STOP THIEF!

The Not So Secret Agenda To Steal NZ People’s Assets

- Murray Horton

Now that National has been in power for nearly two years and thoughts are turning to the 2011 election, the direction of its political and economic agenda is becoming all too obvious. Take just two of the most recent examples – kicking workers in the guts, and the abortive attempt to rip the guts out of National Parks. Bashing workers and unions (the two are no longer synonymous, sadly) is an item of faith for Tories, as much a reflex action as bashing beneficiaries (which it is also doing) and National signalled its intention from the outset when it included the right to fire newly hired workers within 90 days without explanation or redress as one of its first legislative moves upon taking power. In 2010 that has been fleshed out considerably, to give all employers (not just small ones) the same right, and a whole lot of anti-worker, anti-union moves have been added (such as union officials needing the employer’s permission to enter the work site). Slowly but surely National is eroding Labour’s Employment Relations Act (which was pretty feeble to start with) and sliding back towards the notorious provisions of the former Employment Contracts Act. Thankfully the unions have signalled that they will fight back, and hopefully they will not just roll over and play dead as they did when that law was rammed through under the last National government in 1991.

But, while bashing the working class (and the shrunken sector of it that is organised in unions) is one thing, it is quite another matter to stir up the middle class. And that is exactly what National did with its ill considered bombshell proposal to open up the most pristine areas of the conservation estate, those in National Parks, for mining. The uproar that this generated was guaranteed and included the biggest protest march in Auckland in decades. It even managed to piss off influential chunks of its own natural constituency, leading to the likes of Auckland’s Mayor and at least one Auckland National MP publicly coming out against it. So the Tories were on a hiding to nothing over this one and Key the smiling pragmatist prevailed over the ideologues. Even established transnational mining companies distanced themselves from the Government, saying that it should have been better handled. So, when it came, the humiliating backdown was total and reflected a reality check for some of the more gung ho Ministers, such as Gerry Brownlee. Mind you some National supporters were determined to look on the bright side. One wrote to the Press (24/7/10): “The Government used the ploy of asking for twice what it wanted and then, in response to the outcry, settling for all that it originally wanted – namely, to mine DOC-owned land. By stating that it wanted to mine protected National Park land, it predictably incurred the outrage of the looney-Left hippies and middle class nimbys in Coromandel and Great Barrier Island. By then announcing that this land would not be touched they made nearly everybody happy, and the miners can now happily extract wealth from DOC land without anyone complaining. Not a backdown, but a stroke of political genius”. That really is trying to extract something positive, anything, out of what proved to be a debacle for the Government.

Both of these policies fall into National’s broad policy category of advancing the interests of its Big Business backers, both domestic and transnational. The other major one that is bubbling away on several fronts, and has been since before the 2008 election, is privatisation. There is nothing new about this and there has been a certain inevitability about the way things are panning out. CAFCA has taken a close interest in this subject for years, precisely because of what is now happening. At the beginning of 2008 we hosted the Privatisation By Stealth Conference in Christchurch (some, but not all, of the papers are online at http://canterbury.cyberplace.co.nz/community/CAFCA/publications/index.html#Privatisation) and I have previously written about privatisation in Watchdogs 118 (August 2008, “Sharks In The Water: Privatisation Rears Its Ugly Head” http://www.converge.org.nz/watchdog/18/01.htm) and 119 (February 2009, “Heeeere’s Johnny!” http://www.converge.org.nz/watchdog/19/02.htm).That conference and those articles chronicled National’s ill concealed drive towards privatisation. National campaigned in 2008 on the promise that there would be no public asset sales in its first term (meaning that all bets are off in any subsequent term). But leading Tory veterans such as Bill English, Lockwood Smith and Maurice Williamson were caught blurting out the truth and were made to publicly “clarify” their electorally toxic utterances (watching them reminded me of Dr Strangelove in Stanley Kubrick’s classic movie of that title. As an old Third Reich scientist now working for the Americans he was unable to physically restrain his arm from performing the Nazi salute or from addressing the President as “mein Fuhrer”). This is known as swallowing dead rats and quite a lot of them had to be consumed in the course of that particular election campaign. It worked though, as National was prepared to say anything to get back into power after nine years out of office.

