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AGENDA
Presented by GUYON ESPINER
GUYON National's Leader John Key says the government's decision to buy back the railways will end up costing the public more than 1.5 billion dollars. Despite that and the major investment which is still needed for both the track and the rolling stock Mr Key says the National government would not reverse the purchase. Even so the Kiwi Rail buyback must leave a future government with less money for its own initiatives and it raises questions about how a future government would run state assets like Kiwi Rail and our state owned enterprises. Well National's Deputy Leader Bill English is in our Wellington studio and joins us now. Well Bill English you have to keep Kiwi Rail I guess because of the commitment not to sell state assets in your first term, but aside from just the purchase price you’ve got perhaps 800 million dollars of investment in the track and the rolling stock over the next five years, will National commit to that investment?
BILL ENGLISH – Deputy Leader, National
Well we're not going to commit to a plan that Michael Cullen puts forward because it's become quite clear in the last few days that Labour haven't put any time at all into working out how they're going to get an effective return on this very large investment, so if we become the government we will review whatever's in place before we make any decisions. It is a large commitment and we're going to have to see that alongside other infrastructure commitments around roading around ports, because they all interrelate. At the moment you’ve got policy that’s a series of ad hoc political manoeuvres like the purchase of rail that was purely political manoeuvre.
GUYON Okay I'd like to talk a bit about those other infrastructure things later but just specifically I mean I know you haven't probably seen the exact detail and the costings etc but those sorts of numbers is that do you think – are they numbers that are too big for National to commit to, that 800 million over five years?
BILL Well we certainly don’t have enough information but I would make this point. Now the money has been spent we need to make sure that we run it in a way that gets an effective return for the taxpayer. There's no point in having a Kiwi rail buyback and then just running the thing into the ground.
GUYON One of the things that Toll was talking about running into the ground according to the government were closing a number of quite major train lines, I mean would you be prepared to see any of those lines closed, we're talking about Picton to Christchurch freight and passenger, even some of the Overlander service, are you prepared to see any of those lines closed so that it is a money making venture?
BILL Well the government can't have it both ways, I mean if it is the case that none of the lines were viable why did they give the Aussies 900 million dollars for the business. Look in the long run we're going to hold on to the thing, make some investment, we have to look at that investment alongside other modes of transport, so whether lines stay open or don’t stay open it's likely they’ll stay open but we have to weigh all those things up, cos the amounts of money are just so large, the demands for funding for roading is very significant and as I think you pointed out in your introduction with the economy turning down the government's books will be pretty tight, so we'll have to make some decisions that are about priorities. The current government has carried on for eight years like it can do everything, they’ve had the party now we're into the hangover and we're going to have to think more seriously about how we use the money.
GUYON You said something interesting there, you said in the long run, so do you see yourself as a long term owner of the railways should you take office?
BILL Well it's a matter of the pragmatics of the government having paid900 to a billion dollars for this business. If you went out in the market now you might be lucky to get a couple of hundred million given the credit crunch, the economic downturn, and if the business was as bad as Michael Cullen says no one's going to pay you 900 million dollars for it, so we need to make it now an effective investment and that doesn’t mean running it like a government department where you pour the money in and hope something good happens, it means some pretty straightforward commercial criteria, a transparent subsidy so the trucking operators, the coastal operators, the ports can all see just how much subsidy's going in.
GUYON What do you think of the Kiwi Rail Board, I mean there is an argument that in some ways many of them have been appointed for political reasons, you’ve got Ross Wilson there, you’ve got the former Labour candidate Linda Constable there and I spose even in a sort of tricky political way Jim Bolger's been appointed to that board, what do you make of that board?
BILL Well look what we need in charge of rail which is now going to be a 1.7 billion dollar investment for the taxpayer is people who know what they're doing.
GUYON Do these people know what they're doing do you think?
BILL Well I think that’s yet to be tested.
GUYON Would you be happy to keep the board?
BILL Well we'll have a pretty good look at it, we'll have to have a hard look at it to make sure the expertise is there, but there's a pattern across SOE boards from this government of appointing cronies, we hear stories of people who go along and do their crossword puzzle till they fall asleep, well that’s no good with a very difficult investment like Kiwi Rail where someone has to do a very good job just to get it to break even.
GUYON Okay what will you do as a National Party government if you get in to change that, how would you make the boards of SOEs and Crown entities less political?
