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Christchurch City Council – Having your asset-cake and eating it

28 March 2015 2 comments

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Prelude

On 29 January 2013, Prime Minister John Key announced that the rebuild of Christchurch would be a Herculean, multi-billion dollar task;

New Zealand also faces a domestic construction boom. That will be centred, of course, on Christchurch, where the total spend is now estimated to be around $30 billion.”

By 15 May 2014, National’s Finance Minister, Bill English delivered his sixth Budget speech to Parliament. The cost of the Christchurch re-build  had escalated by $10 billion;

The total cost of the rebuild has been estimated at $40 billion and the Government’s share will be significant.

On current estimates, the Government’s contribution to the rebuild is expected to be $15.4 billion, of which $7.3 billion will be incurred by the Earthquake Commission, net of reinsurance proceeds.

Despite central government’s massive re-build bill for Christchurch, in his Budget Conclusion, English was at pains to repeat his new mantra;

The Government’s books are on track to surplus next year and are the envy of most developed countries.”

The surplus English referred to was an Operating balance Before Gains and Losses (OBEGAL),  forecast to be a hair-thin  $86 million for 2014/15.

English’s  Budget document pointed out;

Government is still borrowing a net $78 million a week, and in dollar terms, net debt is expected to peak at $64.5 billion in 2015/16...”

Little wonder that English stated, with blinding obviousness four days earlier;

It means we will need to maintain firm expenditure control beyond our return to surplus...”

Which is why an increasingly nervous Finance Minister, conscious of spiralling re-build costs, came down hard and crushed any suggestion that taxpayer’s money be used to subsidise the proposed SkyCity convention centre;

There’s no contingency for that. If the less preferred option ended up being the option then that money would be part of the Budget process.”

Firm expenditure control in this case meant that the government-purse was firmly shut. And padlocked.

National Government’s Predictable Response

In May 2011, barely three months after Christchurch’s devastating earthquake that killed 185 people, there were already suggestions from Gerry Brownlee that the Christchurch Council would have to sell part of their community-owned assets to fund the re-build.

National’s mis-handling of the economy, with two unaffordable tax-cuts,  as well as the Global Financial Crisis and resultant recession,  had left the government’s books deep in the red.

At first, Brownlee was coy at any suggestion of asset sales;

I don’t foresee the council having to sell any assets, though in the end that will be their choice.

But in the next breath, he added;

I would suspect that Treasury have had a look at the city council’s balance sheet, given that we are going to have to take a whole lot of debt onto our [the Government’s] balance sheet.

It’s only natural we would have a look at what the council can stand [to pay].

Yes, there is provision in this legislation for Cera [Canterbury Earthquake Recovery Authority] to suggest to council that they might need to sell something.

Brownlee denied that government or Treasury had been scoping CCC assets with a view to partial (or full) privatisation;

The accusation is that Treasury have been looking at council assets with a view to what the council will sell. That is, I think, completely erroneous.

On 9 February 2012, a year after the second earthquake,  Brownlee admitted in Parliament (in response to questioning by the future mayor of Christchurch, Lianne Dalziel);

In the days leading up to that particular injudicious comment from me there were numerous discussions going on with the council—between the senior executives, the mayor, me, and the senior executives of the Canterbury Earthquake Recovery Authority—over a number of issues that we want the council to take some responsibility, alongside us, for. Although Treasury officials will have talked to the council, I am unaware of exactly what that discussion would have been about. But let me tell you that when the Government is spending $5.5 billion anywhere we expect the recipients of that to have some plan for how they will participate in what will be a very, very expensive recovery, and that plan has to be a lot better than saying “We’re just going to put up the rates, and we’re going to borrow a lot more money”.”

Brownlee would have us believe that he was “unaware of exactly what that discussion would have been about” between Treasury officials and  Christchurch council?  As Minister of Earthquake Recovery of that devastated city, that proposition is simply not credible.

Brownlee was not being truthful.

The Minister’s denial was further shown to be less than truthful with this evasive response in Parliament on 2 August 2012;

I have received advice from Treasury and the Canterbury Earthquake Recovery Authority on a range of funding options for the rebuilding of Greater Christchurch, to which the Government has committed $5.5 billion to date. Alongside the Christchurch City Council, I support the regeneration of our city, which will be enhanced by the development of the central city plan, released on Monday. I have publicly acknowledged the funding challenges for both the city council and the Government. Councillors and I have agreed to discuss, alongside our respective organisations, a sensible and achievable time line and funding programme for the delivery of the blueprint. I approach these discussions in good faith, as the thousands of city residents would expect us to do so. I intend to say no further on this matter.

The full text  of a remarkable, and somewhat ‘testy’ exchange between Minister for Canterbury Earthquake Recovery, Gerry Brownlee, and the then-Speaker of the House, Lockwood Smith, under-scored the sensitivity of any suggestion that central government was putting the “squeeze” on Christchurch to sell community-owned assets and relieve pressure on English’s struggle to balance the books.

