'THE NATION'

DAVID CUNLIFFE interviewed by STEPHEN PARKER
and joined by THE PANEL

STEPHEN As the government wrestles with its Emissions Trading Scheme and the price burden on households, the Labour Party says it would still implement the ETS. I spoke to Labour's Finance Spokesperson, David Cunliffe a short time ago and asked him how much households should have to pay to meet the extra cost.

DAVID CUNLIFFE – Labour Finance Spokesman
New Zealanders are going to end up footing the bill for this one way or the other and at the moment there's a 1700 million dollar liability on the taxpayers' book from what we owe other countries under the Kyoto protocol. Now the best thing to do for the whole country is for those who can make the smart decisions about early and appropriate adjustment, have the incentives to do that, that’s how we lower the cost to the householder in the long term.

STEPHEN So who foots the bill? Who should be paying the cost of this?

DAVID It depends. If emitters were paying none of the bill, taxpayers would have to pay the whole lot. If it's shared around it's more efficient because the emitters were the ones who can make the decisions about investing in clean technology, about getting the total amount of pollution down and thereby lowering New Zealand's total exposure to Kyoto liabilities.

STEPHEN If there is in fact an inquiry into power companies and their price rises on the justification of ETS, which is you know started by the government, Labour would support that inquiry?

DAVID Well I haven't consulted my colleagues on that, but I imagine that we certainly would, because we do have a very strong interest in making sure that the cost of living faced by ordinary Kiwis is manageable and we know people have been under a lot of stress with the recession, and now the Budget's made it worse.

STEPHEN I just want to move on to another area of debate that’s opened up and this is the issue of partial privatisation if you like of SOEs, is Labour opposed to partial privatisation?

DAVID Yes we are for several reasons. Firstly why would New Zealanders be asked to pay for something that they already own, that’s the first and principal argument. Secondly taking Kiwi bankers the example that Bill English floated a week ago – the government's made an excellent return on that investment so far, close to 100%, it's saved hundreds of millions of dollars for other non Kiwi bank customers by keeping the big four banks honest and bringing interest rates down, and it's also helped to stabilise New Zealand's net international debt position by creating credit domestically, and that’s incredibly important. So we think it's a no brainer to grow and protect that asset within community ownership so it can't be bought off in the end by one of its competitors.

STEPHEN One of the issues being able to I guess recapitalise companies like Kiwi Bank and the government argues that this is a way of doing it and retaining ownership. Do you accept that position?

DAVID No I don’t, the government's not capital constrained, KiwiBank only needs a 100 million dollars which in the scheme of the government's books is not a lot of money, and the government's made as I said close to 100% return on its existing investment already in terms of the asset value of the bank. I think it's a complete no brainer, I certainly don’t mind the government getting an independent review, but if the government were to make a decision not to retain KiwiBank and not to capitalise that … I think we would have a field day with them and I think 9/10ths of the public would be on our side.

STEPHEN Well let me take the chance now to bring in the panel.

ANDREW HOLDEN – The Press Editor
Just on KiwiBank obviously because that’s the one we're talking about now, off camera you were mentioning an IMF report this week that lamented the poor state of New Zealanders savings. Doesn’t KiwiBank provide an incentive to actually get Kiwis buying shares in an effective business. I mean admittedly they own it now, but they don’t have their own savings in that business, here's an opportunity to let mum and dad investors further their own savings in a business that’s doing very well?

DAVID Well I think there's two separate questions Andrew, the first is do we need to increase our savings rate, and the answer's absolutely yes, it's absolutely critical and we're critical of the Budget for not doing more in that area. The sort of things that Labour might be looking at would be things like savings bonds, dead instruments that are safe low risk that mum and dad Kiwi can invest in with great assurance, might be infrastructure bonds, might be municipal bonds, it's even possible to issue a bond instrument in a state owned enterprise without losing equity or control.

ANDREW That seems plausible but there's no doubt that you need a spread of savings, and part of that is shareholdings in businesses on the stock market, and I would have thought KiwiBank is an ideal one, I know a lot of people would have invested in Telecom and their shares are looking pretty ugly at the moment.