BILL Well I think in the first case just some direction from the top, that the SOEs are not an arm of the government's political objectives, are not there to achieve political things, are there to provide services for the public and to return something to the taxpayer who's got significant investment in them.
GUYON And that’s critical isn't it, because I'm wondering whether you see a change in the roll of SOEs, I mean you're now committing yourself to be a relatively long term holder of these companies, are they there simply to make a dividend, or do they have a social purpose as well and who do you combine and deliver both those things?
BILL Well look I think lack of clarity has created some problems, you’ve just gotta look at the biggest chunk of SOEs which are the electricity generators and retailers and the government has messed around with the policy because it's sent them off down different tracks over renewables, over thermal bands and the result of it is we do not have as much generation supply as we should have. They need a period where they're clearly in the interests of the taxpayer and the electricity consumer, out there to make sure that there's enough power supply for a growing economy, so a bit of clarity about the objectives would actually help rather than having them pursue three or four different things at the same time.
GUYON Okay you're gonna have to hang on to Kiwi Rail at least in the short term and many of these other SOEs as well, what constraints does that put on you because you’ve got the thick end of a billion dollars, what other national initiatives fall off the end of the cliff if you like having had to commit to that sort of expenditure, there must be things that you wanted to do that you're not going to be able to do.
BILL Well it does make it a bit – the rail investment makes it a bit harder for instance to do all the roading projects that would benefit a growing economy, there's no doubt about that, but the SOEs aren’t our biggest issue, I mean there is a ten year requirement from central government, 30 to 40 billion dollars of infrastructure investment, and we need to look at the whole range of tools for financing that from public private partnerships through to perhaps some debt. The government's got some loose cash still sitting on its balance sheet that can be used, so we've gotta keep the rail thing in perspective. We don’t want to see it – we don’t see it as a blockage to the kind of infrastructure investment that we need for an economy which in three to five years is going to be growing again and with some good stewardship growing quite rapidly.
GUYON Okay what about tax cuts, surely these sorts of initiatives and spending commitments that you're sort of tied into are going to constrain your ability, I mean are you still looking at 50 dollars a week for the average workers which is what your leader John Key said some weeks back?
BILL Yeah we're still looking at significant tax cuts, again we don’t...
GUYON In that range of $50 for the person on the average wage of 45 odd thousand?
BILL Yeah well John Key's given a pretty clear signal about that, it's not our intention to allow the thrashing arounds of a dying government to dictate what happens in this country for the next three to give years, there will be some costs to the rather desperate policy choices that Labour are making at the moment but we're not gonna let that get in the way.
GUYON Okay let's look at one of your policy options and that is ACC, you're gonna open it up to competition again, why?
BILL Well we'll be announcing a policy on ACC in the next couple of weeks, but there's already some competition and choice in ACC because when Labour renationalised it ...
GUYON Can you give us some of the points about what you would change how you would make it more competitive, I mean that surely is your policy?
BILL Well let's look at the objective here, we want safer workplaces and we want that at the least cost, now there's a bit problem with ACC coming up, in the next five years the ACC liability is going to grow from 16 billion to 24 billion...
GUYON Okay just people want to know in the markets and in the public and in the works places whether private insurance companies will again be able to compete with the ACC?
BILL Well private insurance companies are in there now in the Accredited Employer Scheme providing coverage, I mean there's nothing new it's actually wrong to say there's no competition and choice in there, we see it as one tool to achieve safer workplaces at least cost, but also now to deal with what's been revealed as a huge increase in the liability. I mean Labour have been fiddling the books to keep the levies down to make it harder for anyone to compete and they’ve pushed all the costs out to the next four or five years. Now we'll have to be responsible in how we deal with that, but the competition and choice will go ahead if it meets the benchmarks which are safer workplaces at the lower cost.
GUYON Okay, where is the pressure coming from, because if you listen to employers they don’t want this, I quote to you the Business New Zealand law expert Paul McLay, he's argued against it, he says the upheaval outweighs the big three for business which are political certainty, financial certainty and economic stability. I mean if the bosses don’t want it where's the pressure to introduce this competition actually coming from?