By May 2013, all pretences that asset sales were not being discussed were firmly kicked to the side, with John Key entering the political fray (and Gerry Brownlee standing pensively and obediently in the background);

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Christchurch rebuild - Council needs to come to the party - PM

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Key was clear with Christchurch residents in his expectations;

The only other option available to it is that it doesn’t actually embark on some of the projects it might want to embark on. In the end Cantabrians will have to have a say on what they think is the right mix.

I actually personally hold the view that for Canterbury, where you love sport, happen to be pretty darn good at it, and have climatic conditions that argue that a covered stadium might make sense, then actually it could be a really sensible thing to do.

And if it was up to me I would make that choice in a heartbeat if it meant changing the mix of assets, but I understand for lots of other people they might not hold that view.

This is the chance to get it right. I just urge everyone to think that through.  There is the opportunity to have some quite fantastic facilities here.

The Government is quite happy to step up and put $15bn in, and there is a limit as to how much we can put in, and some of it must come from the council.

The threat is obvious; ‘cough up the extra cash by selling some of the family silver, or  no more rugger for you lot’!

Faced with National firmly closing off any options to meet ever-increasing re-build costs, Christchurch was faced with few alternatives and on 1 August last year the Council caved to central government pressure in the form of a report from investment bankers, Cameron Partners. As Mayor Lianne Dalziel admitted;

We’ve got nothing, there isn’t even wriggle room any more, there’s just nothing there, we’re over the line and we have to pull it back before 2017.

Creating financial certainty will attract much needed investment in the rebuild. We want to work alongside the Canterbury earthquake Recovery Authority (CERA) to scope the possibilities for a one-stop landing point for both local and foreign investors.”

Note the year Dalziel refers to: 2017. An election year.

Dalziel’s reference to “both local and foreign investors” is an oblique acknowledgement that the Christchurch City Council will have to part-privatise community assets to raise money that will not be forthcoming from Key’s government.

She was more forth-coming here, on the same day;

Releasing capital from our balance sheet alongside the other options, (including increased income, reduced operational expenditure and government assistance), is clearly one of the ways we can address the uncertainty around the city’s finances.

Dalziel also hinted at why Christchurch was forced to undertake asset sales;

The purpose of releasing capital would be to generate funds to assist in solving the identified funding shortfall; provide the level of confidence and certainty required to develop a credible long term financial strategy and get on with the rebuild of our community facilities, infrastructure and housing; allow CCC to buffer Christchurch residents and businesses from the exponential rates increases; and allow CCC to align our vision and strategic objectives for the rebuild with our asset portfolio – that is, what we own and operate.

It is simply untenable – both from a commercial perspective, as well as morally – that citizens in one city should be forced to pay for the rebuild of their infra-structure. This was a disaster not of their making.

Any suggestion that the cost should not be spread more evenly around the country would create a precedent that we are each solely responsible for any disaster that might befall our own region. Do New Zealanders really want to go down that road? They should think long and hard if that is the kind of society they want for themselves and their children.

Earthquake Recovery Minister could not endorse the Cameron Partners report fast enough, releasing this statement on the same day – 1 August;

The Cameron Partners report makes it clear some major areas of financial uncertainty are causing headaches for Christchurch City, including the cost of repairing and replacing the city’s essential horizontal infrastructure [pipes, roads, waterways].

When we signed the cost-sharing agreement with the council in June 2013 we foresaw this and undertook to do a thorough review of where the shared costs of the rebuild lay by 1 December this year.

Once we have this information we can consider if any amendments are required to the cost-sharing agreement.

Officials from CERA and the Treasury are working with the council already to ensure the review provides Christchurch City with the clarity it needs to help make some of the big decisions ahead of it.”

National had won.

Brownlee had successfully forced Christchurch Council to adopt unofficial National Party policy; that Council’s were expected to divest themselves of strategic assets if funding for extraordinary projects was required. This was the same policy that Brownlee had forced on Auckland, to fund it’s rail loop, and which he outlined on TV3’s ‘The Nation‘, on 30 June 2013;

Rachel Smalley:John Key said on Thursday that Auckland should consider selling its assets in order to meet some of these costs. Should the Council consider that?”

Gerry Brownlee: Well I think it’s one of those things that’s inevitably going to be on the table. Remember that we’ve got a programme that is now set out for the next 10 years, and as we come up to the point where you’re getting the business case together for the city rail link and that huge expense that’s involved in that, and recognise that you’ve got a 2016 Local Body Election as well, I’d be very surprised if it wasn’t something that was considered by some people.”

But more was come on 6 December 2014, Brownlee was demanding that Christchurch Council increase the level of asset sales;

So it’s a positive step but it’s not the end yet. I do have some worries that it might be a little timid and particularly if it were to lead to much higher rates there in Christchurch.

