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.
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;
To which our well-heeled Prime Minister responded thusly,
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.
NZ Herald: Meridian boss hails deal with smelter
Australia Mining: Rio Tinto’s New Zealand smelter to axe jobs
Fairfax Media: More jobs to go in smelter revamp
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
Previous related blogposts
Above image acknowledgment: Francis Owen
This blogpost was first published on The Daily Blog on 18 February 2014.
= fs =
In case there are still one or two New Zealanders remaining who haven’t yet cottoned on to one very simple truism about National in office, let me spell it out; they are rank hypocites of the highest order.
And in case you, the reader, happen to be a true-blue National supporter, let me explain why.
In the last four years, National has been beavering away,
- slashing budgets
- sacking nearly 3,000 state sector workers
- closing schools
- attempting to close special-needs services such as Nelson’s Salisbury school
- cutting state services such as DoC, Housing NZ, Police, etc
- freezing wages for state sector workers (whilst politician’s salaries continue to rise)
- cutting back on funding to various community services (eg; Rape Crisis ands Women’s Refuge)
- and all manner of other cuts to state services – mostly done quietly and with minimum public/media attention.
In return, the Nats successfuly bribed us with our own money, giving us tax-cuts in 2009 and 2010. (Tax cuts which, later, were revealed not to be as affordable as what Dear Leader Key and Little Leader English made out – see: Key: $30b deficit won’t stop Nats tax cuts, see: Government’s 2010 tax cuts costing $2 billion and counting)
One such denial of funding for public services is an on-going dispute between PHARMAC and the New Zealand Organisation for Rare Disorders (NZORD) which is struggling desperately to obtain funding for rare disorders such as Pompe’s Disease,
Acknowledgement: Fairfax Media – Mum not prepared to wait and die
NZORD and it’s members have been lobbying National for the last four years to gain funding for much-needed medication. They are in a dire situation – this is a matter of life or death for them.
This blogger has blogged previously about their plight,
Previous related blogposts
- Priorities? (19 Oct 2011)
- Terminal disease sufferer appeals to John Key (12 Nov 2012)
- “There’s always an issue of money but we can find money for the right projects” – John Key (20 Jan 2013)
- “One should judge a society by how it looks after the sick and vulnerable” – part tahi (4 March 2013)
- “One should judge a society by how it looks after the sick and vulnerable” – part rua (4 March 2013)
- “One should judge a society by how it looks after the sick and vulnerable” – part toru (4 March 2013)
This blogger has also written directly to the Prime Minister and to Health Minister, Tony Ryall.
One response from Minister Ryall is presented here, for the reader’s attention,
So there we have it, folks. If you’re a New Zealander dying from a rare disease, and PHARMAC won’t fund life-saving medication – don’t expect an assistance from this rotten government. Their response will be, and I quote,
“While I share your concern [snort!!!] for people with Pompe disease, as I advised you in my letter of 22 November 2012, in the current fiscal environment, unfortunately funding is not available for all treatments.”
So “in the current fiscal environment, unfortunately funding is not available for all treatments“?!
But funding is available for;
$1 Rugby – $200 million to subsidise the Rugby World Cup (see: Blowouts push public Rugby World Cup spending well over $200m)
$2 Movies – $67 million paid to Warner Bros to keep “The Hobbit” in New Zealand (see: The Hobbit: should we have paid?) and $300 million in subsidies for “The Lord of the Rings” (see: Hobbit ‘better deal than Lord of the Rings’ – Key)
$3 Consultants – After sacking almost 3,000 state sector workers (see: 555 jobs gone from public sector) – and with more to come at DoC – National seems unphased at clocking up a mind-boggling $1 billion paid to “consultants”. (see: Govt depts clock up $1bn in consultant fees)
And on top of that, we are now faced with the prospect of a trans-national corporate – Rio Tinto – with their hands firmly around Meridian Energy’s neck, attempting to extract a greater subsidy from the SOE powerco. The story began in August last year,
Acknowledgement: NZ Herald – Rio Tinto seeks power deal revision
We know why. Despite implausible assertions to the contrary by National Ministers, Genesis Energy, and Rio Tinto executives – the partial sale of SOE powercos (Meridian, Genesis, and Mighty River Power) have made them vulnerable to the demands of Big Businesses.
