Hon Bill English
Minister of Finance

14 December 2010
Embargoed until 1pm Media Statement

Investment Statement lifts scrutiny on assets

The Government's first Investment Statement will drive improvements in the Crown's investment decisions and how it manages its $223 billion of assets and $128 billion of liabilities, Finance Minister Bill English says.

“Effective management of the Crown's assets and liabilities and making the best investment decisions is important if we are to realise our economic goals and deliver better public services,” Mr English says.

“The first annual Investment Statement clearly shows the Government's assets, liabilities and future investment intentions and brings this important aspect of financial management into line with other regular fiscal reporting.

“It forecasts Crown assets to grow by $33 billion over the next five years to $256 billion – about five times the size of the sharemarket. That growth comes from a combination of investment in new infrastructure and social assets, alongside forecast accumulation of financial investments.

“At a time when we are borrowing for all new capital investment, we need to get the most out of our existing asset base and ensure new investment goes into areas where it can provide the largest improvements in public services.

“We believe this level of transparent information allows the public to demand a much greater level of accountability from the Government and will lead to sharpened incentives and significantly better public sector decision-making

“One of the big challenges is to get our capital moving to where we think it will have a positive impact - for example, newer better schools, modern well-organised hospitals, upgrades of our national electricity grid and the roll-out of ultra-fast broadband. To do this we need to look at ways of reprioritising poorly performing capital.”

Some of the areas identified in the Investment Statement, where capital is not being used efficiently, include:

• Social housing: About 27,000 state houses are the wrong size, location or quality to meet the needs of high-priority Housing New Zealand clients. There are also 5,000 tenants currently paying market rent who could afford to rent in the private sector.

• Defence: Opportunities exist for base consolidation and divestment of housing stock, which would reap significant gains.

• Education: The Ministry of Education holds 244 surplus schools, teacher houses, vacant sites or other assets worth $96 million.

“Disposing of these surplus assets faster would provide additional capital for new schools, more appropriate social housing and modern defence equipment,” Mr English says. “We are asking other agencies to investigate a similar approach.

“The Government is committed to new capital investment where it can be shown to improve public services. But over the coming years, most state agencies will be expected to first show their existing capital base is being fully and effectively used before being granted additional capital.

“The Government is focused on getting better performance across our entire asset base. With regard to major asset sales, our position is clear – there will be no sales this term and if that position changes we will say so and campaign on it at next year's election,” Mr English says.

Summary of Crown assets and liabilities

Assets: $ billion
Social
e.g. highways, schools, housing, hospitals, conservation land 111
Commercial
e.g. SOE assets, rail network, Air New Zealand 52
Financial
e.g. Crown Financial Institutions, Reserve Bank, DMO 60
Total Assets 223
Liabilities (e.g. debt, ACC and GSF liabilities) (128)
Net Worth 95

Investment Statement:
http://www.treasury.govt.nz/budget/2010/is

ENDS

© Scoop Media