Along with Bill English’s admissions, her comments are a disturbing indication where National is going with state housing. See: Govt social housing target 3000 homes
NZ Herald: PM – no more SOEs to sell after Genesis
John Key: My key commitments to you
The Independent: How China’s slowing GDP growth could drag down the global economy
TV3 News: National Party wins third term
NZ Herald: No surplus this year – Treasury
Fairfax media: Budget 2014 – Surplus real, says English
Fairfax media: Budget 2014 – Surplus real, says English
Radio NZ: Key denies Auckland housing crisis
National Party: Free doctors’ visits, prescriptions for under 13s
Facebook: John Key
Facebook: National Party
Scoop media: Govt breaks free doctors visit promise to kids
Fairfax media: Nats milking Housing NZ – Labour
Fairfax media: Not much in the cupboard for English to dine on
TVNZ Q+A: Govt social housing target 3000 homes
Landlords – For Kiwi Property Investors: State houses to go on sale in Tauranga & Invercargill
Fairfax media: Invercargill and Tauranga chosen for first state house sales
Otago Daily Times: Invercargill among first state house transfer sites
Previous Related Blogposts
Polity: Housing horrors
The Jackal: Nationals housing failure
The Standard: Key Govt asset stripping state housing
This blogpost was first published on The Daily Blog on 10 May 2015.
= fs =
For a better New Zealand…
~ Cleaner rivers
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~ Less on Roads - more on Rail
~ A Living wage at $20.20/hr
~ Marriage equality - Yay! Got that one!
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~ Rebuild public TV broadcasting!
~ Keeping farms in local ownership
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~ State housing for life
~ Jobs, Jobs, Jobs!
~ Stronger communities
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