Rio Tinto knows that the share price of each SOE will be predicated on marketplace demand for shares.
They know that if there is less demand for electricity, then the price of power may (note: may) drop; those SOE’s profits will drop; and the price of shares will drop.
That leaves shareholders out of pocket and National with egg on it’s face. And a whole bunch of Very Pissed Off Voters/Shareholders.
Think: Warner Bros. Think: corporate blackmail to shift ‘The Hobbit’ overseas. Think: National not wanting to risk the wrath of Peter Jackson and a thoroughly manipulated Public Opinion. Think: National looking at the 2011 election. Think: panic amongst National ministers and back-room Party strategists.
This is precisely what is happening with Rio Tinto, Meridian, and National.
In the space of six and a half hours yesterday (28 March 2013), events came to a dramatic head. The following happened in one day:
Via a Press Release from Merdian Energy;
“Thursday, 28 March 2013, 9:15 am
Press Release: Meridian Energy
New Zealand Aluminium Smelter’s electricity contract
For immediate release: Thursday, 28 March 2013
Meridian was approached by Pacific Aluminium, a business unit of global mining giant Rio Tinto Ltd, the majority shareholder of New Zealand Aluminium Smelters Ltd (NZAS), in July 2012, to discuss potential changes to its existing electricity contract.
Since talks began, various options have been discussed and Meridian has offered a number of changes and concessions to the existing contract.
Chief Executive of Meridian Energy, Mark Binns, says that Meridian has advised Pacific Aluminium of its ‘bottom line’ position.
“Despite significant effort by both parties there remains a major gap between us on a number of issues, such that we believe that it is unlikely a new agreement can be reached with Pacific Aluminium,” says Mr Binns.
In the event no agreement can be reached, Meridian will seek to engage with Rio Tinto and Sumitomo Chemical Company Ltd, the shareholders of NZAS, who will ultimately decide on the future of the smelter.
Meridian signed a new contract with NZAS in 2007, after three years of negotiations. This current contract commenced on 1 January 2013 and remains unaltered and binding on the parties.” – Source
To which Rio Tinto replied,
In a NZ Herald story,
CEO of Pacific Aluminium (the New Zealand subsidiary of Rio Tinto), Sandeep Biswas responded with,
“We believe a commercial agreement that is in the best interests of NZAS, Meridian, the New Zealand Government, and the people of Southland can be reached. We look forward to continuing productive negotiations with a view to achieving a positive outcome for all parties.” – Source
De-coding: “This ain’t over till the Fat Chick sings, and she’s nowhere to be seen. You guys better start hearing what we’re saying or this is going to turn to sh*t real fast; we’ll close our operations at Bluff; 3,200 people employed by us directly or indirectly will be told ‘Don’t Come Monday’; your Southland economy will collapse like a Cyprus bank, and National can kiss goodbye to it’s re-election in 2014. Ya got that, sunshine?”
That got the attention of National’s ministers Real Quick,
The Government has opened discussions with Tiwai Point aluminium smelter’s ultimate owners Rio Tinto in a bid to broker a deal after talks between the smelter and Meridian Energy reportedly broke down.
“With this in mind, the Government has been in contact with Pacific Aluminium’s international parent company Rio Tinto this week to discuss helping to bridge the gap in their positions over the short to medium term, if this could be of assistance in concluding an agreement.
