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Smoke, mirrors and jam jars

Smoke, mirrors and jam jars

National's announcement that it will set up an infrastructure fund is a smokescreen for its asset sales programme, says CTU economist Bill Rosenberg.

"It does not alter the fact that New Zealanders will lose valuable assets which will work to their benefit in 100 percent public ownership much more effectively than as half-owned businesses aiming to make maximum profit. We will lose the ability for government to tell the power companies to cut prices for domestic consumers, to make environmentally friendly energy generation a priority, and to build enough capacity to make sure power shortages are a rarity rather than regular. We will not be able to tell Solid Energy to put its workers' safety and controlling carbon emissions ahead of profits," said Bill Rosenberg.

If the government wants to set up an infrastructure fund, it could do so at any time. Rather than making buildings and roads a priority, the CTU advocates a fund to invest in raising the skills of New Zealanders - a Human Capital fund which would provide increased certainty to our public tertiary education institutions. That's a decision that has nothing to do with unpopular asset sales.

But the government needs to be reminded that it dismantled the previous government's Fast Forward Fund for research and development saying it was "Government borrowing money to put into the fund, to go and invest in the Government bonds that it had borrowed in the first place. It was a nonsensical money-go-round of $700 million, set up simply for branding purposes in election year." (Bill English, Hansard 26 March 2009, below).

"It needs to hold up a mirror to itself. The only difference is that the money this time is coming from selling public assets rather than borrowing. Both increase the government's net liabilities."

"This is election-year jam-jar accounting. By putting money in a "fund" the government wants to pretend it has somehow changed its need to borrow, and that it will make people forget the folly of selling public assets."

But money is money wherever it comes from - from asset sales, borrowing, tax receipts or the dividends from the assets it hasn't yet sold.

The fact is that that the government's own projections show it will still need to be borrowing money well beyond Treasury's forecasts out to 2016.

Setting up a jam-jar fund doesn't change that one bit. Governments will still have to make decisions on what their spending priorities are, fund or no fund.

Money it puts in this fund can't be used to repay debt but will be "loaned" back to the government until it is spent. In Bill English's words, it will be invested in government bonds in a nonsensical money-go-round set up simply for branding purposes in election year.

It doesn't change the fact that privatising public assets is bad policy which most New Zealanders oppose.

ENDS

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