PPPs In Infrastructure

Two years down the track and still riding high in the polls (not hard when faced with such a lacklustre and directionless Labour Opposition), the mask is slipping and rat is off the menu. Privatisation, on the other hand, is very much the chef’s suggestion. As far back as August 2009 Bill English called for a “more sophisticated debate” about the use of public private partnerships (PPPs) – this followed on from the May 09 creation of a National Infrastructure Advisory Board “consisting of members from the private sector” to advise Treasury and the Minister for Infrastructure (English).Treasury created its own National Infrastructure Unit tasked to produce a national infrastructure plan by the end of 2009. The Board included the chair of the Business Roundtable and big players from the construction and engineering industries. English said that NZ could learn from the extensive Australian experience of PPPs and Green Co-Leader Russel Norman agreed – we should learn to steer well clear of them. “Private companies involved in PPPs in Australia have on numerous occasions underbid, overpromised and under-delivered. Private firms time and time again in Australia have aimed to minimise their financial risks – at the public’s expense. Many times when project budgets have been miscalculated the Aussie taxpayer has come to the rescue. But when a windfall profit has been made the private company has unsurprisingly not distributed any largesse to the Australian taxpayer. The first aim of a private company is to make as much profit as possible from engaging in a PPP – not to engage in large scale risky projects for the good of society. Any debate Mr English wants to have about PPPs is likely to miss this salient fact given the one-sided make-up of the Board tasked with advising Treasury on infrastructure development. As with a number of advisory boards set up to assist the current Government the membership consists of those with a vested interest in one particular outcome” (Press release, 12/8/09, “PPP debate stacked in favour of private sector”).

Physical infrastructure is not the only sector targeted for lucrative privatisation. ACC has been in National’s sights since it was last in Government. In July 2008 John Key was forced to prematurely disclose his policy to “partly privatise” workplace accident compensation by opening ACC up to competition from transnational insurance companies. He was forced into this disclosure by a report from the Australian branch of Merrill Lynch (for whom Key had been a top currency trader; it was a very lucrative pre-politics career for Key, who became a multi-millionaire as a result). “Merrill Lynch’s report said Australian insurers were poised for a $200 million windfall if National won power and privatised the ACC” (Press, 3/7/08, “National to let in ACC competitors”, Dan Eaton). He denied that this would be privatisation but simply opening up a monopoly to competition. In 1999, during the dying stages of the last National government, accident compensation was opened up to competition from the insurance transnationals (and as a self-employed worker, I well remember the glossy bumf bearing blandishments from those who wanted my business. I stayed with ACC and was pleased when the new Labour government promptly renationalised it). When National was elected in 2008 it promised to investigate opening the work account of ACC to “competition” (i.e. privatisation).

By October 2009 this had become a clear commitment and in June 2010 ACC announced that it was looking at moving some new claims to private providers. “The corporation is already trialling private provision for people who have been on ACC for a long time…In April ACC said it was contracting out to third parties – insurance companies – administration of some long-term claims”, Labour’s ACC spokesman David Parker said: “It’s privatisation by stealth (there’s that phrase again). They are privatising functions that are currently publicly provided”. And Hazel Armstrong of the ACC Futures Coalition (www.accfutures.org.nz; the Homepage is headed: “ACC Works for all Kiwis. Don’t let the Government rip you off”) said: “It will result in new accident victims having their claims scrutinised to the tiniest detail, payments being delayed or refused altogether on spurious grounds and injured workers being forced back to work before they are properly rehabilitated” (Press, 25/6/10, “Govt extends private sector’s role in claims”). ACC provides a comprehensive world class service, so why would National want to buggerise around with it? The only answer is that it wants its fat cat mates to get their snouts into the trough. And note that National is only talking about workplace accident compensation. What about the vast array of non-workplace accidents currently covered by ACC? Who will provide cover for those? The insurance transnationals won’t be interested in picking up the unprofitable crumbs.

