Red Alert

Archive for the ‘privatisation’ Category

A Rocky Road To Asset Sales

Posted by on November 27th, 2012

National has failed to reach its target of selling of shares in State Owned Energy Companies prior to Christmas 2012. They underestimated the broad public consensus opposing the move and they overplayed the level of ‘support’ from iwi leaders that did not equate to real votes on the ground for the Mixed Ownership Model (MOM) being promulgated.
Today the New Zealand Maori Council (NZMC) will present their case in the High Court. There are several strands to the arguments being debated about water, the rationale builds on the firm belief that;

➢ The Crown has a moral obligation to recognise the tino rangatiratanga that Maori assert over their Taonga and a fiduciary obligation to protect those rights and interests

It seems to me that this argument was the initial premise that built the case for the New Zealand Maori Council who sought to object to the Sale of Shares in SOE’s and the Mom model being promoted by the Government. That the Tribunal went a step further and suggested a ‘shares plus’ model to resolve the disputed action was, in my view, a pragmatic step to try and reconcile a way forward.

It was unhelpful and has become a red herring to the real issue that is that Maori do have proprietary rights and interests in water albeit undefined.

➢ That the common interest that all New Zealanders have in water is not prejudiced by Maori seeking greater protection of their proprietary rights and interests in water

Insofar as water is concerned, Maori accept that there is a common interest in water and that the Crown must take steps to preserve and protect those bundles of rights. The assertion that’ no-one owns water’ is offensive to Maori who see the hypocrisy of a water management framework that ascribes rights and interests through resource consents and allocation models.

This is why iwi have sought greater input into the RMA framework and the current management regime to accommodate the generic interests of Maori as kaitiaki and the co-existing rights of iwi insofar as localised Treaty Settlement outcomes.

The moment the Crown seeks to privatize rights in water through exclusive shareholding interests in water companies, transferability of water permits or the like, then the game changes and iwi/Maori are forced to ensure that their collective interests will not be disenfranchised.

In many respects, if New Zealanders who believe that Energy Companies should be operated for the benefit of all New Zealanders, they would support the actions of the NZMC to stop the sale of SOE’s and seek greater clarity over the nature and extent of proprietary rights and interests in water.

➢ That s.9 of the SOE Act was a mechanism used by Maori to protect their interests vis-à-vis Crown actions and the new clause inserted in the Public Finance Bill does not ascribe the same level of protection

This legal mechanism was intended to be Nationals solution to soften the Maori sentiment towards a share sell-down of 49% in SOE’s. But the Government failed to consider whether its actions fundamentally breached the Treaty of Waitangi and the fiduciary obligation to protect the ‘rangatiratanga’ of Maori in relation to water.

The Maori Party a close ally and coalition partner tried to dance on a pinhead by saying that they supported consultation with ‘the people’. They hid behind a small group of iwi leaders who showed some interest in the MOM model and transferring the s.9 clause of the SOE Act into a similar provision of the Public Finance Act. Yet they opposed Assets Sales. This is a confused position and reeked of political maneuvering rather than principles and should the NZMC be successful it will be despite the action of the Maori Party.

Once again, the take home point is that while the Government believes it may have a political mandate, 3 Maori electorate members of the Maori Party does not constitute a broad consensus or mandate from iwi or Maori on the issue and the Government should be concerned if the Court pursues the fiduciary obligation that the Crown has to protect the interests of Maori insofar as Article 2 of the Treaty of Waitangi.

➢ That the Treaty Settlement process does not adequately provide for Maori proprietary rights and interests in water that may be specific and localised to whanau and hapuu
The Waikato River Settlement is a case in point. It is a historical settlement that has affirmed co-governance and co-management mechanisms in the ongoing management of New Zealand’s most utilised waterway. That settlement does not, however, ascribe proprietary rights and interests to hapuu or whanau who may have a puna, aquifer, lake, waterfall or stream in many parts of the rohe.

The NZMC court action may assist those hapuu and whanau whose interests may not be captured in the Treaty Settlement but have an important bundle of rights that need to be protected.

➢ That the final determination of the extent of Maori rights and interests in water will need to be accommodated in Resource Management legislation alongside Treaty Settlements
Whatever the outcome of the NZMC case, change is inevitable insofar as the Resource Management Act, water catchment management, co-existing rights vis-à-vis efficient allocation models. The Land and water Forum has been a constructive process to focus many minds on the challenge of sustaining more efficient water management regimes to enable productive enterprise, be cognisant of Maori rights and interests, protect the ongoing quality of waterways and sustain community utilization.

A post Land and Water Forum should lead to more sophisticated water-management tools and frameworks that bring together ‘competing interests’ with greater coherence around the sustainable use and allocation of water.