DAVID Well I won't comment on that, other than they’ve got quite a job on their hands at the moment and some rather rapidly changing goalposts from the Minister of Communications won't have helped, then all the other bidders for that Broadband fund, but we need to get savings up, we do need a variety of products, we need proper regulation of financial markets so that the integrity of the markets aren't questioned. We do need to work to implement the recommendations of the Capital Markets Taskforce, but I don’t think that partial privatisation of key community assets that the New Zealand public already owns, is the answer. In KiwiBank's case it's a no brainer.

STEPHEN The Capital Markets Taskforce though does actually make that call for a partial privatisation, they don’t regard it as no brainer.

DAVID And of the 70 odd recommendations that’s the one that we disagree with, and we would ask why the Minister hasn’t rapidly implemented the other 69.

COLIN MARSHALL – RadioLive Political Editor
Yeah I mean you say why would New Zealanders want to pay to buy something they already own, but you know surely if you look at something along the lines of say Landcorp getting extra money to buy into the Crafer Farms, it could actually help, like we could keep more things in New Zealand ownership if we actually had some private floats, some partial floats for some of these organisations.

DAVID Well firstly let's acknowledge that there's a proper process that the Crafer Farms sale needs to go through, so let's not undermine that. We certainly have no problem in principle with Landcorp being a successful bidder, but the Crown is not constrained in terms of its ability to access very cheap debt, very cheap loan capital, that it can use to gear up SOEs if it needs to, and it can borrow cheaper than the market so why shouldn’t the public benefit from the extra leverage that the government can provide, and look in terms of growing savings, if mum and dad Kiwi put their money into an SOE they already own that’s arguably not growing the savings pie, cos they could be putting that money into another saving instrument, and growing the pie that way.

COLIN That takes it back to a constant refrain of National that under Labour the debt of the government would grow and grow and grow, and they say that's…

DAVID No no, no no no, no no, in fact I'm being very clear about this, Labour thinks that the government has been fiscally irresponsible in this Budget and I'm going to be releasing tomorrow some independent analysis that shows a nine billion dollar fiscal hole, an additional nine billion dollars deficit opening up over the next decade as a result of this Budget, so I will not be lectured to by Bill English about who's being responsible. Labour cut net debt to zero, and the government inherited only 5% debt when it took office, and we are very lucky as a country that Labour did not listen to Bill English, who said let's give unaffordable taxcuts in 2005, 2006, he's finally done it, he's spent 15 billion dollars on taxcuts the country can't afford, one third of which go to the top 5% and that is a good investment in nobody's book.

ANDREW I just want to go back to the ETS. Given how hard a sell it is for a watered down ETS, doesn’t this call for a bipartisan support from you and arguably the Greens to say at least we've got something, the Australians couldn’t put in an ETS?

DAVID I think Australian Labour will live to regret the day that they moved away from their ETS, and fair to the government it's good that they’ve stuck to theirs, but taxpayers need to understand that because National has watered down Labour's ETS so much, they are going to end up footing hundreds of millions in the end, billions of an extra bill that otherwise ought to have been paid by the people actually emitting the carbon pollution. There's no free lunch.

STEPHEN Just one final question to wrap up here, you alluded to this independent analysis you are getting done and releasing tomorrow, who's doing the independent analysis, why is it independent, and just briefly what conclusion does it come to?

DAVID We outsource to a professional economist crunching the numbers on the out year impact of tax changes.

STEPHEN And the conclusion?

DAVID And the conclusion is that there is a nine billion additional deficit by about 2022 that arises because tax has shifted to lower growing sources of taxation, but expenditure has not been properly controlled. So the government's broken a lot of promises. It broke the promise not to raise GST, broke the promise to leave everybody better off, broke the promise to rebalance the economy, and it's also broken the promise to be fiscally neutral, and if the IMF report is to be believed, we do not have a single penny to spare, every cent that the government has must be very careful weighed and a nine billion dollars fiscal hole because of upper income taxcuts is absolutely reprehensible.

STEPHEN Labour Finance Spokesperson, David Cunliffe, speaking to us earlier this morning.

ends

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