“In the meantime, we understand Meridian’s existing contract with Pacific Aluminium remains in place at least until 1 January 2016 with significant financial and other obligations beyond that.” – Source
Barely two hours had passed since Meridian had lobbed a live grenade into National’s state asset sale programme, and it’s fair to say that the Ninth Floor of the Beehive was in a state of panic. It was ‘battle stations’. Red Alert. National ministers were, shall we say, slightly flustered,
By noon, the markets were reacting. Though share-market analysts were attempting to down-play the so-called ‘Phoney War’ between Meridian and Rio Tinto, Devon Funds Management analyst, Phillip Anderson, remarked that,
“…the announcement had hit Contact’s share price – the company was down 3 per cent in early trading but is now down only 1.2 per cent.” – Source
If Contact’s (a fully privatised ex-SOE) share price had dropped 3% on the strength of these media stories, it is little wonder that share-market analysts were down-playing the brinkmanship being played out by Meridian and Rio Tinto. If the share-market was spooked enough, Contact’s share price would plummet, as would that of Mighty River Power – estimated to be in the $2.36 and $2.75 price-range. (see: Mighty River share tips $2.36 to $2.75).
In which case, National would be floating shares worth only a fraction of what ministers were seeking. In effect, if Rio Tinto closed down operations, Key could kiss goodbye to the partial sale of energy SOEs. They would be worthless to investors.
By 3.43pm, and six and a half hours since Meridian’s press release, National had negotiated some kind secret deal with Rio Tinto. We don’t know the terms of the deal because though it is our money, National ministers don’t think we have a right to the information,
The Government is negotiating a new taxpayer-funded subsidy with Tiwai Point aluminium smelter’s owners and has all but acknowledged its assets sales programme is being used by them to get a better deal on power prices.
State Owned Enterprises Minster Tony Ryall this morning said the Government has opened discussions with the smelter’s ultimate owners global mining giant Rio Tinto in a bid to broker a deal over a variation to the existing electricity contract.
“With this in mind, the Government has been in contact with Pacific Aluminium’s international parent company Rio Tinto this week to discuss helping to bridge the gap in their positions over the short to medium term, if this could be of assistance in concluding an agreement.”
Mr Ryall indicated the Government had offered Rio Tinto “a modest amount of money to try and help bridge that gap in the short to medium term but there’s still a very big gap in the long term… We’re not interested in subsidising this business in the long term”. – Source
“…they’re pretty tough negotiators and I’m sure they look at what else is happening in the economy when they make their various decisions…
…”they certainly haven’t got the Government over a barrel.”
Three questions stand out from Ryall’s statement,
- If State subsidies for electricity supply to Rio Tinto’s smelter are “short to medium term” – then what will happen when (if?) those subsidies are lifted? Will shareholders “take a bath” as share prices collapse in value?
- Does Ryall think we are fools when he states that Rio Tinto did not have the government “over a barrel” ?! Is that how National views the public – as morons?
- How much is the “a modest amount of money” that Ryall is referring to?
Perhaps the most asinine comment from Ryall was this, as reported by TVNZ,
“The electricity market is capable of dealing with all the issues relating to the smelter,” said Ryall.
Acknowledgement: TVNZ News – Talks break down over Tiwai smelter contract
Really?! In what way is “the electricity market … capable of dealing with all the issues relating to the smelter” when the government has to step in with what could be millions of dollars worth of subsidies? Is that how “the market” works?!
This blogger has two further questions to put to Minister Ryall. Both of which have been emailed to him,
Date: Thu, 29 March 2013, 6.43pm
From: Frank Macskasy <email@example.com>
Subject: Re: Your correspondence to Hon Tony Ryall
To: Tony Ryall <Tony.Ryall@parliament.govt.nz>
Kia ora, Mr Ryall,
I am in receipt of your emailed letter to me, dated 5 December 2012, regarding the non-funding of certain medications for sufferers of Pompe Disease. Firstly, thank you for taking the time to respond to this issue in a thorough and timely way. Several of your other ministerial colleagues seem to lack that simple etiquette.