Murray Horton, from the lobby group ‘Keep Our Assets Canterbury’, was correct when he warned;

Once a chunk of ownership of those assets, the council’s assets, is gone then it won’t be long before there are calls for more to go.

Horton’s prescience was proved barely three months later.

Costs & Consequences

On 26 February, 2015, four years and four days after the city’s second quake, the Christchurch City Council voted;

“...subject to public consultation, the council will release $750m in capital through the sale or partial sale of assets the council owns through its commercial arm, Christchurch City Holdings, to help plug its $1.2 billion funding shortfall.

By the following day, Brownlee was demanding more asset sales, which he repeated more forthrightly on TVNZ’s Q+A on 

I don’t think you can put a particular price on it. What I think they need to do, and I’m sure that the council will get there. I’ve got to say the council have been edging their way to a position that I think will leave them in a good space progressively. What really is necessary is a sales process that gets you the highest possible price. If you go out and say, ‘Look, I’m just going to sell a little bit of this and a little bit of that,’ then you’re not going to get any premium on it at all. And if you’re going to sell something, you may as well get as much for it as you possibly can. That’s my real point.

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…if you look at something like the airport. It’s essentially a real estate company that just provides parking for planes. You could break it down to being that simple. It’s still going to get used. It’s still going to provide the service the city requires whoever owns it. It is partly price controlled through the Commerce Act, as is Orion. Completely price controlled. So the idea that someone else would buy it and the pricing of your electricity lines are going to become completely out of control is completely wrong. ”

The sale of community assets is a perfect fit with National’s ideological and fiscal needs;

  1. Ideologically, National is as wedded to privatisation as it ever was. It is only held back from a  more radical asset sales programme by public opinion – a point no doubt reinforced through National’s on-going secret polling.
  2. Fiscally, forcing local territorial authorities to finance infra-structure through sales of community-own assets lets central government off the hook, and gives English his desperately needed surplus.

Territorial Authorities have little control over Point 2.

With regards to Point 1, however, Territorial Authorities finding themselves under financial pressure can be more strategic when it comes to finding ways and means to navigate political pressure from the likes of right-wing governments and ministers like Gerry Brownlee.

One such mechanism is found within Christchurch City Council’s own document, “Council decision on proposed Financial Strategy“, where it states;

The sale of 14.3 % of Orion on condition that the shares are only offered to another public entity, such as another TA [Territorial Authority], or an institutional investor such as NZ Super Fund, and that any agreement would be subject to the shares returning to the CCC should the investor wish to sell down its share at a future date.

The same document suggests the sale of 34% of Lyttleton Port Company and 9% of Canterbury International Airport Ltd to “a suitable strategic partner“.

The latter measure opens the proverbial slippery slope to further down-selling of Christchurch Council’s shares in both companies. As such, it would be unacceptable to most Cantabrians (and New Zealanders, who have experienced the down-side of sales of strategic assets).

The NZ Super Fund would be an ideal partner for a Territorial Authoritory such as Christchurch Council. At present the NZSF’s investment in New Zealand amounts to only  13.8% in 2014  (down from 14.2% in 2013).

Not only would the NZSF offer an ideal means by which to keep these assets in New Zealand ownership, but would retain the profits instead of seeing them sent off-shore, worsening our Balance of Payments even further.

It would also fulfil the Super Fund’s  2009 directive from the Minister of Finance “requiring us to, while always investing in a prudent and commercial manner, identify and consider opportunities to increase the allocation to New Zealand assets in the Fund“.

Lastly, the Christchurch Council could eventually re-purchase the shares from the NZSF once the city’s re-build was essentially completed and it’s books were back to some semblance of normality.

The first option should always be that local strategic assets remain in local ownership, so that everyone in the community benefits.

In the face of intransigence from an ideologically-bound, and fiscally inept National Government, the best we can hope for is Plan B.

Plan B: transferring ownership, by temporary sale, to the New Zealand Super Fund. It ticks nearly all the boxes.

Additional – Christchurch City Asset Holdings

  • Christchurch City Holdings Ltd (CCHL) is the commercial/investment arm of the Christchurch City Council.
  • CCHL manages the Council (ratepayers’) investment – worth around $2.6 billion – in these seven fully or partly-owned council-controlled trading organisations.
  • CCHL is forecasting to paying $46 million in dividends for 2015/16 period.
  • CCHL Special dividend for 2015/16 period: $549,300,000
  • “The return on our CCHL investment from cash dividends has averaged 3 per cent in the last three years and 4 per cent in the last 10 years. When the appreciation in the capital value of its investments is taken into account, CCHL has achieved an internal rate of return over the past five years of 8.0per cent a year, or 25.9 per cent a year since its inception in 1996.” (Source)

