Assets of corporations

Press, 18 March 1987, Page 20

Assets of corporations

Sir,—Your editorial “The assets of corporations” was most interesting (March 14). However, you failed to explain why the corporations have to pay anything at all for the people’s assets. That is the crux of the matter. I recall that when the Railways Department became a corporation no money was paid to the Government; in fact a considerable debt was wiped. Under this Labour Party policy of corporatisation the Government will receive enormous amounts of cash (plus shares in the corporations) while the public will have to pay more for services to pay interest on borrowings and repay debt. It is not difficult to see who is being milked. As with GST, corporatisation smacks of swindle.— Yours, etc., P. A. VAN DUGTEREN. March 15, 1987.

[The editorial addressed the question of whether taxpayers were being asked to pay for the assets twice and came to the conclusion that they were not. The question of why the corporations are paying for the assets at all is a separate one. The editorial gave the Government’s arguments for this but did not discuss them in detail. The Government believes that if the corporations have to pay for the assets they will be less inclined to take investment decisions which are unwise. The Government also believes that the trading departments have already raised their charges and that increased charges by the corporations are unlikely. “The Press” shares some of the correspondent’s scepticism, but maintains that technically it cannot be argued that the New Zealand taxpayer will be paying for the same assets twice. — Editor.] Sir, — Your editorial on corporatisation appears to contain errors. The borrowing required of State corporations to repurchase assets would be unnecessary without corporatisation. The corporations are giving the Government cash in exchange for assets, which represents an additional capital expenditure burden that must be passed along in, higher prices. So the consumer ends up paying twice for the same assets. Your February 18 article on Central Canterbury Electric Power Board borrowing and the deputy general manager’s statement supports this. The editorial’s references to pricesetting also ignore the quasimonopolistic reality of the State corporations. They will charge the prices they need, to cover the additional drain on funds represented the assets charge, dividendsao the Government, and corporate taxes. In the

case of electricity this could mean about a 30 per cent increase in prices. The Government’s corporatisation programme is therefore a hidden form of additional taxation. — Yours, etc., JAMES BACON, National candidate, Yaldhurst. March 15, 1987.

[On the specific comment that the editorial’s references to price-setting ignore the quasimonopolistic status of the corporation, the editorial in fact says: “A number of countries have Government corporations that enjoy monopolies. The experience is usually that the corporation pushes prices high.” — Editor.]