I note that, as Minister of SOEs, you have been in direct negotiations with Rio Rinto, and have offered the company subsidised electricity for the “short to medium term”.
This will no doubt cost the taxpayer several millions (hundreds of millions?) of dollars.
If National is able to provide such largesse to a multi-national corporation, please advise me as to the following;
1. Why is the same subsidy for cheaper electricity not offered to ALL New Zealanders? Or even those on low-fixed incomes? Why provide a multi-million dollar subsidy just to a billion-dollar corporation when New Zealanders could do with a similar cut in their power bills?
2. In your letter to me, dated 5 December 2012, you point out that,“While I share your concern for people with Pompe disease, as I advised you in my letter of 22 November 2012, in the current fiscal environment, unfortunately funding is not available for all treatments.”
If National has millions of dollars available to subsidise multi-national corporations, them obviously your statement on 5 December 2012 that “in the current fiscal environment, unfortunately funding is not available for all treatments” – is simply not credible.
It is obvious that your government can find money when it wants to. This applies to Rugby World Cup funding, consultants, movie-making subsidies, etc.
As such, I hope you are able to find the necessary funding for medication for people suffering rare disorders.
You are, after all, Minister for Health as well as Minister for State Owned Enterprises.
PS: Please note that this issue will be canvassed further on the blogsite, The Daily Blog.
Minister of Health. Minister for SOEs. Minister for corporate welfare.
Which ‘hat’ will Tony Ryall be wearing today?
And will he find the necessary funding to save the lives of sick New Zealanders?
This blogpost was first published on The Daily Blog on 31 March 2013.
NZ Herald: Rio Tinto seeks power deal revision (10 Aug 2012)
Scoop.co.nz: New Zealand Aluminium Smelter’s electricity contract Press Release (9.15am, 28 March 2013)
NZ Herald: Govt steps in to sort out stalled Tiwai power deal (11.15am, 28 March 2013)
NZ Herald: Tiwai stoush may affect Mighty River price (12.00pm, 28 March 2013)
NZ Herald: Mighty River share tips $2.36 to $2.75 (20 March 2013)
Related to previous blogposts
Pharmac: The politics of playing god (16 June 2011)
$500,000 a year to keep toddler alive (5 Feb 2013)
Rare disease sufferers want pricey treatments (1 March 2013)
Rare disease takes awful toll on boy (1 March 2013)
Bill English – do you remember Colin Morrison? (4 Feb 2013)
NZ Herald – Fran O’Sullivan – Govt intervention doesn’t cut mustard (30 March 2013)
= fs =
This week has been a busy one for Dear Leader…
Trans Pacific Partnership Agreement
Perhaps the most far-ranging trade agreement that New Zealand has been involved with, since CER with Australia took effect in 1983, the TPPA (Trans Pacific Partnership Agreement) is currently under negotiation between eleven nations (including New Zealand).
Negotiations are being held in absolute secrecy, with no Parliamentary or public oversight. Quite simply, New Zealanders have no idea what National is signing up to, until the deed is done and we are committed to god-knows-what.
There are suggestions that part of the TPPA may contain,
(1) The right of corporations to sue governments for “loss of profits”. This is no better illustrated than the recent attempt by tobacco companies to force the Australian government to back down over plans to introduce plain-packaging in that country. (See: Tobacco packaging: cigarette companies lose Australian court case)
Tobacco manufacturer, Philip Morris, moved it’s subsidiary shares from Australia to Hong Kong so as to exploit a 1993 trade agreement between the two jurisdictions and was thus able to sue the Australian government. (See: Smoke signals: plans of Big Tobacco plain to see)
This barely-concealed attempt to exploit an obscure trade agreement should serve as a sign of things to come.
(2) Stricter intellectual property rights that may undermine Pharmac’s ability to buy cheaper, generic medicines, after patents have expired.
