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Tuesday, July 24, 2012

A Storm in a T-blog?

A Labour stalwart is feeling quite confused and put-upon after querying (in an internal email newsletter) the breakfast speech made on 11 July by Labour Finance spokesperson, David Parker.  Parker’s speech revealed an apparent contradiction between the Labour stand against asset sales and the Labour overseas investment policy that allows for the sale of electricity generators. An explanation seemed warranted.
The fact that our Labour stalwart was alerted to the Parker speech by a newspaper column and blog post by a favourite bogey of many Labour MPs, Chris Trotter, did not help his/her case (or standing in the party).
The question posed by the T-man and referred in the internal email newsletter was this:

“Speaking to a group of corporate head-hunters on 11 July, Mr Parker spelled out the details of Labour’s policy on foreign investment. Concerned to prevent 'infrastructure assets with monopoly characteristics' from being sold to offshore buyers, Labour, in the run-up to last year’s election, drew up a 'closed list' – to keep a 'bright line' between 'what is to be sold and what is not.' Among the infrastructure that was not to be sold was any: electricity line, water storage or irrigation networks; no seaports or airports; and no public hospitals, schools, railway lines or roads.
"Not included in Labour’s 'closed list' were telecommunications networks and – amazingly – 'electricity generators'.
"According to Labour’s policy: 'While the electricity market is on the cusp of becoming uncompetitive and exhibits monopoly-like characteristics, generation assets are diverse in nature, location and ownership.'
"What this means is that although Labour went into the last general election on a policy of 'No Asset Sales'; and in spite of the fact that its campaign advertising showed a vast banner, displaying that very message, being draped over a hydro-electricity generating dam; the party was unwilling to include electricity generators on the list of state-owned infrastructure that 'ought to be run in the New Zealand interest' – and never be sold to foreigners.
"Am I alone in thinking that Labour’s foreign investment policy fatally compromises its current campaign against asset sales? If the generation of electricity is an activity which properly belongs to the market, and if New Zealand’s electricity generation assets are 'diverse in nature, location and ownership' and, therefore, able to be purchased by foreign interests, then I’m at a loss to know why the Labour Party is opposed to their partial privatisation.”

For Mr T. this is evidence that the Labour leadership (and caucus) is moving to the right and that a Shearer-led Labour Party could emulate the stalking-horse Rogernomics strategies of the Lange-led Labour Party of the 1980s.
Our Labour stalwart received a reply from David Parker’s office that managed to evade the central point of confusion and merely stated:

“The comments you refer to were not about this issue, but refer to the rest our policy to tighten up on controls on overseas investment in privately owned rural land and monopoly infrastructure.”

The key point that everybody seems to be missing is that Contact Energy, one of the four major electricity generators, is already totally in private ownership. In case anybody missed it, this happened under National in 1999. Here is the potted history from the Contact Energy website (written in 2007 I assume):

“The New Zealand electricity industry has undergone significant reform in the last 20 years. First, the Electricity Corporation of New Zealand (ECNZ) was established in 1987 as a state owned enterprise to operate as a commercial, profit-making organisation. ECNZ was the sole provider of electricity in New Zealand, including generation, transmission and retail. Electricity was distributed through local electricity supply authorities.
"Then, in 1994, Transpower was separated from ECNZ and created as a state owned enterprise. In 1996, ECNZ was split into two more state owned enterprises - ECNZ and Contact Energy - and a wholesale electricity market was established. Another major reform was the privatisation of Contact Energy in 1999.
"The last significant reform was the separation of the lines and energy businesses of the former Electricity Supply Companies and the split of ECNZ into three competing state owned enterprises: Meridian Energy Limited, Genesis Power Limited and Mighty River Power Limited. These reforms were designed to introduce a more dynamic and competitive environment into the generation, distribution and retailing of electricity.”

So where does that leave us with the Parker speech and the somewhat long-bowalley conclusions drawn by Chris Trotter?
The Labour asset-sales policy is “no sales” of existing state-owned assets. The foreign investment policy is no foreign ownership of monopoly infrastructure.
The electricity generator Contact is already privately owned, so it would be subject to Labour’s foreign investment rules. These are designed to put limits on foreign ownership, not private ownership. Contact is not a monopoly, therefore overseas investment is possible under Labour's policy. There is really no contradiction here.
The question that could be asked is; should energy generation be deemed too important to the economy and the environment to allow any form of private ownership of it, whether that be locally-based or foreign (is there a difference in a globalised world?)?
The re-nationalisation of all privatised energy generation infrastructure and the removal of the clumsy and artificial market mechanisms currently in place in the sector is a move that would have wide support amongst New Zealanders.
This is not (yet) Labour policy.
It is up to Labour members and affiliates to push for such a policy if they want to see it enacted by a Labour-led government.
The current democratic reforms of the Labour Party organisational structure and policy-setting mechanisms will make adoption and fulfilment of policies like this more likely.

1 comment:

Chris Trotter said...

I'm depressed (but not surprised)to learn that NZLP members asking questions (still)incur the wrath of Labour MPs.

Let me say first, Len, that your explanation of the situation is correct. Labour does argue in favour of the energy generators remaining in the hands of the state, but sees no point in including them among the strategic infrastructural industries that must never be sold to foreigners.

My fundamental concern, however, the same as yours. Energy is a basic human need - and should not be in private hands.

That Labour does not take this as its starting-point, highlighting instead the beneficial dividend stream to the public treasury, is what I find morally obnoxious.

That the free market view of electricity generation is Labour's view is confirmed in David Parker's speech.

And it is precisely because Labour looks upon this issue through Neoliberal eyes, and is unwilling to take the democratic socialist stance mandated in the Party's constitution, then I do feel justified in warning NZLP members, supporters and all NZers to be on their guard.

We've been down this road before.