Ian McLean Spokesperson for the Green Party

It makes business sense to sell assets if the profits from that sale are used to generate new income. But why not simply retain the original profitable enterprise?

Between 1987 and 1999, partial or complete sales of more than 25 businesses netted more than $19 billion for central Government. Those sales, by both Labour and National, included enterprises in the industrial, banking, forestry, works, transportation (including airports), communications industries, and more.

That was certainly a case of offloading the family jewels.

Perhaps the money was used wisely. But, today we have a Government attempting to balance the books by reducing social and environmental services, and carrying enormous debt. It seems that those asset sales did not produce a fiscally-robust Government.

The sales did result in some of the profits from our economy flowing overseas, as now with Mighty River Power. Meridian is next on the block according to the recent budget. Both MRP and Meridian were held back during the 1990s, perhaps because they were especially profitable.

What is more of note, is some of the sold businesses provided essential services. When they failed (as with rail), Government felt obliged to step back in and buy them back. That was a good deal for those who bought rail for $328 million in 1993, and after 15 years sold a run-down operation back to the taxpayer for $665 million.

A capital gains tax might have sweetened that purchase just a little.

A successful government-owned business generates income that reduces the per capita cost to taxpayers of running Government. For example, we in the Bay of Plenty benefit from the subsidy on our rates provided by regional council-ownership of the port. That port is a sound investment.

Asset sales generate cash, and paying down debt is profitable in that it reduces the burden on the cost side of the balance sheet. While that makes sense, reducing debt only generates savings, not genuine income. The benefits are quickly lost if debt is allowed to spiral upwards again.

*Wood, G.A., & Rudd, C., 2004. The Politics and Government of New Zealand, Univ. of Otago Press.

Ian McLean is a spokesperson for the Green Party of Aotearoa New Zealand. He can be called on 07 579 4670 or emailed at: ian.mclean@greens.org.nz