➢ That the Crown does not have the moral mandate of Maori to sell 49% of shares in State Owned Energy Companies because it prejudices the ability for Maori to assert their tino rangatiratanga over a significant Taonga that is managed in the common interest of ALL New Zealanders
Last but not least the political point to be made time and time again in relation to the Governments Asset Sale Agenda and the rights and interests being asserted by Iwi and Maori alike is that the Crown must assure itself and the Court that their actions do not prejudice the Article 2 interests of hapuu and iwi.
If they cannot demonstrate this high threshold based on proper consultation or a significant and broad-based mandate from hapuu and iwi then it would be safer to retain that common interest that all New Zealanders have in water by holding onto New Zealand’s Energy Companies for the ‘Public Good’.

I remember a kaumatua once saying that:
“…the trick to walking on water is knowing where the rocks are…”

Now is a very good time for the Government to rethink its SOE Asset Sales Agenda….

Need more time… really?

Posted by on September 4th, 2012

A few weeks back I revealed how the government’s new public:private partnership school in Auckland is actually costing more than it would’ve cost if it had been built using the traditional approach. Since then I’ve been asking a few more questions. Here are a couple of recent answers:

Question: What is the total annual budget for the Ministry of Education to oversee government use of Public Private Partnerships within the education sector, in each of the next 3 years?

Answer: The Ministry of Education has appropriated a budget of $100,000 per year for the next three years.

Question: What is the full list of Ministry of Education staff positions that oversee government use of Public Private Partnerships within the education sector?

Answer: The team for the Hobsonville Point Schools’ Public Private Partnership (PPP) includes a Project Director, Policy Analyst and Project Co-ordinator.

Question: How many people working for the Ministry of Education to oversee government use of Public Private Partnerships within the education sector have been redeployed from other areas and how many are new recruits?

Answer: I am advised that that there is one new recruit. No one has been redeployed from other areas.

Now either the Ministry has found an ingenious way to hire 3 staff for less than $100,000 per year all up, or something isn’t quite right here. It’s also not clear how they can have put together a team of 3 people by only recruiting one person and not redeploying anyone else. Perhaps these are some of John Key’s ghost jobs?

I asked for a bit more information. The answer to one of my follow-up questions came through today:

Question: Further to his answer to written question 06416 (2012) Does the $100,000 budget for the Hobsonville Private Public Partnership project cover the full salaries of the 3 staff working in the team?

Answer: The question cannot be answered in the timeframe and I will resolve to answer as soon as practicable.

Really? It’s a pretty simple question. I suspect the answer is going to be no, given 3 project management staff are likely to have salary packages that collectively add up to significantly more than $100,000 per year. How on earth can he justify taking more than 5 working days to come up with an answer to this one? Certainly doesn’t inspire confidence that the taxpayer is getting value for their money from this lot!

PPPs save money – yeah right!

Posted by on July 18th, 2012

A few weeks ago I revealed in Parliament that the National government have spent $3.5 million developing the business case for a new school in Hobsonville to be built under a Public-Private Partnership. That school is forecast to save $2 million over the 25 year lifespan of the contract, in other words, a lot less than the Business Case cost to develop in the first place.

At the time Craig Foss, the Associate Minister of Education, argued that the blowout in the cost of the Business Case was justified as it could be used as a template for other PPPs for schools. Interesting to note, therefore, that Hekia Parata confirmed at the Education and Science Select Committee this morning that her Ministry will be employing a $100k a year Relationship Manager to oversee the new project in Hobsonville. Over the life of the PPP, that would equate to another $2.5 million.

There is simply no way this PPP is going to save the taxpayer money. In fact, quite the opposite. This school is proving to be considerably more costly than if we’d just built it using traditional public sector practices. Will every PPP school have one of these managers paid for by the taxpayer?

I’m pretty sure there will be a number of boards and principals around the country who will be shaking their heads at this. The government have argued that PPPs could ‘free up’ boards and principals by reducing the amount of time they spend managing property. I’m sure every public school in the country would argue they could ‘free up’ quite a bit of time if they were given an extra $100,000 a year to manage their facilities…

Blind belief in privatisation fails taxpayers again

Posted by on June 19th, 2012

The Government’s blind belief that privatisation will save the taxpayer money has been proven wrong once again. Today in the House I quizzed Associate Education Minister Craig Foss on figures quietly released by the Ministry of Education that show the much vaunted Public Private Partnership to build the Hobsonville Schools in Auckland will actually cost the taxpayer more than it saves.

According to that information, private developer Learning Infrastructure Partners can charge the Ministry of Education a maximum price of $111.069 million under the PPP contract. Documents released under the OIA indicate the Ministry of Education estimate it would cost $113 million if built using normal public sector processes, a saving of $1.98 million (over 25 years).

However, Budget documents reveal they’ve spent $3.5 million over the last 2 years developing the Business Case for the deal, more than the PPP is destined to save. No wonder the Government tried to keep these details undercover.