It is by this process that PHARMAC can purchase cheaper drugs from overseas and pass those savings on to all New Zealanders. The US pharmaceutical industry recognises the threat that PHARMAC poses to their profits – especially if the PHARMAC-model is adopted by other nations.
More of what pharmaceutical corporations are demanding can be found in this article, by Keira Stephenson; TPPA could ‘gut’ Pharmac, say critics.
John Key recently stated,
“We’re not prepared to see dairy excluded. And in terms of abolition, yeah, I mean that’s the aim. There might be a time frame under which clearly there’ll be a phase out. But in the end New Zealand can’t sign up to the TPP if it excludes our biggest export.”
Key also said it would “not a good look” if concessions undermined the status of Pharmac.
Unfortunately, we have good reason to be concerned. If past experience is anything to go by, John Key’s reassurances are mostly meaningless and more changeable than our weather. Key has changed his position on matters such as,
- not raising GST (See: Key denies ‘flip flop’ over GST increase)
- not implementing youth rates (See: Govt reintroduces youth wage)
- not selling state assets (See: Highlights from Key’s 2008 ‘no job cuts’ speech)
- Capping state sector workers, and not cutting numbers (See: Highlights from Key’s 2008 ‘no job cuts’ speech)
- To create 170,000 new jobs (See: Unemployment up to 7.3pc – a 13 year high)
- To implement a nationwide food-in-schools programme (See: National launches its Food in Schools programme, Key in poverty ‘la la land’)
- Implementing tax cuts in 2009 and 2010, and assuring the public that they were “appropriate for the current economic and fiscal conditions” (See: National Party Tax Policy 2008, John Key: Address to the CEO Summit, APEC Business Advisory Council)
- Double standards over sale of farmland to overseas investors (See: Investors should not have to live here, Key says)
- And statements in 2010 and this year, that taxpayers would not be giving subsidies to Warner Bros, as inducements to keep “The Hobbit” in New Zealand. Then gave extra tax breaks an cash subsidies to Warner Bros. (See: PM: I’m not going to write cheques NZ can’t afford, PM’s ‘special’ movie studio meeting, Key on Hobbit deal: ‘It was commercial reality. We did the business.’)
If there is one thing we’ve come to expect from John Key – he can flip-flop on his promises and committments with all the ease of a Nigerian scammer.
So when Dear Leader says he is committed to…
“We’re not prepared to see dairy excluded. And in terms of abolition, yeah, I mean that’s the aim. There might be a time frame under which clearly there’ll be a phase out. But in the end New Zealand can’t sign up to the TPP if it excludes our biggest export “…
And, it would “not a good look” if concessions undermined the status of Pharmac…
We should immediately be concerned.
The man is simply not to be trusted.
In October 2010, Key categorically rejected spending taxpayers money on corporate welfare for the movie industry,
Mr Key reiterated that the Government was prepared to move at the margins when it came to money but it did not have an open chequebook.
He said Warner Bros were asking for “lots and we’re not offering lots”.
“If it’s just simply a matter of dollars and cents, I’m just not going to write out cheques that New Zealand can’t afford.”
Two years later, and our Prime Minister is dishing out taxpayers money to the movie industry like it’s growing on trees,
The Government wants to offer better incentives to get more foreign TV shows filmed in New Zealand.
Prime Minister John Key, in Matamata yesterday for the opening of the Green Dragon Pub at the Hobbiton Movie Set Tours, said attracting television series was the next step to aiding the creative industry after movie work such as Sir Peter Jackson’s The Hobbit.
“Blockbuster movies are very, very large … but they have big peaks and troughs and during the troughs that’s really difficult for people working in that field, so we can fill those gaps with television,” Mr Key said.
Under Mr Key’s lead the Ministry of Business, Innovation and Employment, the Film Commission and the Inland Revenue Department are jointly reviewing the incentives offered to overseas producers to film TV series in New Zealand.