The previous National government contracted out the running of Auckland Central Remand Prison to Sydney-based GEO, until Labour restored it to public management in 2005. Early in 2010 John Key revealed that there will be two private prisons and in April the Government announced plans for a new prison at Wiri, south Auckland - it will be the first PPP prison. The intention is for it to be both privately built and run (although the Chief Executive of the Department of Corrections will be accountable for everything that happens in it and any other private prisons). The contract will likely run for 25-35 years. GEO was one of two Australian firms that immediately announced they would bid for the job – the other one was Melbourne-based G4S, which operates NZ’s home detention monitoring and runs two prisons in Australia. To refresh your memory about the dismal track record of private prison transnationals, read John Minto’s “Profiting From Imprisonment: Maori Party Smoothes The Way For Private Prisons” in Watchdog 121, August 2009, http://www.converge.org.nz/watchdog/21/06.htm. Per head of population NZ’s number of people in prison is second only to the US. Don’t expect that to improve anytime soon, with the Government adding a private profit incentive to the mix. The prison transnationals will have a vested interest in keeping their “product” in plentiful supply.

Schools are another institution with a captive market and the privatisers are keen to turn them into profit sources as well. In the 08 election campaign Key committed National to supporting PPPs in education sector infrastructure. In December 09 the Minister of Education, Anne Tolley, announced that the Government was actively exploring PPPs, with private companies to build and maintain new schools, instead of the State. They would run the schools under contract for several decades before handing them back to the State. They would be responsible for the school’s property only; the State will continue to own the land and the school’s day to day operations will continue to be the responsibility of a board of trustees, as it is now. Frances Nelson, President of the NZ Educational Institute (the primary teachers’ union) said: “We are starting to get away from the very nature that has made our schools so robust – community-based schools. What is in it for the businesses? They are not going to throw their money away. They will want to make a profit. I have a lot of concerns about going down this path” (Press, 5/12/09, “Private financing of new State schools mooted”, Tracy Watkins and Nathan Beaumont). There is definitely money to be made from schools: “The school portfolio is worth an estimated $10 billion” (ibid.).

By July 2010 things had firmed up to the extent that Tolley announced that tenders for the first PPP schools could be called as early as 2011.The private companies have told the Government that they’re only interested in being involved if there are a significant number of schools up for grabs – NZ only builds about six new schools per year (by contrast, in Australia up to 40 schools have been built at a time under a PPP). Tolley said that there could also be PPPs for rebuilding or adding to existing schools. “In Australia, a study of Victorian PPP schools suggested they had saved only about 2.6% over conventional purchase. Labour’s education spokesman Trevor Mallard said the British experience with new PPP schools was that they were no cheaper, better or quicker to build than those set up with public money” (Press,22/7/10, “Govt plugs PPPs to aid schools”, John Hartevelt). What’s the attraction? “Private companies may be keen to own school buildings because they have virtually guaranteed tenants who always pay the rent” (ibid.). And who cleans up if there is a mess? “If a private company decided to quit a PPP deal, the Government could step in and buy the buildings” (ibid.). So the good old taxpayer, as usual, will foot the bill. It’s called privatising the profits and socialising the losses.

And who stands to benefit from such a policy in education? The Press answered that in an article headed “Corporate plan for classrooms” (2/10/07, Colin Espiner): “A multinational company specialising in public private partnerships (PPPs) could become a school landlord under National’s education plans…The use of PPPs would provide a boost for the private sector. Among those understood to be interested is Australian bank Macquarie, which has invested in PPPs around the world. Macquarie is one of the largest non-governmental owners of assets in the world, with about $A150 billion worth of infrastructure under management. The bank’s New Zealand Executive Director is former National Deputy Prime Minister, Jim McLay….Macquarie already owns rest homes, commercial property and early childhood education centres in New Zealand.