What’s more, the $2 million saved over the next 25 years is pocket money compared to the savings John Key boasted PPP’s would bring. It wasn’t long ago that he boasted PPPs would be cheaper because “If they weren’t, no government would consider them”.

For a Government that professes to be focused on cutting back office waste, this is a stunning waste of money from our education budget. Private consultants have been the real winners from this deal, not taxpayers; KPMG and Castalia have pocketed $995,000 and $152,000 respectively for their roles in developing the business case.

Economic development ideas

Posted by on April 29th, 2012

During the recess I have been working to fill out some ideas around economic development.

These personal views build on caucus discussions and our 2011 manifesto, and take on board feedback from party and business circles as I have been listening and engaging over the last few months.

This oped, published in the Herald on Friday, argues for lifting sustainable economic growth through a more ‘can do’, positive partnership with between government and business. It argues for a clear and credible strategy that integrates economy-wide, sector-driven and regional initiaitives. It warns of the dangers of the kind of one-off ‘deals’ with indvidual corporates now so typical of National.

This speech, delivered today to a meeting hosted by the New Lynn Women’s Branch of the NZLP, goes back to first principles. It argues that, post GFC, the “invisible hand” of neoliberal economics has failed, that New Zealand cannot cut or sell our way out of a hole, and that Labour must therefore present a clear alternative economic approach to the current government based on our own enduring values.

Hope you enjoy them.

Then and now: Key on all sorts

Posted by on March 14th, 2012

Over the weekend I posted some of John Key’s earlier statements on asset sales and public sector restructuring, pointing out how much his current views and approach differ from what he promised people before he became Prime Minister.

Tonight TV3 have gone one better and unearthed video footage of him speaking to the PSA Conference back in September 2008. Not only does John Key rule out asset sales, he makes a compelling case against them.

“There’ll be no asset sales in the first term of a National government, and there may never be asset sales in the years ahead… Nor am I hell-bent on selling assets actually. I personally think it’s not the issue that the current economy faces. In the world of making the boat go faster, actually I don’t think selling off state assets is going to make the boat go faster.

Labour has been arguing all along that asset sales will not make us a richer country. We’ve been consistent. John Key and the National government have done a complete u-turn and have now placed asset sales at the centre of their economic strategy.

“The Crown’s dividend streams from the Meridians, the Mighty Rivers of the world is large, so on both motivations we don’t have a debt problem, they’re acting, I think, highly effectively as companies, and they’re making money. There is no motivation to sell assets.

Once again, Key is borrowing the line that Labour has been consistently arguing for over a decade. The SOEs are highly profitable. They make more money than we would save in debt repayment costs if we sold them. Also note Key arguing we don’t have a debt problem (Bill English also made similar comments both before and after the 08 election). Interesting how after 3 years of a National government debt seems to be the biggest issue we face…

“So there’s no agenda to sell assets.

This is perhaps the most damning quote. Although Key was careful before the 2008 election to qualify his no asset sales pledge with “during the first term” he gave New Zealanders the very clear impression that he wouldn’t be selling assets long-term either.

“What we are saying is we’re not going to cut jobs, we’re simply capping at 36,000.

That commitment didn’t even last a term. Now he’s promising even more job losses during National’s second term. Nothing about that in their manifesto for 2011.

“The second point is, no we’re not borrowing for tax cuts.

So if they’re not borrowing for tax cuts, and New Zealand didn’t have a debt problem when they took office, why are they now arguing we have a major debt problem and need to sell assets to fix it?

John Key has built his political career on telling people what they want to hear. Eventually that strategy always catches up with people, and it’s catching up with Key big-time.

Assets and Elbows

Posted by on March 1st, 2012

Can the Government tell an asset from an elbow?

Had it thought through the fatal flaws in its partial privatization drive, or has it been taken by surprise? Hat tip to Clayton Cosgrove for bringing SOE sale issues to the fore. Here’s a potted summary of some emerging commercial and economic development implications:

– When the SOE’s are partially privatised they become companies with a partial public shareholding, regulated by commercial law and not the SOE Act. They are no longer SOEs. They no longer have the Crown’s good corporate citizen obigations. Elbow #1.

– That is why the s9 Treaty Clause debate is so fundamental. Iwi are 100% right to be outraged that the Crown’s obligations under the Treaty of Waitangi could be sold down the river (literally). If the Crown’s response is to indemnify the private investor and bear 100% of the ongoing Treaty obligation, then the taxpayer is effectively subsidising the private investor. Clayton nailed this last week. Elbow #2.

– Minority shareholders rights include the ability to invest in future profitable expansion plans. Dilemma for Crown: pony up its 51% of those future capital requirements or face equity dilution below 51% and loss of residual control. The Govt’s response has been to hedge how much it wil initially sell. Does 45% leave it enough of a buffer? For how long? How long is a piece of string? How does this affect its sale proceeds? In a rare moment of frankness Bill English fessed up that those proceeds are only a “guess”. You bet they are. Elbow #3.