And yet, on 16 September this year, Key specifically rejected all suggestions of subsidies to other industries – especially exporters – to help save jobs,
“But there will always be job losses, Shane. There will always be parts of the economy where, for whatever reason, there’s a change in pattern. So years ago, we all did different things from what we’re doing today. The point for New Zealand is if we’re going to sell more to the world than we buy from the world, if we’re going to earn our way in the world and not spend more than we earn, then we have to have a highly focused, competitive economy. And we need to have three things: access to capital, access to markets and access to skilled labour.
If I just take you back to your point, many of the countries you are pointing to that are paying out these levels of subsidies are backed up by governments that are hugely indebted. So the whole problem in Europe, the whole reason why you’re seeing countries like Spain, like Greece and right through Southern Europe in the sort of mess they are is they have huge levels of government debt. So the answer in New Zealand is not necessarily coming up with a make-work scheme funded off taxpayers’ taxes. It comes off New Zealand having a competitive industry, making sure that we have flexible labour markets, making sure that we are investing in things that will make the economy go faster, like science and innovation.”
When it comes to holding two diametrically opposed beliefs, simultaneously, (aka ‘doublethink‘) John Key excels.
I cannot recall any politician in the last forty years who can flip-flop so easily on any given issue.
Statistics & John Key
When the Household Labourforce survey was made public on 8 November, the data showed a dramatic leap in unemployment from 6.8% to 7.3%. (See: Unemployment up to 7.3pc – a 13 year high) There are now at least 175,000 people without work in this country.
Dear Leader’s response?
He rejected the figures outright, in this Fairfax story,
” In the end these things bounce around quite a bit… it’s at odds with what most of the economists thought would happen. Like a lot of surveys, from time to time, it can produced usual data, let’s see what happens in the next one. But it’s not going to make the Government change tack. These are challenging international conditions … but I don’t think we should change course I think we’re on the right track. “
On TVNZ’s Q+A, on 25 November, Key was just as reluctant to accept the HLFS results,
” The Household Labour Force Survey is a survey. It’s a survey of 15,000 people. It has a quite significant margin of error and it bounces around a lot. Quite a number of the bank economists, in their review of the last number, said it’s notoriously volatile. So I can’t tell you whether it might go up a little bit or go down a little bit. What I can tell you is that’s not the relevant point. The relevant point is is the government doing everything it can to create an environment to allow businesses to create jobs? “
Which makes it even stranger and more comical when – having trashed the reliability of the Household Labour Force Survey over the last month – he suddenly invokes the very same Household Labour Force Survey to back up his position (which depends on what day it is),
” There’s always a range of different data series. QS [Quarterly Survey?] is one. That’s obviously another. Household Labour Force is another. All I can tell you is we’ve looked at [garbled gibberish] … The concensus view and that was the previous government’s view as well, is that HLFS was the best measure of the economy. Sometimes it produces numbers I don’t like. But if you look at their data series what they are saying is, in broad terms, over the last four years, the number of jobs in manufacturing is roughly about the same.” – John Key, 27 November 2012
It is fairly obvious to the ordinary bloke and blokette in the street that relying on John Key’s word will generally result in disappointment.
Back to Pharmac, the TPPA, and John Key’s “reassurances”
Last year, on 13 June, Fairfax reporter Nikki MacDonald wrote an excellent piece on how TPPA negotiations may impact on Pharmac’s drug-buying policies,
Pharmac was established in 1993, to rein in rocketing drug costs and distance the government from drug-buying decisions. Its task is to spend its $710 million annual budget to achieve the best health gains for Kiwis.
Broadly, Pharmac works by referring drug-company funding applications to the Pharmacology and Therapeutics Advisory Committee, made up of senior doctors and pharmacists, to examine whether or not the drug is effective, and whether it is significantly better than anything else already on offer.
The committee then gives the drug a low, medium or high funding priority and Pharmac’s board decides whether or not its benefits justify the price tag.