“In New South Wales, nine primary and secondary schools have opened using PPPs in a joint venture with another multinational bank, ABN Amro. The New Zealand Council for Infrastructural Development (NZCID) welcomed National’s plans... Macquarie and ABN Amro are members of the infrastructure council. Its patron is Jim McLay…” (for a very detailed analysis of who is behind the drive to privatisation, putting Macquarie, McLay and the NZCID into their local and global contexts, see Bill Rosenberg’s “International Pressures To Privatise” in Watchdog 117, April 2008, which is online at http://www.converge.org.nz/watchdog/17/03.htm). The information in that 2007 Press article is nearly three years old but still relevant. However, it must be noted that, as of 2009, Jim McLay resigned from all business positions to become NZ’s Permanent Representative at the United Nations in New York (presumably compensation for being one of the very few National Party leaders – Bill English is another – not to have become Prime Minister).
In March 2010 Craigs Investment Partners launched the New Zealand Social Infrastructure Fund to raise up to $125 million for PPPs in “social assets”, such as building prisons, schools, hospitals and other social infrastructure. The fund hopes to get an 11% annual profit. “The money would be invested in the Public Infrastructure Partners programme, managed by Morrison and Co, managers of listed infrastructure investor Infratil, alongside $100m invested by the New Zealand Superannuation Fund” (Press, 16/3/10, “Opportunity to invest in social assets”, Nick Churchouse). Infratil, of course, was a finalist in the 2009 Roger Award for the Worst Transnational Corporation Operating in Aotearoa/New Zealand (the Judges’ Report is online at http://canterbury.cyberplace.co.nz/community/CAFCA/publications/Roger/Roger2009.pdf. It’s worth also reading CAFCA’s Press release “Don’t be fooled into thinking that Infratil is a ‘New Zealand’ company”, 30/3/10, http://canterbury.cyberplace.co.nz/community/CAFCA/publications/Statements/Infratil.html).

Things started to hot up in June 2010 when John Palmer, Chairman of the State-owned Enterprise Solid Energy said that the SOE should be partially privatised to raise up to $10 billion of capital needs and because, in his opinion, it is a lower political risk than privatising other SOEs. This accompanied a report from the Capital Markets Development Taskforce to Commerce Minister Simon Power which recommended partial privatisation of State assets, such as the power generators Meridian, Mighty River Power and Genesis. Rob Cameron, the Taskforce Chairman, did not suggest a percentage of each SOE to be privatised, saying it would depend on the size of the company. “For some 10% of existing equity would be enough, for others you need more. Air NZ has about 20% of its stock listed and it works” (NZ Herald, 17/6/10). Bill English was quoted in 2007 as saying that if National won the 2008 election it would privatise 30% of Solid Energy, as well as partially privatise other SOEs, so this was not a new idea. But it’s highly politically sensitive issue and Palmer’s proposal was quickly disavowed by the Government. Energy Minister Gerry Brownlee said: “Mr Palmer is not an elected official, he’s an appointed chairman and if he wants to go making those sorts of announcements on behalf of the Government he should stand and get himself elected to Parliament. The Government has made it very clear we are not selling any assets until we go to New Zealand and say that’s our plan” (Press, 18/6/10, “’We are not selling assets’”, Ben Heather).

However, the double whammy from Palmer (who is also Chairman of State-owned Air New Zealand) and the Taskforce achieved the propaganda goal of raising the cry for privatising SOEs. Entirely unsurprisingly, brokers (the very people who personally benefit from such privatisation) supported it and the transnational corporate media swung in behind it. The Press devoted an editorial to it: “It is fast becoming clear that at some point before next year’s general election, possibly in the 2011 Budget, National will unveil plans for a partial privatisation of some State assets. For the National Party this is a sensitive issue, as it promised before the 2008 election that it would not embark upon a privatisation programme But this guarantee only applied to its first term in office and there is now every indication that National will seek a mandate from the electorate next year for the partial sale of assets if it is returned to power. Such a policy plank, which should include details of how much of which State-owned companies would be sold, would have an element of political risk, but this would be outweighed by the economic benefits that partial sales would generate…The State-owned Enterprise model was established in the mid-1980s to split off business units from the core public sector and run them on a commercial basis. A quarter of a century later it would be timely to reconsider whether the Crown really needs to own 100% of many of its assets. This should be done not for blind ideological reasons but for the economic gains which would ensue from the move” (19/6/10, “Time to consider whether the State needs to own all its own assets”).