Trading Organisations

Orion New Zealand Ltd: 89.3% shareholding

Christchurch International Airport Ltd: 75%

Lyttelton Port Company Ltd: 78.9%

Christchurch City Networks Ltd (trading as Enable Networks): 100%

Red Bus Ltd: 100%

City Care Ltd: 100%

Selwyn Plantation Board Ltd: 39.3%

[Acknowledgement Fairfax Media]

 

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References

National Party: Prime Minister’s Statement to Parliament

NZ Treasury: 2014 Budget Speech

NZ Treasury: Rebuilding Christchurch

NZ Treasury: Budget Priorities

Beehive.govt.nz: Budget will confirm track to surplus in 2014/15

Interest.co.nz: Finance Minister prefers not to spend taxpayer cash to avoid Sky City ‘eyesore'; no money in Budget 2015 for it

Fairfax media: Christchurch door open for asset sales

TV3 News: Government accounts show $18.4 billion deficit

Scoop media: Parliamentary Questions And Answers Feb 9 2012

Green Party: Eugenie Sage questions the Minister for Canterbury Earthquake Recovery on Christchurch asset sales

NZ Herald:  Christchurch rebuild – Council needs to come to the party – PM

Fairfax media: Cameron Partners Review – full report

TV One News: Christchurch facing huge financial black hole

Sharechat.co.nz: Christchurch considers selling strategic assets stake to fund rebuild

The Press: Council asset sales mooted to help raise $900m

Scoop media: Brownlee says its up to Len to sell assets for loop

Radio NZ: Asset sales plan ‘may be too timid’

The Press:  Christchurch City Council votes for $750m asset sales

The Press: Gerry Brownlee says Christchurch rate rise as ‘too much’

Scoop media: TV1 Q+A – Govt will protect identities of NZ troops – Brownlee

NZ Super Fund: 2014 Annual Report

NZ Super Fund: 2009 Ministerial Directive

Statistics NZ: Balance of Payments and International Investment Position – December 2014 quarter

Christchurch City Council: Christchurch City Long Term Plan 2015 – 2025

Christchurch City Council: Council decision on proposed Financial Strategy

Additional

Christchurch City Council: Long Term Plan consultation document adopted

Previous related blogposts

Christchurch, choice, and charter schools

Christchurch – Picking the bones clean?

The “Free Market” is a fair-weather friend


 

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This blogpost was submitted to the Christchurch City Council as a submission to the Long Term Plan, on 22 March 2015.
This blogpost was first published on The Daily Blog on 23 March 2015.

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The Mendacities of Mr Key #8: A roof over your head, and boots on the ground

15 February 2015 1 comment

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boots and homes

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Recent Timeline of Events: Iraq

18 June 2014

Prime Minister John Key has ruled out sending special forces soldiers to Iraq as the United States mulls options in response to the unfolding crisis there.

Speaking in New York, Key said the New Zealand Government was looking at what humanitarian aid it might provide as tens of thousands of Iraqis have been displaced by a violent takeover of parts of the country.

He said it was high unlikely New Zealand would put “boots on the ground” in Iraq in terms of combat troops.

“We’re not a country out there looking for a fight.” – Source

 

Prime Minister John Key has ruled out New Zealand military intervention in Iraq, barring an unlikely United Nations Security Council mission.

Mr Key, who is in the United States on a four-day tour, told media that New Zealand wouldn’t send SAS troops to Iraq in a training role, or troops in a non-combat role, as Sunni militants approach Iraq.

“I don’t see New Zealand overly getting tied up in that. That wouldn’t be something we’d want to do,” he said at a visit to the September 11 memorial site in New York.

[…]
“We said we would only respond to a UN Security Council mandate for any humanitarian assistance,” he said on Firstline this morning.

“We are a loyal and active member of the international and the UN. If there’s a UN operation and it’s non-combat down the track, then that is something we could consider.” Source

20 September 2014

National wins third term in government, with United Future, ACT, and Maori Party support.

30 September 2014

New Zealand’s elite Special Air Service (SAS) personnel are not yet on standby for deployment to combat Islamic State militants in Iraq or Syria, Prime Minister John Key says, but he won’t rule out sending them if asked “as a last resort”.

[…]

Asked whether he would send military personnel if requested, Mr Key said: “I can’t rule out that there won’t be because what you can see around the world is countries being asked to give support.”

As far as sending SAS personnel, Mr Key said: “I can’t rule that absolutely out, but what I can say is that I’ll get advice and we’ll see how that goes, but it would be my least preferred option.”Source

5 November 2014

Kiwi military personnel are on their way to Iraq as New Zealand swings in behind the fight against the Islamic State group.

Defence Minister Gerry Brownlee confirmed three unarmed military personnel left for Iraq this week to assess how New Zealand could help the fight against the Islamic State group…  Source

 20 January 2015

The Government will make a decision in the next month or so about whether to send training forces to Iraq, Prime Minister John Key says.

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The prime minister said…

“We are going through that process of doing the [reconnaissance] to see whether it’s logical for New Zealand to take the next step, whether we should do that with Australia, whether we can find a location that fits the criteria that I set in my national security speech late last year.