Pharmac’s cost-benefit analysis, which takes into account average patient age and the number of good-quality years gained by the treatment (called quality adjusted life years, or QALYs), is similar to that in Australia’s scheme.
The major difference is that Australia funds everything meeting a given cost-effectiveness threshold.
New Zealand, on the other hand, has a fixed budget, so has to decide whether it can afford to fund a drug in any given year. Pharmac must also consider the opportunity cost of a funding decision – what do you sacrifice to spend $20 million on the latest cancer drug?
Pharmac uses various bargaining strategies so it can buy more for its drug dollar. These include:
Reference pricing: Where a newer, patented drug has similar benefits to a cheaper generic drug, Pharmac might subsidise the newer drug only to the same level as the lower-cost alternative. The drug company then either drops its drug price to the subsidy level, or the consumer pays the difference.
Sole-supply tenders: When a drug patent expires, Pharmac tenders to get the best price for a generic replacement. Drug companies can offer much cheaper deals because they’re assured of a large market share.
A 2004 price comparison found Australia paid up to 20 times more than New Zealand for some generic drugs, because it did not use tenders. (Legislation has now bridged some of that difference, by enforcing staged price drops for generic drugs.) A Canadian study found generic drugs were up to 93 per cent, and on average 58 per cent, cheaper in New Zealand.
Package deals: A costly new drug that works well but is not cost-effective can be funded by negotiating cheaper prices for other drugs made by the same pharmaceutical company. Glivec was funded using this method.
Negotiated contracts. On the numbers Pharmac has been spectacularly successful. In 1985, a basket of commonly prescribed drugs cost 37 per cent more in New Zealand than in Australia. Between 1993 and 2006 New Zealand’s drug spending grew by 11 per cent, while Australia’s soared by 212 per cent. Pharmac estimates its aggressive pricing policies save almost $1 billion a year.
Most New Zealands either have no idea what the potential impact on Pharmac may be, if US pharmaceutical companies get their way through TPPA negotiations – or are too busy watching the latest “Masterchef Botswana”, “X Factor Bolivia”, or gawking at a celebrity’s tits on some vacuous “reality” show.
It is only when Pharmac’s ability to buy cheap drugs is undermined by the full power of pharmaceutical companies, levied through the TPPA, and the costs for medicines suddenly doubles, trebles, quadruples, will New Zealanders wake up to the fact that we’ve been rorted.
And it all happened on the watch of our smiling, waving, Prime Minister – that ever so-nice Mr Key.
By then it will be too late.
So when Key reassures New Zealanders that,
“…it would “not a good look” if New Zealand made concessions that undermined the status of its drug-buying agency, Pharmac.”
… it is time to be worried.
Like all his other assurances, pledges, promises, and committments that have been broken or backtracked, our Prime Minister is not a man who stands by his word.
When it comes to the health of our economy, he has failed.
Let’s not allow him to do the same to our own health.
US free-trade deal suspect (19 Dec 2010)
Pharmac: The politics of playing god (13 June 2011)
Pharmac faces trade ‘threat’ (26 Oct 2011)
No TPP deal unless dairy and Pharmac are in – Key (26 Nov 2012)
TPPA could ‘gut’ Pharmac, say critics (29 Nov 2012)
Navigating the choppy waters of the TPP (1 Dec 2012)
Right Wing Reaction
Anti-trade camp running debate (28 Nov 2012)
The Standard: TPP Negotiations Auckland next week
Gordon Campbell: Gordon Campbell on the NZ Herald’s attack on Jane Kelsey
Idle Thoughts of an Idle Fellow: TPP in crisis?
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– Penny Bright
“How many billion$ of public monies could be saved by ‘CUTTING OUT THE CONTRACTORS’?
Where’s National’s ‘corporate welfare’ reform?
Which of the major political parties are pushing for ‘corporate welfare’ reform and shrinking the long-term dependency of the private sector on our public monies?