– Magically the Government’s new-found forecasts of SOE dividend loss are not, apparenty. These were shamefully omitted from the Pre-Election Economic and Fiscal Update (PREFU) because they were apparently too hard to calculate. They have since been found in a bottom drawer and Lo! they show there will be precious few future divvies, so little loss. Ooops Why would a private investor buy them then? Elbow #4.

– Except Air NZ of course, which will be as cheap as chips after its sad losses last year. Crazy, stupid fire sale. Elbow #5.

– Speaking of which, future takeover threats must now be managed. Minority shareholders have rights. If a future merger or takeover provides them a windfall, they have the right to sell, most likely to foreign corporates or hedge funds (subject to the 10% individual cap, if any). What would the Crown do in the face of such temptation? Could it face legal action from minorities if it blocked such a future sale? How is the public protected from future leveraged asset stripping? Elbow #6.

– Potential cross-shareholding complications arise, as confirmed by the Chair of the Commerce Commission at the Commerce Committee hearing this morning. (I can’t comment on the Committee’s views but can on the issues diiscussed in public hearing). Lets say a foreign energy company bought the maximum allowable shareholding in each of the 3 SOE generators – risks of information pooling, coordination and anti-competitive behaviour would need to be policed by the Commission. At best there would be a lag while consumers suffered and prices rose. The Crown itself would have to be subject to Commission oversight in this regard. Sound complicated? Elbow #7.

Back to the original dilemma: did John Key know about all these issues when he started this privatisation crusade? If so, why was the Government not more transparent about them all before the election – with the public and even with its potential coalition partner?

Oh yeah, I momentarily forgot. It’s politics.

That being the case, lets fight this crazy plan to the last comma.

Labour and the POA

Posted by on January 18th, 2012

There’s been some chatter around about Labour’s position on the Ports of Auckland dispute.

At our core Labour believes that all Kiwis deserve decent jobs with fair pay, that they should have certainty around their work hours and conditions and their families need to know that they will come home safe and sound at the end of the day.

And while I’m at it, Labour will strongly oppose any suggestion that the Ports of Auckland be privatised. It is a public asset belonging to the people of Auckland, and needs to be kept for the benefit of future generations.

Sure, employers can seek reasonable efficiencies, effective labour utilisation and a fair return on investment. The Ports are an important part of our transport infrastructure and they need to be operating as productively and efficiently as possible.

But good faith bargaining and working together to find common ground is the way to achieve this, not wholesale redundancies and contracting out.

Labour is concerned about the increasing casualisation of the workforce in New Zealand. What this does is create uncertainty and stress for workers and their families – and, as we have seen, can cost lives.

Surely, we’ve learned something from the Pike River Mine tragedy about the folly of recruiting inexperienced workers and contractors into highly dangerous jobs and cutting corners on health and safety?

I’m worried that the pursuit of greater returns at the Ports of Auckland through contracting out will mean we could all be learning another tough lesson in a couple of years.

Stevedoring is difficult and sometimes dangerous work, and that should be recognised.

Three deaths at the Ports of Tauranga in the last 15 months should make us all question the safety of contracted out stevedoring firms who compete with each other for business.

No worker has died at the Ports of Auckland for 18 years.

Contracting out and competitive tendering is often used as a means to lower labour costs, through cuts to wages, reduced staff numbers, casualising work hours and cutting “red tape” such as health and safety.

Deregulation, short cuts and disregard for safety has already taken a terrible toll in some of our workplaces.

Let’s learn the lessons.

Nats promise wholesale ACC privatisation

Posted by on October 13th, 2011

Yesterday Nick Smith announced ACC levies were going to be cut. That’s good news. They never should have been hiked up massively in the first place, and Smith’s own press statement highlights just how cynically the National government have manipulated the situation.

There was never a crisis in ACC. It was hit by the global financial downturn and revaluation of existing claims liabilities, leading to deficits. But the problem was not a structural one, and ACC would have returned to surplus even without the levy hike. ACC was already back to a $2.5 billion surplus in 2009/10 before Smith’s levy hike had taken effect.

But don’t get too excited about the levies falling just yet. If National are re-elected, all Kiwis will end up paying more to get less from ACC. Smith has effectively announced the wholesale privatisation of ACC if National gets half a chance. That means money that should go into providing cover for injury victims will go into the profit lines of Aussie insurance companies.

Smith has confirmed that if a National-led government is re-elected, their ACC privatisation agenda will be expanded from only covering workplace injuries to also include injuries sustained in car accidents, around the home, or even on the sports field.