Kiwibank is the State asset that has been most in the crosshairs of the Tory snipers. It was at National’s 2008 pre-election Conference that Bill English was covertly recorded saying that he will sell it “eventually, not now”. English was forced, with Key standing next to him, to apologise (claiming he had used ill chosen words) and withdraw his remark, saying that National had no policy on selling Kiwibank. This was one of several public swallowing of dead rats that English and his senior colleagues had to perform in 2008 in order to assure voters before the election. Journalists confronted him with the fact that he had simply been caught out telling the truth. In 2010 English has felt sufficiently relaxed again among the converted to lapse back into telling the truth. At a post-Budget lunch in Christchurch for business leaders he said that the Government is conducting a stock-take of its $200 billion worth of assets (just as Gerry Brownlee wanted to conduct a stock-take of mineral assets in the National Parks) and would produce an “investment statement” in 2011. English said that he favoured a share float of State assets aimed at “Mum and Dad investors” as opposed to big institutional buyers. This was the model used for the partial privatisation of Auckland Airport in the late 90s and for the sale of some power companies earlier that decade (naturally the institutional buyers then came along and made the “Mums and Dads” an offer they couldn’t refuse). English suggested Kiwibank as a prime candidate for such a float, saying it was the best way to raise the capital needed for the bank’s expansion. John Key described the Government’s plans as being to “kick the tyres”.

Clayton Cosgrove, Labour’s SOE spokesman, stated the obvious: “The reality is that if part of Kiwibank goes up for sale, it won’t be Kiwi Mum and Dad investors who buy shares. It will be large foreign institutions who want to grab a slice of this popular and growing young bank that is actually owned by Kiwis” (Press, 25/5/10, “Government to ‘kick tyres’ as English puts asset sales back on agenda”, Vernon Small). Phil Goff, the Leader of the Opposition, said: “Haven’t the National Party learned anything from history? We sold off Kiwirail – it was asset stripped and run into the ground. Air New Zealand was sold off; it was run into bankruptcy by its private sector board” (NZ Herald, 26/5/10, “Telecom woes ‘lesson in selling off assets’”, Audrey Young). But Key was delighted to point out that Labour can’t take the moral high ground when it comes to privatisation: “… because that (Goff) is the man who sold Telecom, the State Insurance Office, the Post Office Bank, Air New Zealand, the Tourist Hotel Corporation, New Zealand Steel, Petrocorp, the Government Printing Office, the DFC, the National Film Unit, the Rural Banking and Financing Corporation, the Shipping Corporation, New Zealand Liquid Fuel Investment, Maui Gas, SynFuels, forest cutting rights, Health Computing Services and Communicate New Zealand. If there is ever a man who knows…about privatisation, it is that one” (ibid.).

English’s musings on Kiwibank and SOEs brought out the transnational corporate media editorialists to applaud his suggestion. The Herald (26/5/10, “Kiwibank float makes sense for everyone”) was in raptures about what it called a “shareholding democracy, a concept that has flourished in Britain and Australia but which enjoyed a regrettably brief currency here… Everything, therefore, points to a float. The Government should not hesitate to confirm as much in the most unambiguous of terms. And to state that, finally, the country will have the chance to fully embrace the benefits of a shareholding democracy”. But Key is a pragmatic political wind sniffer. In June 2010 he told the Press that he stands by the statements that he made before the 08 election, namely that there would be no sales of any public assets, including Kiwibank, in National’s first term and he praised the bank for “making an important contribution to the banking landscape in New Zealand…they’ve attracted clients from right across New Zealand, and we’ve been supportive of what they’re doing” (Press 4/6/10, “Govt won’t sell bank, says Key”, Sam Sachdeva). This recognises the fact that not only has the only publicly-owned bank been hugely popular with the New Zealand public, who have joined it in their hundreds of thousands; it is also extremely successful. That very success makes it a prime target for the political ideologues who monotonously chant the mantra “private good, public bad” and, equally, an attractive buy for one of the four Australian-owned banks that dominate the sector in New Zealand.

The country owes a debt of thanks to Jim Anderton, who fought hard to get Kiwibank established. Labour now claims it as its own but at the outset both Helen Clark and Michael Cullen sneered at the idea and damned it with faint praise. Jim Anderton is running for Christchurch Mayor at the 2010 local body elections; if he is successful perhaps he could see about re-establishing a locally-owned bank. There used to be one – TrustBank – which was also extremely popular and successful but it was flogged off to Westpac in the 90s (to refresh your memory on that, and CAFCA’s role in the campaign against the sale, there are several articles in Watchdog 82, August 1996, http://historicalwatchdog.blogspot.com/2009/12/foreign-control-watchdog-august-1996.html).