Where is the ‘devilish detail’ at both local and central government level – which shows EXACTLY where our public rates and taxes are being spent on private sector consultants and contractors?
Why aren’t the names of the consultant(s)/ contrators(s) – the scope, term and value of these contracts, published in Council or central government Annual Reports – so this information on the spending of OUR public monies is available for public scrutiny?
Where are the publicly-available ‘Registers of Interests’ for those local government elected representatives, and staff responsible for property and procurement, in order to help guard against possible ‘conflicts of interest’ between those who ‘give’ the contracts and those who ‘get’ the contracts?
Where’s the ‘transparency’?
Given that New Zealand is ‘perceived’ to be the least corrupt country in the world – along with Denmark and Singapore, according to Transparency International’s 2010 ‘Corruption Perception Index – shouldn’t we arguably be the most transparent?
Going back a step – where are the New Zealand ‘cost-benefit’ analyses which prove that the old ‘Rogernomic$ mantra – public is bad – private (contracting) is good’ can be substantiated by FACTS and EVIDENCE?
At last – someone – somewhere has actually done some substantial research – which proves the opposite.
That ‘contracting out’ services that were once provided ‘in-house’ is actually TWICE as expensive.
“USA Project On Government Oversight (POGO) decided to take on the task of doing what others have not—comparing total annual compensation for federal and private sector employees with federal contractor billing rates in order to determine whether the current costs of federal service contracting serves the public interest.
Based on the current public debate regarding the salary comparisons of federal and private sector employees, the Project On Government Oversight (POGO) decided to take on the task of doing what others have not—comparing total annual compensation for federal and private sector employees with federal contractor billing rates in order to determine whether the current costs of federal service contracting serves the public interest.
The current debate over pay differentials largely relies on the theory that the government pays private sector compensation rates when it outsources services. This report proves otherwise: in fact, it shows that the government actually pays service contractors at rates far exceeding the cost of employing federal employees to perform comparable functions.
POGO’s study analyzed the total compensation paid to federal and private sector employees, and annual billing rates for contractor employees across 35 occupational classifications covering over 550 service activities. Our findings were shocking—POGO estimates the government pays billions more annually in taxpayer dollars to hire contractors than it would to hire federal employees to perform comparable services. Specifically, POGO’s study shows that the federal government approves service contract billing rates—deemed fair and reasonable—that pay contractors 1.83 times more than the government pays federal employees in total compensation, and more than 2 times the total compensation paid in the private sector for comparable services. ”
The implications of this both nationally and internationally are HUGE.
If NZ central government figures are comparable with those of USA Federal Government – could the current NZ $82 billion central government spend be sliced in half by $40 billion ‘CUTTING OUT THE CONTRACTORS’?
Which political parties / candidates are focussing on the SPENDING of public monies, rather than debt and borrowing?
If central and local govt departments /SOEs / CCOs / Crown Research Institutes are all defined as ‘PUBLIC- BENEFIT ENTITIES’ as defined under NZ Equivalents to International Financial Reporting Standards (“NZ IFRS”) – then their primary objective is to provide services and facilities for the community as a social benefit rather than make a financial return.
So – how come so many services that USED to be provided ‘in-house’ are now contracted out to the private sector – whose primary objective is most certainly to ‘make a financial return’?
What magic is this that transforms public (ratepayer and taxpayer) monies into private profit?
WHERE IS THE NZ EQUIVALENT OF ‘POGO’ the USA ‘Project On Government Oversight ‘ which has just completed first-ever research which proves that private contractors cost twice as much as ‘in-house’ providers of Federal Government services?
HOW MUCH MONEY could be saved in NZ at central and local government by cutting out all the private ‘piggies in the middle’ with their greedy snouts in our public troughs?
Why aren’t the statutory ‘third party’ Public Watchdogs, as well as other major political parties demanding this accountability?
How much public money at central and local government level could be saved by ‘CUTTING OUT THE CONTRACTORS’?
Who else is even asking this question?
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