National’s privatisation plans will effectively bring an end to what has been our world-leading system of universal, no-fault, 24/7 cover for accidental injury. Under National, if someone sustains an injury, they can look forward to spending weeks or even months arguing with different insurance providers about who should cover it.

It’s still not clear what problem National are trying to fix here. Independent studies have clearly shown that ACC is among the cheapest providers of accidental injury cover in the world. New Zealand employers already pay on average half of what Australian employers pay, yet National wants to replicate the Australian model.

The choice for New Zealanders is now crystal clear. If they want to keep our system of universal, no-fault, 24/7 cover for accidental injury, then they will need to vote for a change of government.

Kiwis want to own our future

Posted by on August 23rd, 2011

Tonight TV3 revealed the results of a poll that asked New Zealanders about substantive issues and the results were revealing. New Zealanders overwhelmingly prefer the introduction of a capital gains tax over the sale of state assets.

53 percent opted for a capital gains tax while only 31 percent of respondents wanted to see state assets sold. Even amongst National’s own supporters, one in three prefer the policies that Labour is promoting.

National’s sales pitch for asset sales hasn’t convinced anyone. Kiwis know that once the assets are sold, they’re gone forever. They also know that the shares will probably end up being owned overseas, and we’ll be waving goodbye to more and more of the profits.

John Key’s assertion that it will be “different this time” rings a little hollow when even his own Finance Minister publicly admits there is no way they can stop the shares ending up in foreign ownership.

This election is a clear choice between owning our own future or selling off whatever is left to the highest bidder and becoming tenants in our own country. Labour’s got a lot of work to do over the next three months, but I’ll be proud to be out there campaigning under the banner of a party that’s willing to make the bold calls and do what’s right for the future of our country.

Key puts up ‘NZ For Sale’ sign

Posted by on June 13th, 2011

It’s time for John Key’s government to stop being dictated to by multi-national corporations and start putting the best interests of New Zealanders ahead of corporate profits. News that SkyCity has decided to invest in a new International Convention Centre in Auckland is great news for the economy, locally and nationally. But that doesn’t mean we should rush out and change our laws and regulations to suit the interests of SkyCity’s shareholders.

When Warner Brothers held a gun to National’s head, John Key rolled over and changed our employment laws to suit their whims. Now we’re seeing him roll over and offer to change our gambling laws to suit SkyCity. That’s not good enough. The National government should be guided by what is in the best interests of all New Zealanders, not what’s in the best interests of corporate giants.

It’s ironic that National aren’t willing to back New Zealand companies like KiwiRail, preferring to see contracts for new trains and carriages shipped offshore, but when one of the private sector big corporates clicks their fingers it seems there isn’t anything John Key won’t do to please them.

Nats plan more radical ACC reforms?

Posted by on June 5th, 2011

Nick Smith’s argument in favour of privatising the ACC Work account has already been blown out of the water by the private insurance industry themselves, who openly admit that they can’t offer cover as cheaply as ACC can. This from the Dom Post story:

Vero’s executive general manager of new ventures Nigel Edmiston said his company – which is owned by the Australian SunCorp Group – had done some planning on entering the workplace insurance market but that the Government’s proposal “wasn’t particularly attractive”…

Edmiston said that private insurers would not be able to compete with ACC’s pricing and would prefer it was excised completely from the market.

“[ACC] have a huge market share, they have all the infrastructure and systems, they’ve got no set up costs, they don’t pay tax and they don’t pay dividends and they don’t need capital.”

He said at the outset private insurers would need to provide 80 cents in capital expenses for every dollar gained in premiums on such a product.

In other words, Edmiston is confirming what we’ve said all along. ACC is incredibly efficient and cheap, and it ensures that all of the money collected actually goes into helping those with injuries, rather than into the profit lines of the Aussie insurance industry.

The only way the private insurance industry could compete would be if ACC was excluded, in other words, the cheapest provider was arbitarily shut out of the market. How exactly would that be competition?

This all begs the question, however, of just how enduring Nick Smith’s commitment to his current proposal is. If National win the next election, don’t be surprised to see a more radical proposal for ACC reform suddenly emerge as National claims it has won a ‘mandate’ to do whatever it likes in dismantling our world-leading ACC scheme.

Smith to announce ACC privatisation

Posted by on May 29th, 2011

On Wednesday this week, Nick Smith is going to announce what amounts to the effective privatisation of a large part of ACC. You won’t hear the word privatisation uttered from his lips, he’ll use all sorts of other words like ‘competition’ and ‘market discipline’, but the effect will be the same. Accident cover for those injured at work will now be provided by the private, for-profit insurance industry. That’s privatisation.