“My guess is that by the middle of February or late February we’ll be in a better position to assess whether we are actually going to put people into Iraq to train Iraqi forces.” Source

 

Recent Timeline of Events: Housing

24 February 2014

Prime Minister John Key is ruling out any further sales of state assets, once Genesis Energy is partially sold.

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However, he said there are no more state-owned companies that would make sense to partially sell, with New Zealand Post facing declining business and Transpower operating as a monopoly.

“The truth is that 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. Or they sit in the category where they are very large, like Transpower, but are a monopoly asset and so aren’t suited I think.” Source

20 September 2014

National wins third term in government, with United Future, ACT, and Maori Party support.

28 January 2015

Prime Minister John Key today confirmed the Government planned to sell 1000 to 2000 state houses in the next year to community-housing providers, with with more sales possible in coming years. – Source

 

“It’s definitely not [an asset sale],” says Mr Key. “The overall focus here is to accommodate more New Zealanders in social housing.” – Source

On 9 February, on Radio NZ, Labour’s Phil Twyford outlined how state houses passed into ownership of community organisations could inevitably fall into the ownership of banks, and then on-sold.
Key claimed on Radio NZ’s Morning Report;

“There will be a contract formed between the Government and the community housing providers that buy the houses. The community housing provider won’t be able to on-sell the house unless they have the permission of the Government. To get the permission of the government, the government would have to consider why the community housing provider wanted to do that.”

Considering that Key has a solid reputation for saying one thing, and then months later back-tracking, there is no reason to believe him or take him at his word. His recent one-eighty degree u-turns on New Zealand involvement in Iraq and selling state assets (housing stock) has sent Key’s credibility plummeting.

The thing that people look to for Key now is not rock-solid committments – but what excuses/technique he will use to break his promises.

Prior to last year’s election, Key unequivocally promised

(a) Not to send combat troops to Iraq,

(b) not to sell any further state assets after Genesis.

It seems that we can now expect;

(a) New Zealand combat troops in Iraq, under the cover of “training” Iraqi soldiers,

(b) State houses being sold to various groups, which will eventually end up in private ownership.

The man simply cannot be trusted.

If his public popularity was not so unfeasibly high, there would be unrelenting, growing  pressure calling for  his resignation.

John Key has obviously learned the trick how a politician can break promises; tell lies; and yet maintain the public’s confidence and his own popularity. He is either an expert manipulator – or the public have become increasingly dumber/dumbed-down in the last decade.

Considering the state of public television, one could be tempted to opt for the latter.

Interestingly, not one journo seems to have asked Key three simple questions regarding NZ troops in Iraq or the sale of state housing to community organisations and others;

(a) “Will NZ troops  in Iraq – supposedly on ‘training missions’ – be given indemnity from prosecution by the Iraqi government? If so – why?

(b) “How will the transfer of ownership of a house from the State, to another entity, increase the number of houses in the country? And by how many?”

(c) How many people on the Housing NZ waiting-list  will actually be moved into community housing?

The first journo to ask Key those questions will open a can of worms that, for the first time, may attract public attention and scrutiny to Key’s mendacities and National’s barely concealed activities.

The public may not like what they see when they begin to pay attention to the government they elected.

Especially when the Housing NZ waiting list continues to rise.

And the first body bags return to New Zealand.

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References

Fairfax media: No New Zealand forces to Iraq, says Key

TV3: Key rules out sending troops to Iraq

NZ Herald: Key – SAS could join Isis fight on ground

Fairfax media: NZ military personnel headed for Iraq

Radio NZ: Iraq troop decision weeks away

Radio NZ: PM rules out more asset sales

Fairfax media: Government to sell 1000 – 2000 state houses – John Key

Radio NZ: State houses sale ‘financial risk’

Radio NZ: PM surprised by turn of events in Australia

Additional

Fairfax media: Andrea Vance – Think twice before joining new Iraq war

Previous related blogposts

Letter to the editor – Key paints a dirty, great, big bullseye on our country!

Housing; broken promises, families in cars, and ideological idiocy (Part Tahi)

Housing; broken promises, families in cars, and ideological idiocy (Part Rua)

Housing; broken promises, families in cars, and ideological idiocy (Part Toru)

The Mendacities of Mr Key #7: What is Dear Leader actually saying here?


 

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housing endangered

Above image acknowledgment: Francis Owen/Lurch Left Memes

This blogpost was first published on The Daily Blog on 10 February 2015.

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Letter to the Editor: Kiwi style or American style?

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FROM:       "f.macskasy" 
SUBJECT:     Letters to the editor
DATE:        Wed, 14 May 2014 23:59:33 +1200
TO:         "Dominion Post" <letters@dompost.co.nz> 

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The Editor
Dominion Post

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I am dumbfound. Absolutely gobsmacked.

