Prime Minister John Key says estimates his loyalty scheme to sweeten state assets sales for investors could cost the taxpayer hundred of millions of dollars are "farcical'' and has suggested a $60 million to $80 million bill instead.

Mr Key this confirmed that the loyalty bonus scheme for the Mighty River Power sale this year would be used as the model for part-sales of the other power companies to be partially privatised under his Government's "mixed-ownership model".

Mr Key indicated the scheme is likely to be in the form of extra shares for investors who hold their original stakes for three years. The scheme would be available only to retail or "mum and dad'' investors.

The scheme is likely to be similar to the one the Queensland Government used when it sold Queensland Rail in 2010. It offered Queenslanders one extra share for every 15 they held.


Treasury advice to Cabinet last year suggested the cost to the taxpayer of an incentive scheme to encourage New Zealand participation could be as much as 10 per cent or $500 million for a $5 billion asset sales programme - a figure which works out to about $112 for every man woman and child in New Zealand.

A recent select committee report contained an estimate of $360 million, a figure Mr Key yesterday said was a "possible number''.

This morning however, he was indicating the bill for the as yet to finalised scheme would be much lower than that.

"These numbers that the Labour Party are coming up with and the Greens are farcical.

"If you think about the entire float that could be in the order of $5 billion to $7 billion. Let's argue that it's $5 billion for a moment if you then turned around and said about 20 per cent of that could be for mum and dad, it could be more it could be less - but just for the purposes of maths that's a billion. If you apply the Australian Queensland model that's one in fifteen shares - that's 6 per cent. Six per cent of a billion is $60 million for the entire programme.''

Mr Key acknowledged there may be some "small cost'' to the Crown for the loyalty bonus "but equally the Government believes there are many benefits from encouraging New Zealanders to have long term share ownership''.

"In the context of all of that, $60 to $80 million in the overall scheme of $5 billion to $7 billion I think it's an investment that's worth it.''

Labour leader David Shearer said it was time for Mr Key to come up with definite numbers.


"We absolutely have no idea how much this loyalty scheme is going to cost New Zealanders.

"He was happy to go out and announce the loyalty scheme at the National Party conference but he's not prepared to come out with the numbers now.''