I concluded my 2008 Watchdog cover story on privatisation (118, August 2008, “Sharks In The Water: Privatisation Rears Its Ugly Head” http://www.converge.org.nz/watchdog/18/01.htm) with a sub-section headed “Local Government: That’s Where the Action Is” and that assertion is even more true two years later. Rubbish, water, waste, parks, roads, housing, even libraries and civic venues – these are all local government services that affect our daily lives and any or all could be flogged off (plenty of them already have been by councils throughout the country). With Act Leader Rodney Hide as Minister of Local Government, it’s full steam ahead and damn the torpedoes. Hide’s first target is water – he plans to make changes to the 2002 Local Government Act to allow “flexibility in delivery of water services” i.e. making it easier for private companies to take over water and wastewater services from councils. “The Government wants to extend the 15 year limit on water-service contracts to 35 years and allow companies to build, own and operate new water and wastewater plants during the contract period. The law will also be changed to stop councils controlling the management of privately run water services, although they will retain final say on pricing and policy” (NZ Herald, 29/10/09, “Hide opens door to privatised water deals. Minister says plan gives flexibility, but Greens say it is theft of assets”, Bernard Orsman). Green MP Sue Kedgley said: “This theft of the public’s assets is alarming and dangerous”. The indefatigable Penny Bright of Auckland’s Water Pressure Group added: “In no way is the commercialisation or privatisation of water services to be supported” (ibid.). Aucklanders already have a privatised water system on their doorstep in Papakura, where transnational United Water has provided water and wastewater services to about 15,000 customers since 1997 under a 30 year contract (United Water was a finalist in the 2001 Roger Award and won a special Egg On Face Award, along with the Papakura District Council. The Judges’ Report is in Watchdog 99, April 2002, http://www.converge.org.nz/watchdog/99/03.htm). “United Water is an Australian company and is being sued by the South Australian government for allegedly charging its overhead costs in Papakura and elsewhere to South Australian water users” (NZ Herald, ibid.).

Hide is also keen for councils to stick to “core services” but so far he has only announced that the Local Government Act will be amended to require councils to have “particular regard” to core services, which will be defined as infrastructure, rubbish, libraries, recreation, culture and heritage services, hazard and disaster management, and regulatory and statutory responsibilities. “Mr Hide said he would have liked to have gone further. But he was working with a centrist, pragmatic National Party” (NZ Herald, ibid.). The Act tail has wagged the National dog in plenty of other areas since they went into coalition, so I have no doubt that Hide will get most of what he wants in the local government area.

He and his mates are the driving force behind the Auckland Supercity plan which comes into effect as of the October 2010 local body elections (see John Minto’s article “Auckland Supercity: Another Big Dose Of Neo-Liberalism” in Watchdog 122, December 2009, http://www.converge.org.nz/watchdog/22/05.htm). That will essentially turn over Auckland’s assets and infrastructure to Big Business. An even more anti-democratic coup has already been enacted in Canterbury with the Government’s April 2010 sacking of Environment Canterbury’s elected Councillors, their replacement by appointed Commissioners and the cancellation of the ECan election until at least 2013 (see other articles elsewhere in this issue for details). Democracy and corporate rule are fundamentally incompatible; Hide and co want local government run like a business, by a board of directors, in the interests of Big Business.

There is a very clear pattern here – PPPs in infrastructure, including prisons and schools; ACC contracting out; calls to partially privatise SOEs and to partly float Kiwibank; changing the law to allow transnationals to get their hands on local body water services; restricting councils to “core services” so that the private sector can get its hooks into the rest; and restructuring local government, including firing elected Councillors, to operate it in the interests of Big Business. Moves in all these sectors are part of a concerted campaign to soften up the public for a privatisation onslaught from 2011 onwards, particularly if National is re-elected. At present, these are the opening skirmishes in an undeclared war whose aim is to steal our assets (all wars are basically large scale armed robberies) and it will have to be fought on many battlefields. Nor is it good enough to simply vote Labour and expect things to radically change. In the final year of the last Labour government its leaders were singing the praises of PPPs, specifically in relation to roading and housing. It was the Clark government that gave its blessing to the country’s first toll road. This one will have to be fought out at the grassroots, so that politicians of all stripes learn that it is too politically costly for them to try to steal public assets from their own people. The completely successful mass campaign which stopped National’s mining plan dead in its tracks has shown how to do it.

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Foreign Control Watchdog, P O Box 2258, Christchurch, New Zealand/Aotearoa. August 2010.

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