@GarethMP proves the case for privatisation when arguing against privatisation

Green MP Gareth Hughes today nailed the case as to why governments should never run businesses. Too many MPs simply do not understand what dividends represent and what the profits from asset sales represent.

Hughes was reported today saying that taxpayers lost nearly $1 billion in dividends since the recent privatisations of power companies. He is the Green party spokesman on state owned enterprises.

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Source: Asset sales cost hits $1 billion | Green Party of Aotearoa New Zealand.

Does the Green Party understand that an asset sells for a price equal to its risk-adjusted discounted net present value of the stream of dividends. When you sell a financial asset, you cash out the net present value of the stream of dividends that might have come from those assets.

The Greens, who are prissy about government transparency and dishonesty of their opponents, did not mention the $4.7 billion in revenue from the asset sale. Taxpayers now receiving more in dividends as a part owner of the privatised power companies than they did as a full owner.

Hughes had the cheek to complain about the politicisation of those privatisations such as favourable terms for small share buyers. That inability of governments to even sell an asset competently is a strong reason why governments should never run businesses in the first place.

If an asset cannot be sold in the full light of day –  a major issue in an election campaign and a referendum – without the sale price that is politicised, what is the chance of good management of any state-owned enterprise when it is not the central focus of opposition scrutiny?

It is been many years since dividends from the state-owned enterprise portfolio has been a net positive cash flow for the taxpayer, as the chart below shows.

image

Source: New Zealand Treasury – data released under the Official Information Act.

KiwiRail and Solid Energy gobbled up whatever dividends came out of the power companies. Aside from power companies, state-owned enterprises not really offer much in the way of dividends to the taxpayer as the chart again shows.

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