With New Zealand's sovereign debt now around $60 billion (as
at November 2013) and having increased by $27 million a day
since National took office - John Key is kite-flying with
suggestions of further tax cuts?!

Is this how National exercises fiscal responsibility -
bribing voters with yet more unaffordable tax cuts?

Previous tax cuts in 2009 and 2010 were paid for with assets
sales; taxing children on their paper rounds; increasing
prescription charges; as well as unsuccessful  attempts to
tax carparks and cellphones. Currently, National is planning
to sell off 5,000 State houses that were once homes to
low-income families.

Instead of tax cuts, New Zealanders might care to tell the
Prime Minister that we should be funding education so that
parents don't have to fork out  $357 million a year in
so-called "voluntary donations" and spend long hours 
fundraising to pay for  supposedly "free" schooling.

It is patently simple. We can have free education and public
healthcare. Or we can have tax-cuts. But we cannot have
both. 

This is the moment we decide whether we want public services
for all New Zealanders, regardless of their financial
circumstances - or an American-style user-pays.

I hope we choose wisely.


-Frank Macskasy
[address & phone number supplied]

 

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References

NZ Herald:  Parents fundraise $357m for ‘free’ schooling

Fairfax media: Public debt climbs by $27m a day

Radio NZ: PM John Key dangles tax cut carrot


 

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Skipping voting is not rebellion its surrender

Above image acknowledgment: Francis Owen/Lurch Left Memes

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Letter to the Editor: what is a politician’s promise worth?

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old-paper-with-quill-pen-vector_34-14879

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FROM: 	"f.macskasy" 
SUBJECT: Letters to the Editor
DATE: 	 Sun, 16 Mar 2014 21:10:15 +1300
TO: 	"Sunday Star Times" letters@star-times.co.nz 

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The Editor
Sunday Star Times

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Winston Peters has pledged that his Party's bottom line is
the re-purchase of all shares in Meridian, Genesis, and
Mighty River Power at "a price no more than that initially
paid for them".

This is stated on NZ First's website, and Peter's reiterated
his pledge on TV3's 'The Nation' on 15/16 March.

I sincerely hope that Mr Peters' promise to buy back the
powerco SOEs fares better than his pledge in 1996, to buy
back Forestry Corp's timber cutting rights. Forestry Corp
was privatised by the Bolger-led National government for
around $1.6 billion to a consortium made up by Fletcher
Challenge Forests, Brierley Investments Ltd,  and Chinese
state-owned company,  Citifor Inc (now known as CITIC
Group).

Peters promised during the 1996 general election;

“I want to tell the Chinese buyers and I want to tell
Brierleys that they had better not make any long-range plans
because the day after the election is over we will be
sending them an emissary to them them exactly what is going
to happen, that is, that we are going to keep out promise,
they can give back the asset and we will give the money
back.”

The buy-back never happened, despite Mr Peters becoming
Treasurer and Deputy PM on 11 December 1996. His pledge
quietly disappeared.

Let's hope the same fate does not befall his pledge to buy
back the powerco shares.

-Frank Macskasy
(address  & phone number supplied)

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Related blogposts

Fool me Once, Shame on you

Winston Peters recycles pledge to “buy back state assets” – where have we heard that before?

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Tiwai Point – An exercise in National’s “prudent fiscal management”?

26 February 2014 Leave a comment

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corporate welfare 1

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Timeline

3 October 2007: Meridian and NZAS/Rio Tinto sign agreement for the continuous supply of 572 megawatts of power to the Tiwai Point smelter for 2013 to 2030.

30 October 2011: National government announces partial asset sales, of Genesis, Meridian, Mighty River Power, Solid Energy, and a further sell-down of Air New Zealand.

9 August 2012: Meridian Energy (electricity supplier to Rio Tinto) announces that Rio Tinto/Pacific Aluminium is demanding to renegotiate its electricity supply contract between the Tiwai Point aluminium smelter and Meridian.

10 August 2012: Rio Tinto CEO, Tom Albanese, warns that the smelter will be closed “if they cannot be viable, we have difficult decisions to make”.

7 September 2012:  Rio Tinto/New Zealand Aluminium Smelters  announces it will  make 100 workers redundant by November 2012.

7 August 2013: Rio Tinto/New Zealand Aluminium Smelters  announces 30 maintenance workers to be made redundant at the Tiwai Point smelter.

8 August 2013: National government announces agreement to give cash subsidy of  $30 million  to Rio Tinto, and Meridian Energy to supply the smelter with cheaper (price undisclosed) electricity than agreed in 2007.

9 August 2013: Bill English confirms that he has not sought a guarantee from Rio Tinto that jobs will not be lost at the smelter.

20 August 2013: National government announces details to sell 49% of Meridian Energy.

14/15 February 2014: Rio Tinto announces a   $4.43 billion ($US3.7 billion) annual after-tax profit. Rio Tinto shareholders recieve a 15% increase in dividends.