BILL Well this isn't all about what the bosses want, this is about what's good policy that is going to help lift our economic performance over the next three to five years and ACC will fit alongside a range of other policy focused on that objective. We don’t just do what the bosses want or just do what the unions want, that’s been Labour's style for the last nine years, but the task over the next three to give years is to get through this downturn and lift our economic performance, and it's now turning into serious business when people realise what's actually going on in the economy out there.
GUYON When would you do this, is this a first term objective or is this something that you'll need to measure over some time?
BILL Well I think we've signalled pretty clearly that we want to be fairly considered about it, so we will have – if we become the government we'll have a good hard look at what benefits we can get by what kind of competition and choice coming into ACC, so it's not as clear cut as some of the other policy where it's pretty clear where we want to go and what we want to do, this one we've got to pick our way through it because the lesson from last time when we were in government is that it is complex it's pretty involved and you have to know exactly what you're doing because you have to preserve the coverage and you have to make sure that you are getting safer workplaces.
GUYON Okay just quickly before I leave it, a related area of industrial relations policy, I understand that policy's is going to be released quite soon, are you still looking at that 90 day period where it would be easier to hire and fire a worker, is that still on your list of things to look at in that policy?
BILL Yes we will be announcing a small business policy including industrial relations in the next few weeks and we've had a pretty good look at the 90 day probation period, we're looking at a voluntary probation period that would apply to smaller businesses, in fact that’s what will be in the policy, we're one of the few countries in the world that doesn’t have it and even in New Zealand some professions like teachers for instance have a two year probation period, but a voluntary 90 day probation period will be in our policy.
GUYON So that will definitely be in the policy?
BILL Yeah and applying to small businesses, because that’s where the balance of risk both for the employer and the employee can be improved. People who are on the margins of the labour market need the opportunity to show they can do it, and for small businesses who are under real pressure, the decision to take someone on is a big decision and a big risk for the business.
GUYON To further this discussion we'll go to our panel. You heard that Bill English confirming that National would have a probation period for new workers, is there something else that you'd like to ask him about that policy?
ANDREW HOLDEN – Christchurch Press
Not on that one – Bill I wanted to query you on the energy companies, the power companies, you talk about giving them a period to invest in the generation of power, that suggests to me that you're looking at a window where the returns that the government requires from them, the financial return you'll actually give them a holiday so they can spend that money instead on building better generation, is that the case?
BILL Well we haven't worked through a policy into that kind of detail but you saw a week or so ago, a couple of weeks ago the chief executives of one these SOEs get the boot because they had a different view than the government about thermal generation. Now that tells us that the governance in these SOEs, the people who are running them are confused about what the government's trying to achieve, that they're becoming too politicised, I'm simply making the point it's time to get Labour's sticky fingers out of these organisations and let them get on with what the country needs from them which is more generating capacity so people can get a reasonable price and we don’t face winter problems every year.
BERNARD HICKEY – Interest.co.nz
Mr English do you think then that you'll have to change the state owned enterprises legislation and or their statements of corporate intent to make them do that, or will it just be a change of boards?
BILL Oh no you don’t need to change the act but you need to use the tools that are there, if the government wants the SOEs to do something other than focus on doing their job to a good commercial standard, then they need to give the board directives and make that transparent, rather than the kind of sneaky bullying behaviour that goes on now where ministers end up getting someone sacked because the minister doesn’t like what they say.
BERNARD So what directives then would you give to the SOEs particularly the power companies if you got into power?
BILL Well we're not going to be giving them a whole range of objectives, we'll want them to get on and make the commercial decisions that they should be making to expand generating capacity, what needs to go alongside that is a sort out particularly with the Resource Management Act so these decisions can be made in a timely manner without long delays and high cost.
ANDREW But changing one pair of sticky fingers from another doesn’t actually take the political element out of it, I mean if that’s what you really believe surely you'll sell them.
BILL Well no we made a commitment about not selling them and you know that, but I think the style of leadership that a government gives makes a big difference.
ANDREW I know what you say but what do you truly believe I mean you can't take the political element out of it if you’ve got government having a core ownership of these products, I mean your true belief must be that they need to be freed up from any political interference.
BILL Well we've made it clear that they're not our top priority, we've got other things that we think the government needs to get on and do if we're the new government particularly around infrastructure and we're going to hold on to these SOEs, we're going to give them a clearer and more commercial direction.