What concerns me about this most is that the National government haven’t even attempted to produce a robust case to show that it’s a good idea. This is a purely ideological decision, based on National’s blinkered belief that the market will always deliver the most efficient outcome. But consider these facts:

  • An independent review by Pricewaterhouse (Australia) found that our ACC scheme has the lowest administration costs of any comparable scheme anywhere in the world.
  • Information provided to the Transport and Industrial Relations Select Committee showed that the cost per-worker of work-related accident cover in New Zealand is, on average, about half what it costs in Australia (is this what National meant by catching the Aussies?).
  • Under the current system, if someone is injured at work and has to stay home, the first week of income compensation has to be provided by the employer. Following the Christchurch earthquake, the government waived that requirement and ACC covered the lot. They couldn’t have done that if work-related injury cover had been provided by private insurers.
  • If a private insurer offering ACC cover collapses, it’s the taxpayer who will have to pick up the tab for any outstanding claims liabilities. So the private insurance companies have an effective fail-safe guarantee. We’ve already seen one ‘accredited employer’ collapse resulting in ACC having to pick up the bill, that will only get worse under Nick Smith’s privatisation plan.
  • When HIH, a private Australian accident insurance company collapsed in the early 2000s, the Aussie govt had to pick up a $500 million tab. HIH had been offering accident cover under National’s previous attempt to privatise ACC, which was reversed by the incoming Labour government following the 1999 general election.

There are only two ways that private insurance companies will be able to turn a profit from offering work-related accident cover in New Zealand. Either they will have to reduce entitlements, or they will have to increase the cost of that cover. In other words, we’ll all end up paying more to get less.

Since National became the government, Nick Smith has gone to some lengths to manufacture a crisis in ACC in order to justify his privatisation plans. As I outline a last week, ACC is in pretty good shape and Smith’s scaremongering is pretty transparent. His moves to massively hike up levies in 2009 were designed to erode public support. If ever we needed proof of how cynical a move that was, we got it a few weeks ago when he started talking about levy cuts just six months out from a general election.

ACC isn’t perfect, but the comprehensive, no-fault, 24/7, universal cover it currently offers is the right approach for us to take. We should be focused on how we can improve what we have now, not how we can create more profit-making opportunities for National’s mates in the private insurance industry.

Quake will cost ACC $200 million

Posted by on April 24th, 2011

The Sunday Star Times has reported today that ACC expects the cost of compensation and treatment for those injured in the Christchurch Earthquake to be about $200 million. So far ACC has received 7666 claims, making the February quake the biggest single mass injury event in ACC’s 37-year history.

ACC’s head of injury prevention and insurance products, Peter Wood, said that although the long-term costs to the corporation would be high, they were manageable.

“Obviously additional claims from the Christchurch earthquake will increase costs and ACC funding requirements,” he said.

“However, the overall size of ACC allows for these increased costs to be absorbed with the current levies or funding structure without significant increases being required.”

The costs had to be seen in the context of ACC’s $16 billion in reserves and claims costs each year of more than $3b.

“It is therefore unlikely that the long-term cost of these claims will have an impact on ACC levy rates in the future.”

This highlights once again how crazy the National Party are to try and privatise parts of ACC. As a single, nationalised scheme, ACC is able to absorb the impact of a big event like the Christchurch earthquake without too many problems.

I blogged a couple of weeks ago about the impending collapse of AMI Insurance and how National’s ACC privatisation plans could lead to a similar outcome. I’m not at all surprised that Nick Smith is delaying announcing their preferred options. Carving off a big chunk of ACC and handing it to the private insurance industry right at the time you’re having to bail out one of the big players isn’t a good look in anyone’s book.

Then there is the issue of Nick Smith’s (sensible) move to ensure that victims of the earthquake received cover for the first week of injury if they weren’t able to work. Normally that cost would either have to be met by the employer for a work-related injury, or the individual themselves. Had the government already privatised the ACC work account, they wouldn’t have been able to do this as they would have effectively been instructing a private insurance company to provide cover over and above what the victim was entitled to.

ACC is a good scheme. Sure there are some areas that we’d all like to see improved, but National’s plan to farm it out to the private insurance industry is just nuts. They should go back to the drawing board and leave ACC alone.

Would National bail out private ACC companies too?

Posted by on April 8th, 2011

It looks increasingly likely that the Kiwi taxpayer is going to have to bail out AMI Insurance in some way or another following the Christchurch earthquake. I think it’s important that those who have insurance with AMI are given certainty, so I support the government’s decision.

But it highlights the risks involved in another National government policy – the privatisation of ACC. Under National’s privatised model of accident cover (they try to dress it up by calling it ‘competition’ but it’s privatisation by any other name) a private accident insurance company, faced with an unforeseen influx of claims due to a disaster such as an earthquake, could find themselves in the same boat as AMI does now.

I asked Nick Smith in Parliament a few weeks ago whether or not the government would guarantee Kiwis that if their private ACC insurance provider collapsed they would still be covered. Naturally he evaded the issue. He had no choice really. If he’d said no, he’d basically be saying that privatisation would mean thousands of New Zealanders could find themselves without cover. If he’s said yes, he’d basically be writing a blank cheque to the insurance industry.

