The Letter
THE WEEK
Parliament is in recess. Most select committees will be meeting to keep up with the programme of legislation. Despite
media impressions to the contrary, the government has a heavy reform programme. Chris Trotter in his column last week
argued convincingly that Labour was the most radical left wing government in the OECD. Reforms like the Civil Union
bill, renationalising Air NZ, Rail, and this week a bill to promote trade unionism. It has been The Letter’s experience
that real socialists always claim to be moderate.
UNDER ELECTION COVER
The government has decided to get our troops out of Iraq with no announcement that the army is being withdrawn. When The
Dominion Post broke the story, Minister Burton just claimed the troops were always coming home this month. News to our
allies. The multi-national force-Iraq website makes it clear that America believes we have given a commitment for the
long haul. See http://www.act.org.nz/iraqforce. With elections on, our allies wont say anything but they will not forget.
EMPLOYMENT RELATIONS LAW REFORM BILL
Despite strong opposition from business, the bill has returned to the House with no significant amendments. The largely
unionised press gallery runs the government line that these are minor amendments. They are not. The bill overturns the
Court of Appeal’s definition of good faith. Good faith now requires employers to be “responsive, communicative and
supportive” i.e. whatever the activist Employment Court says that good faith is. An employer who says no to a trade
union can be taken to the Employment Court and have an agreement imposed. It is a breach of good faith to offer workers
the same terms as the collective. But only if it is to undermine the collective, is the Minister’s spin. How is good
faith determined? Here is the diabolical clause. The bill requires that all individual contracts must have been
negotiated individually. For a large organisation, an impossibility. All of parliament’s staff are on standard
contracts. If the terms are the same as the collective and the individual contracts are not each negotiated, it’s a
prima facie breach of good faith. The bill places huge pressure on employers to abandon individual contracts.
Dismissals, already hard, as Cambridge High School demonstrates, have been made even more difficult as employers have to
take into account the employee’s circumstances, (the employee with six kids is dismissal proof).
DE FACTO COMPULSORY TRADE UNIONISM
The best clause is yet to come. The select committee could not draft it so the Minister will present it as an SOP
amendment. The freeloader clause; unions being able to charge non-union members a bargaining fee for a contract they did
not ask for. A trade union secretary’s idea of paradise – compulsory unionism without the hassle of having to serve
members. Ironically these ideas come from America. In practice there will be no scrutiny of how the bargaining fee is
determined. Unions do many activities including political campaigning. A significant proportion of the “bargaining fee”
will end up subsidising Labour’s election campaigns.
ELECTRICITY RENATIONALISATION
The Electricity and Gas Industries Bill is re-regulation of the energy sector. The powers of the new energy commission
are extensive. Not just price control but the ability to dictate energy contracts. The commission can levy all energy
companies to build government owned generation, to fund renationalisation. The government claims there is market
failure. Not so, there is regulatory failure. The RMA makes it very difficult to build new generation capacity. The
preponderance of hydro and the lack of water storage means even though rain is very reliable there will always be
shortage years. The market solution is to charge a dry year premium and to buy back usage in dry years. The part of the
market with the most capacity for variable use is the domestic consumer but neither National or Labour has been willing
to allow the true cost of dry years to be reflected in domestic power bills. So we will over build for most years’
demand. It is easy to predict the new commission will use the new powers. Each failure will be a further reason for more
interventions. So we will lose one of NZ’s few competitive advantages – low cost energy.
INDONESIAN COAL
Being a minority government Labour had to do deals with United and the Greens. The deals are so nutty they give MMP a
bad name. Line companies now subject to price control are increasing prices not because they need to but because of the
formula. They are awash with cash and banned by Max Bradford’s law from investing in generation. They are investing in
vineyards, finance companies and in Australia. Labour cannot decide whether to keep the generator/line company split so
suggested a compromise allowing line companies to invest in generators up to 25 megawatts. The select committee altered
this to 50 megawatts. No one on the committee could explain it. Gordon Copeland from the United party said he had
suggested it to the Minister but he could not say why. The Greens proposed that line companies be able to generate any
amount of power from sustainable energy. Sustainable energy is defined as not being from a NZ energy source that is not
renewable. So thanks to the United and Green parties line companies can now build a 200 megawatt coal fired station just
as long as its imported coal!
POLL
Last week 75% of respondents said the Reserve Bank should not have increased interest rates. This week, “Do you support
the government's re-regulation of the energy sector, through the Electricity Commission?” http://www.act.org.nz/poll - we will send the answer to Pete Hodgson.