BERNARD But if you stick to your rule of not telling them in the first term many of these companies are long investment cycle state owned enterprises, are they always going to be thinking mm am I going to be around in three years, should I be making this ten year investment decision. Surely you should come out and say what you really want to do over the long term cos they have to invest long term.
BILL Well we've said what we're going to do which is we're not going to sell them in the first term and they should get on and make the investment decisions because you're right they are long term decisions but it's in the interests of these companies that particularly at the moment with electricity prices high and looking like they’ll continue rising that they get on and make their decisions.
GUYON But isn't that the point though Mr English that Labour might be holding on to these SOEs and ... some of them back for political reasons but you are holding on to them yourself for political reasons cos you know that selling them's not popular with the public.
BILL Yeah but they still need to be run effectively and the point I'm making is that if we are the government we'll be a lot clearer with the boards about what their objectives are, we're not going to go around trying to push them round and bully them into lining up with you know very generalised objectives that the government might be talking about politically.
GUYON And just moving this over to that industrial relations policy that you were outlining some of there, I mean how necessary do you think that’s going to be in an economic downturn to be able to give the employer the right to take on a worker who might be a risk for a short period of time before making a decision whether you actually take them on long term?
BILL Well I think it's going to be quite important, you’ve got the Reserve Bank forecasting unemployment to rise to 6% which is almost doubling it over the next three or four years, and the people who are going to get hit hardest by an employment downturn are those at the margins of the workforce, and for businesses these days with the accumulated employment costs now that they deal with including Kiwi Saver, higher ACC levies and so on, they’ve gotta be pretty careful about taking someone down unless they’ve got confidence that the economy really is picking up or that their sector is really picking up, so I think where in the last six or seven years you might have been able to argue everyone's getting a job who can, in the next five or six years that is almost certainly not going to be the case, and we prefer to provide more opportunity for people to get into the workforce rather than have an inside or outsider situation where those who are in are okay but the barriers to people who are out of it are too high.
BERNARD Mr English you talked about the potential for an economic slowdown, do you think that a slowdown could be so severe that it forces you to abandon tax cuts?
BILL Oh no I don’t think so and Bernard it's not potential it's actual, I mean we've been in a pretty slow slowdown for the last six months. Look the point with tax cuts is not so much the short term effect although it will put some cash into people's pockets but over three to five years this is one of the things we can do that’s going to lift our longer term economic performance and that’s our time horizon. So we see it as important, in the long term if there's some fiscal impact of them in the short term well that may be worth wearing for the longer term benefits and that’s our focus because if we get too focused on the downturn and today's impact we'll forget the real job - the one we worried about New Zealand for a long time which is lifting our growth capacity, closing the gap with Australia, making this a dynamic enough place to keep our young people.
ANDREW Bill can I switch to the raw nature of politics, I see Helen Clark's been praising you over the weekend saying never take Bill English lightly he's a clever man, she's obviously after John Key, that’s her target. What's your role, given that you're a clever man and she's not gonna take you lightly, in protecting your leader?
BILL Well she didn’t used to say those nice things about me when I was the leader, and I think her vicious attack on John today shows you just where the nasty politics is going to come from and we're not going to get into that sort of politics. John and I work together very well, he's doing an excellent job of taking the public along with his sense of confidence and ambition for New Zealand, my job is a bit more in the back office making sure that the policy's prepared, that it's put together, that the leader is well briefed and that he's got his hands on the wheel about the direction that we're taking and that’s working pretty well.
BERNARD And this week we saw Winston Peters attack the Reserve Bank Act again and the government appeared to flirt with him on - well may the Reserve Bank Act's not the right way to go, it's possible that could attack National and say you guys are doctrinaire monetarists, you're for high interest rates, how are you gonna respond to that if that’s what they do?
BILL Well look if Labour go and throw out the monetary policy framework now there can only be one result of that and that is higher inflation leading to higher interest rates, so no one will be – inflation's already heading for 5%, the Reserve Bank's using all the flexibility it's got to look through oil and food price rises but if they throw away the Policy Targets Agreement or the Reserve Bank Act inflation will head to 7 or 8% and people will be stuck with 10% interest rates for the next two or three years, so I welcome Labour heading in that direction. I happen to believe it's economically irresponsible and the fact that they're flirting with Peters tells you just how politically desperate they’ve got that Dr Cullen the great economic manager is now playing to Winston Peters tune.
GUYON Thanks very much Bill English we'll have to leave it there.