An exercise in National’s “prudent fiscal management”?

We were conned.

There is no other way to describe events between October 2007 and February this year; we were conned by a multi-national mining/metals giant that exploited National’s core-policies, for their own gain.

How else to describe the above events?

Once National announced their intention to partially-privatise Meridian Energy and float it on the New Zealand  (and Australian) stock exchanges – Rio Tinto realised that the price of Meridian shares would be determined by the income they derived from selling electricity.

As Green Party co-leader, Russel Norman stated,

”Rio Tinto took advantage of Mr Key’s obsession with asset sales by threatening to derail the sale of Meridian by closing the Tiwai smelter, so Mr Key gave them $30 million of public money.”

Rio Tinto was Meridian’s biggest customer, supplying  Tiwai Point  with approximately 15% of New Zealand’s total  electricity output. As such, Rio Tinto had Meridian  (and by proxy, the National Government) by the balls. And on 7 September 2012 and 7 August 2013, Rio Tinto squeezed.

By making  130 workers redundant, it sent National, and it’s compliant  leader, a clear message; “Don’t f**k with us, Johnny-boy. These 130 plebes are an example of what we can do to screw you over“.

Had Rio Tinto followed through on it’s threats (and make no mistake – they were threats), it would have brought down the government. That would have ended Key’s career and his reputation would have been in tatters. No Knighthood or beersies for Johnny-boy!

Key had no choice but to capitulate. Key admitted as such when he said on 14 February,

“At the end of the day I think the Government took a modest step to ensure there was a smooth potential transition there – that we didn’t have a glut of electricity we couldn’t use or that thousands and thousands of Southland jobs are out at risk.”

The resulting loss of 700 jobs at the smelter,  and a further 2,500 downstream throughout Southland, would certainly have been embarrassing for Key and damaging to National .  But this is a government that has overseen the sacking of approximately 3,000 state sector workers (up to August 2012) and 29,472 few jobs in the manufacturing sector, since 2006 (2013 Census results), so unemployment per se is not a problem that overly concerns right-wing government ministers.

What really threatened this government was Key’s reference to a “glut of electricity” – note the words. A glut of electricity would have de-railed the entire asset sales programme. Result; end of National; end of asset sales programme (and the neo-liberal agenda on the whole), and the end of Key’s career.

This shabby, self-serving, politically-expedient exercise, has cost us – the tax-payer – $30 million, plus an even cheaper electricity deal than probably anyone else in this country gets. No wonder the contract price is even more uber secret than the goings-on at the GCSB – the public would erupt in fury if they came to know what our electricity was being sold for, whilst the rest of us have mounting power prices, year after year after year.

Meanwhile, the lowest paid workers in New Zealand’s rest homes are paid just barely above the minimum wage;

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Resthome spy hails saint-like workers

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To which our well-heeled Prime Minister responded thusly,

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PM  No money for aged care workers

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To quote Dear Leader,

“It’s one of those things we’d love to do if we had the cash. As the country moves back to surplus it’s one of the areas we can look at but I think most people would accept this isn’t the time we have lots of extra cash.”

Interesting. Key and his Cabinet cronies found $30 million to throw at a multi-national corporation – which only six months later posted a $4.43 billion ($US3.7 billion) annual after-tax profit.

But no money for the lowest paid, hardest-working people (predominantly women) in our community. Key responded to Russell Norman’s criticism of the $30 million welfare handout,

“If Tiwai Point had closed straight away then hundreds and hundreds and hundreds of jobs would have disappeared and the Greens would have said the Government doesn’t care about those workers and is turning their back on them so they really can’t have it both ways.”

If only we could believe Key. But considering that thousands  lost their jobs since the Global Financial Crisis, and National has not bailed out any other company, the Prime Minister’s protestations ring hollow.

In fact, it’s fairly well obvious that the taxpayer-funded payout to Rio Tinto had nothing to do with jobs or the Southland economy – and everything to do with the state assets sales. As David Hargreaves wrote on Interest.co.nz,

“So, it will cost you, I and him and her a combined NZ$30 million of our hard-earned to keep the Tiwai Point aluminium smelter open just long enough so that the Government can flog off 49% of Meridian Energy.

That’s about the size of the deal struck between Meridian and the company controlled by global giant Rio Tinto, with additional sugar coating supplied by the Government, courtesy of us.

From the point the Government first stepped in earlier this year in an attempt to ‘help out’ it was always obvious tax payers were going to be forced to front up with some readies for the pleasure of keeping the always controversial smelter running for a while longer.

I have no doubt that the smelter will be closed in 2017, which is now when the owners get the first chance to pull the plug.”

The most asinine aspect to this deal (and there are many) is that Finance Minister,  Bill English, told Radio New Zealand on 9 August 2013 that “ensuring the safety of those jobs was not part of the deal and no undertakings were sought on the operation of the company”.

No guarantee for preserving jobs?!

