Had some time-warp glitch allowed Benjamin Franklin to witness our Parliament’s debate over the Mixed Ownership Model Bill this week, he might have kept what he discovered about the nature of electricity to himself. How could something so simple be turned into something so complicated?
As the filibuster wore on, it became more apparent than ever that the Government has done the equivalent of sticking its finger in a light socket to see what would happen. Its own officials are Eeyorish about the net benefits of selling minority stakes in our four power companies. And as a vote-loosener, this is a turbo-blast of CRC. Or, as a hopelessly over-stimulated Winston Peters put it during the bill’s introductory debate, the Government has bought “a one-way visa to political oblivion!”. So why on earth perservere with it? Partly, as Labour’s Grant Robertson says, it’s for a sugar-rush of cash. The Government is determined to get borrowing down, and the potential $5-7 billion from these floats will save it from having to borrow to fund key social infrastructure.
Trouble is, as far as can be calculated, the forsaken dividends from the companies pretty much cancel out the savings in borrowing costs. There’s not much in it in terms of net benefit. Worse, there is every reason to suppose the companies’ new part-owners will want to optimise their investment returns through higher power charges. There’s good evidence that the state power companies currently charge less than the privately owned ones. Join the dots. The Government’s only hope of retrospective justification is that earlier legislation has given the companies increased freedom to be much more intrepid overseas, where their expertise in areas like geothermal power is in demand. That’s where their profit growth is most likely to come from in the long term, and where – it is hoped – the fattening-up of the balance sheet could more than make up for the loss of dividend income over time. But it’s a Pantene deal at best. It’s very possible that these companies could end up being massively profi table global players. But this is such a long-term hope that the Government isn’t even talking about it.
So what we seem to have here is what Sir Michael Cullen would call an ideological burp after a binge on jam tomorrow. National still has more than a tincture of Rogernomics and Ruthenasia in its soul, believing the state shouldn’t own stuff – not even public utilities. Trouble is, these mixed-ownership, public-private partnership enthusiasms look marvellous on paper, but in practice their path seems to be littered with banana skins. A glorious absurdity was highlighted this week by Labour’s Chris Hipkins, who discovered that a PPP deal to build Auckland’s Hobsonville schools was more expensive than if the Government just had them built the old-fashioned stodgy state way. Why? Because it spent $3.5 million on consultants and faffing about with the “business case” for the project. These add-ons more than ate up the projected savings from going with PPP. The power company floats are similarly larded with consultants’ fees, and with merchant bankers, advertising and PR companies clipping the ticket all the way through. Imagine how thrilled voters will be to see slick, ingratiating TV and print campaigns exhorting them to buy a stake in the power companies they already own.
The abiding mystery is why Prime Minister John Key, who has often shown a canny ability to pull the plug on more-trouble-than-they’reworth projects, like the recent class-size proposal, has stuck so passionately to this policy. Maybe he has a genuinely romantic view of the “mum and dad investor” idyll. But with power prices rising, the cash available for a parental share fl utter could be minimal. Perhaps the most remarkable thing about Key in all this – besides his exceptional popularity – is that he is the only PM, certainly that I can recall, whose tenure and commitment is openly and routinely discussed without it amounting to leadership wobbles. On the contrary, the sense that he would rather walk away than hang in there looking desperate in the Gordon Brown mould has often seemed a strength. The underpinning here is that Key, unlike most other MPs, is loaded and doesn’t have to work. Nor is he ideologically fuelled the way, say, Helen Clark and David Lange were. Nor, even, can you imagine him lurking about in a “pick me!” elder statesman role post-Parliament, like Jim Bolger or Cullen.
Bluntly, most politicians are at least a teeny bit needy, never wanting to depart the political firmament. Key simply isn’t like that. The flipside of this blithe political temperament is that, as they say in the commentary box, it could indicate a lack of commitment. To quote Winston again, it does rather make him “Mr Spray and Walk Away”. Key didn’t put these suspicions to rest when the Listener gave him the chance in our last issue, saying, “I haven’t actually thought that through… I’m going to stay for as long as I think I can make a difference”. He’ll certainly make a difference with these power company floats, including to the fortunes of his party. But knowing that he won’t feel compelled to stick around to endure the consequences of the difference he’s made probably makes him all the more gung-ho about this very risky policy.
So much so that he bizarrely chucked another one onto the pile this week, apropos of nothing in particular: league tables for schools. Why, having wisely extricated himself from the frying pan a couple of weeks ago over class sizes, would he jump into a new one over league tables? The argument goes that the data to rank children is going to be sufficiently accessible that de facto calculations will be bandied about anyway, so the Government may as well superintend the exercise to ensure the figures are at least correct. Julia Gillard brought in league tables in Australia, so perhaps she’s been giving him tips – although given that she’s been on death-watch since the day she became PM, she might not be the smartest mentor.
Overall, it’s hard to overlook the possibility that Key is losing his famous trader’s eye for a sweet deal. Pretty much everything the Government has in train has “bad news” stamped all over it. Schools, local bodies, public service cuts, troubling peculiarities in the Trans-Pacific Partnership, a surplus more elusive than Lord Lucan and a slew of other untidy National impulses are making the Opposition’s job ridiculously easy. Labour hasn’t even had time to self-flagellate about its leadership succession lately. A funny aspect of the MOM filibuster – something else I can’t recall having seen before – was a note of genuine entreaty in some of the Opposition speeches. Labour MPs, in the manner of kindly old uncles, implored National to avoid making the same mistake their 1980s Government did over state assets. The Greens gave speeches in the manner of “this is something only your best friend would tell you” girlie-chats –puh-lease, don’t make this terrible mistake, you’ll live to regret it.
It was all getting a bit chick-lit there for a while. But trust Winston to restore the tone. He vowed to ring every last unseated National, Maori, United and Act MP next election night to say, “Told ya!” Hard not to conclude his phone will be engaged for a long, long time.