I think there are a lot of Kiwis who are getting pretty fed up with the government having to constantly bail out private companies who rack up massive profits when the going is good and then turn to the taxpayer for assistance when things get a bit tough. Why would we want to replicate the problem in ACC?

Selling power companies will put prices up

Posted by on April 2nd, 2011

Went to the local supermarket yesterday morning – took even longer than normal probably because the clientele were double the normal average age, moving slowly and keen to chat.

Quite an animated discussion ( not argument because not one took a contrary point of view ) developed with a small group who were very concerned at the effect of putting power companies into the hands of foreign bankers.

Very strong views were expressed that the government held shares on behalf of all Kiwis, that the dams had been built by the old Electricity Department using taxpayers money, that we had paid for them several times over as power prices went up, and they weren’t John Key’s to sell.

Unanimous that foreign owners would try and milk every last cent out of them and that would mean higher prices and fewer people employed to do maintenance.

Wellington rail upgrade

Posted by on March 10th, 2011

Today the government and the Greater Wellington Regional Council have announced another major upgrade of the commuter rail network, completing a project started under the last Labour government to deliver Wellingtonians the quality, reliable public transport options that they deserve.

The latest package includes $88 million from government to complete the upgrade of the signalling and tracks, and a commitment by the Greater Wellington Regional Council to takeover and refurbish the 30 year old Ganz Mavag trains at a cost of $80 million. GW will then own all the trains, maintain all of the stations, and pay a fee for access to the tracks, offset by a central government subsidy.

For the past couple of years, residents of the Hutt Valley, Johnsonville, Porirua, and the Kapiti Coast have put up with frustrating delays, breakdowns and cancellations as the upgrading work has been going on. Some of it was avoidable, but some of it just reflects the fact that under privatisation our rail services were badly neglected and there is a huge backlog of upgrading and maintenance work to get through, a task made all the more difficult by the need to keep the trains running while it happens.

I’m pleased that the rail upgrade is going to be completed, but I’ll be very concerned if GW increases fares in order to pay for their share. Wellington rail commuters have already been hit with increased fares and the improved service they have been promised hasn’t yet eventuated. I don’t think commuters should be asked to stomach another fare increase until the problems are fixed and the service is more reliable.

Nats predetermined ACC privatisation agenda

Posted by on February 18th, 2011

NewstalkZB revealed this morning that Nick Smith had asked his officials to begin work on privatising the ACC Work Account before his own ACC stocktake report was even finished. It’s pretty clear that the Nats cooked up a deal to privatise ACC with the private insurance industry before the last election and everything they’ve been doing since then has been leading towards that inevitable outcome.

The documents released clearly show that their blind rush to privatisation could shift even more costs onto other parts of the health system while benefits and entitlements are reduced. In other words, ordinary working Kiwis will pay more to get less. National has already been forced to provide an additional $10 million per year to the health sector to cover the cost of ACC refusing increased numbers of people treatment.

This has nothing to do with getting better outcomes for those who have accidents and everything to do with National’s obsession with creating profit-making opportunities for their mates. Who is going to end up paying? You and me. And if the private insurance companies collapse, the taxpayer will probably end up footing the bill for that too (when HIH insurance collapsed in Australia, the govt picked up a $500 million liability. HIH were one of the companies offering cover under the previous National government’s privatised ACC scheme, which was thankfully stopped by the incoming Labour government in 1999).

New Zealand’s ACC scheme is a world leader. Rather than trying to run it down in order to justify privatisation, the National Government should be looking for ways to improve what we already have. Nobody has been able to find a single alternative system anywhere in the world that offers better outcomes at a cheaper cost.

In God’s own country

Posted by on January 31st, 2011

Last Sunday, the Sunday Star Times surprised and delighted by leading, no less, with a story about a survey showing people are increasingly concerned at the growing gap between rich and poor in this country, God’s Own which once prided itself on being egalitarian.

Yesterday it followed up with a major feature providing more detail, including a graph from the book The Spirit Level which shows NZ was 18th out of OECD 23 nations in terms of the gap between the richest and poorest 20%.

At Labour’s excellent Summer School over the weekend, Otago University academic David Craig reproduced GINI data which suggested in fact we are now the most unequal society. (He’s sending it and I will post up the link.)

Yesterday’s SST article quotes Brit Tory leader David Cameron as saying of The Spirit Level that it showed that “among the richest countries, it’s the more unequal ones that do worse according to almost every quality of life indicator…”

“We all know, in our hearts, that as long as there is deep poverty living systematically side by side with great riches, we all remain the poorer for it.”

Cameron is doing more than mouthing the words. Last year he appointed former Observer editor and long-time campaigner on equality and a ‘stakeholder’ society, Will Hutton, to head a pay equity review. (I am currently reading Hutton’s latest book Them and Us but more on that at another time.)