Question: So what, precisely, did $30 million buy?

Answer: Rio Tinto not rocking the boat and upsetting National’s asset-sales programme.

This was a most odious, repugnant deal.

Every New Zealander contributed some of their hard-earned cash, which ended up in Rio Tinto’s shareholder’s pockets.

All done to achieve the sale of state assets which we own.

John Key gave away our money; which ended up in shareholder’s pockets; to sell assets we own; to other share investors.

This is the crazy side of National’s economic policy. This is  corporate welfare and crony capitalism rolled into one. Which begs the question to National’s supporters; is this what they see as “prudent fiscal management”?

How “prudent” is it to pay a subsidy to a multi-national corporation, that posted a multi-billion dollar after-tax profit,  that will most likely close the smelter regardless in some near future date (2017?)?

And why was that $30 million not invested in other job creation industries in Southland, so that a multi-national corporation could not hold this country to ransom? After Rio Tinto and Warner Bros – who is next to hold a gun to our collective head demanding a taxpayer subsidy/payout?

This was an odious, repugnant and wasteful deal.

This should not be allowed to be forgotten this election.

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John Key says I'd like to raise wages but I can't

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References

NZ Herald:  Meridian boss hails deal with smelter

Radio NZ: Details of Meridian share offer announced

Radio NZ: National announces plans for asset sale profits

TV3: Rio Tinto seeks new Bluff smelter terms

TV3: Rio Tinto eyeing smelter closures

Australia Mining: Rio Tinto’s New Zealand smelter to axe jobs

Fairfax Media: More jobs to go in smelter revamp

Interest.co.nz: Govt pays NZ$30 mln to smelter owners in a deal that will clear the way for the float of Meridian Energy

Radio NZ: No job guarantees sought in smelter deal

Otago Daily Times: Rio Tinto profit more than $4.4b

NZ Herald: PM defends $30m payout to Rio Tinto

NZ Statistics: 2013 Census QuickStats about national highlights

Dominion Post: 555 jobs gone from public sector

Fairfax media: Resthome spy hails saint-like workers

Fairfax media: PM – No money for aged care workers

Interest.co.nz:  Opinion: There was a certain inevitability the long-suffering taxpayer would be ‘invited’ to cough up for the pleasure of keeping the Tiwai Point smelter open

Previous related blogposts

John Key’s track record on raising wages – 4. Rest Home Workers

“It’s one of those things we’d love to do if we had the cash”

2013 – Ongoing jobless talley

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The Cost of Living

Above image acknowledgment: Francis Owen

This blogpost was first published on The Daily Blog on 18 February 2014.

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Radio NZ: Nine To Noon – Election year interviews – David Cunliffe

26 February 2014 Leave a comment

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– Radio NZ, Nine To Noon –

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– Wednesday 25 February 2014 –

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– Kathryn Ryan –

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On  Nine To Noon, Kathyrn Ryan interviewed Labour’s leader, David Cunliffe, and asked him about coalition negotiations, policies, polls, and other issues…

 

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Radio NZ logo -  nine to noon

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Click to Listen: Election year interviews (27′ 50″ )

A major policy statement by David Cunliffe;

@ 22.00:  “We will create incentives for private employers to be certified living wage employers, who pay the living wage  to all their employees, by giving them a preference in  Crown contracts.”

This will not only support firms that pay their staff properly – but will de facto give preference to local businesses to supply goods and services!

If this doesn’t motivate Small-Medium Enterprises to switch their allegiances from the Nats to Labour, I don’t know what will!

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Has Key just insulted 1,058,638 National voters?

21 December 2013 Leave a comment

As was predicted, Key’s response  to voter turnout to the asset sales referendum has been dismissive and derisory,

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PM playing down voter turnout - 13.12.13

Source

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With “only” 1,297,281 voting papers returned,  Key was obviously unimpressed,

Well the numbers don’t look like they’re that significant. I mean at the moment it’s sitting at around about 40 per cent.

Key added that the number was ” not absolutely amazing, it’s not overwhelmingly opposed“.

Considering that 1,058,638 people voted for National in 2011, does that also mean that Key is dismissive of National’s electoral support in 2011 as “ the numbers don’t look like they’re that significant“; “not absolutely amazing“; and not “overwhelmingly opposed ” to the Labour Party’s anti-asset election campaign?

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electoral result 2011

Source

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Because from where I stand, 238,643 more people participated in the  asset sales referendum  than voted for National, two years ago.

I’m sure 1,058,638 National voters would be unimpressed at the suggestion that they “don’t look like they’re that significant “.

That’s the trouble when a Prime Minister casually describes nearly a quarter of the country’s population as not “significant”. That’s a lot of people to dismiss out of hand.

And a lot of aggrieved voters.

This blogpost was first published on The Daily Blog on 14 December 2013.

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References

Wikipedia: 2011 Election results

Fairfax media: PM playing down voter turnout

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