Editorial: Asset sales need sound justification

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The National Party has taken its courage in both hands to go to next year's election with a policy to sell shares in state-owned companies. Deputy leader Bill English says the party is considering selling up to 50 per cent of selected companies to help to finance improvements to public infrastructure and to provide investments for the savings funds the present Government has established. This pragmatism, he thinks, will overcome people's dislike of asset sales in principle.

He is probably wrong about that. Voters will sense that capital infrastructure could be financed from a fair share of current tax surpluses and loans over the life of the asset. They will also regard the idea that public assets have to be sold to provide a domestic destination for savings funds as a poor reflection on our private enterprise.

The only valid reason for selling public assets is to improve the performance of the economy but it is not easy to explain. If National is serious about asset sales it needs to raise the level of popular understanding. It might help for the party to do a public stocktake on each of the 40-odd companies in the crown stable.

It could start with Air New Zealand, which was privatised not so long ago and had to be rescued by the present Government from the consequences of a rotten investment in Australia. The experience has made everyone wiser no matter where they stand on the principle of asset sales.

Air NZ had to be rescued not because it was vital to our tourism - other airlines could service this country perfectly well - but because when it came to crunch we wanted a flag carrier.

That being so, the airline should not be on National's sales list, though some of the state's 80 per cent could be sold without losing control. No company that will not be allowed to fail should be privatised. The economy gains no benefit from an asset sale if the asset is protected from the consequences of its bad decisions. The only beneficiaries of a partial sale of such an asset are the private shareholders of the state-assured company.

For the same reason TVNZ may be off the list. The state has no need to own a television network but it has always done so and chances are a privatised TVNZ would not be allowed to fold no matter how much audience and revenue it leaked. Better, therefore, that at least one channel stays in state ownership.

The Government owns three of the four electricity generating companies. None of the three, Meridian, Genesis and Mighty River, seem sacrosanct. They are not monopolies like the national grid operator, Transpower, and Ontrack which nominally owns the railway. Nor these days is New Zealand Post, which competes with couriers and electronic communications. But Post and its subsidiary Kiwibank satisfy a need among older citizens for paper transactions and counter services that might not survive the companies' sale.

National could, and should, sell the state's three airports, its educational publications company, its law firm the Public Trust, its pest-control manufacturer, Landcare's farms, its coalmines, timber company, and maybe its science laboratories. But none should be sold simply to pay for Government projects or provide a convenient investment for savings funds. They should be sold because they will perform to their full value in competition under owners that have to make hard-headed decisions that pay off, or else they fail.

Unless they will be allowed to fail, forget it. Assets that are going to survive on public sentiment whatever they do are best left in public ownership. Their partial sale would present a gilt-edged security to the buyers and no true economic gain.

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