So you might think there is the chance for a reasoned debate here in NZ, if not Government pick-up?  Accompanying the SST feature yesterday was commentary from both CTU economist Bill Rosenberg (agreeing) and Roger Kerr, director of the Business Roundtable.

I can’t find an e-version of Kerr’s comments (although the BRT website carries this but he starts by saying: “Other things being equal, I prefer less inequality in incomes and wealth rather than more…”

Kerr then goes on the pan the book and story and dismisses the idea of better equity by saying:  “Equalising incomes, was, of course the socialist goal…”  No one is talking about equalizing incomes, that’s stupid and out of line even with a Tory Prime Minister. What we are talking about is a more equitable society, where the gap between rich and poor is reduced because otherwise everyone suffers.

It is simply obscene, for example, for the Westpac  chief executive in this country to be commanding a salary of $5m+ a year as we struggle out/through a recession for which banks have to take some responsibility. Banker JP Morgan had a rule that his executives should not earn more than 20 times that of his lowest paid employee. Westpac call centre people earn around $45,000 a year. That would take their CEO to around $1m.

That’s the sort of ceiling in place for state sector chief executives. Even then you have to ask why some SOE CEOs are earning twice + what the Prime Minster earns.

John Key is unlikely to follow the line taken by David Cameron. He is more likely to support Roger Kerr’s defence of the growing pay inequity gap and argues opposition is the politics of envy; that we should simply stop redistributing wealth (as if no redistribution has happened) and look at growing the economic pie.

No argument with that if the growth is sustainable but there’s no evidence provided that this is enhanced by paying someone 50 or 100 times what their workers earn.

Moreover, The Spirit Level graph of inequality appears to suggest that more equitable societies are more stable. Spain at tenth on the list of most equitable is the first truly troubled economy to be listed. The USA is second most unequal, just ahead of Portugal.

Neither our economic stability, nor our growing equality gap now perhaps the worst in the western world will be helped by tax cuts heavily favouring top earners. And another dose of state asset sales pushing up power prices won’t close the gaps either.

The Financial Elite have Gambled away our Future

Posted by on January 29th, 2011

Yesterday’s Press Editorial welcomed the PM’s announcement on the beginning of National’s privitisation programme for our country’s assets with the words “John Key was able to demonstrate…the value of his background in the financial industry”.  Excuse me?  Did the Press miss the Global Financial Crisis, where “the over-paid heroes of Wall Street and the City worshipped the gods of globalisation, financialisation and speculation”?   The quote is a teaser for the best of the five books I read over the summer break: “The Gods that Failed: How the Financial Elite Have Gambled Away our Futures” by Larry Elliott and Dan Atkinson.  The first edition of the book was subtitled: “How Blind Faith in Markets Has Cost us our Future”.  The second edition (published in 2009) has an extra chapter, which as one reviewer said could have been titled: We Told You So.  The authors of this book are economics editors, Elliott with the Guardian and Atkinson, the Mail on Sunday.

The metaphor that drives the narrative is inspired by the twelve gods of ancient Greece that lived on Mount Olympus.  Elliott & Atkinson have styled the super-financiers and the international organisations, (central banks, IMF, World Bank, WTO), the “New Olympians” and the twelve gods of the modern Mount Olympus: globalisation, communication, liberalisation, privatisation, competition, financialisation, speculation, recklessness, greed, arrogance, oligarchy & excess. 

“Greek mythology provides plenty of raw material for a book about the failings of modern financial markets.  There is the story of King Midas, who found the ability to turn all he touched into gold a curse. The tendency of markets to veer between the wild optimism of booms and the manic depression busts is akin to the life led by poor Persephone, condemned to live every six months of every year in Hades. But Pandora – a gift from the gods whose beauty belied her baleful influence on the lives of mortals – makes the best metaphor.”

As they said August 9 2007 was the moment the lid came off the modern version of Pandora’s box.  And the rest is history, which is why I believe this book must be read, because unless we learn the lessons of history, we condemn ourselves to repeating it.

This book is well-researched and easy to read.  It contains a chapter called ‘Last Tango on Wall Street” which has a very simple explanation of how the New Olympians (our Prime Minister’s background the Press values so highly) found ways to make money out of nothing – creating securitised financial products like “collateralised debt obligations” out of the subprime market and then hiding the risks behind AAA rated institutions.  The New Olympians made personal fortunes with bonuses they never had to repay when it all turned to custard.  And they were happy to see the taxpayers pick up the tab for their trillion dollar insanity. 

I conclude with this quote: ‘Speculators may do no harm as bubbles on a steady stream of enterprise.  But the position is serious when enterprise becomes the bubble on a whirlpool of speculation’.  That was John Maynard Keynes in 1936.  When will we ever learn?