Listener: 18 August, 2012.
One of the reasons King Charles I was beheaded in 1649 was that, without Parliament’s approval, he raised taxes and spent the proceeds. Forty years later, after the Glorious Revolution, the English Parliament passed the Bill of Rights, requiring that the Crown tax or spend only with Parliament’s approval.
That act remains an explicit part of our law and underpins the authority of the New Zealand Government. In 1976, a public servant, a Mr Fitzgerald, challenged the order of incoming Prime Minister Robert Muldoon suspending the 1974 New Zealand Superannuation scheme – Labour’s scheme, not unlike a compulsory KiwiSaver. The Chief Justice, citing the first clause of the 1689 Bill of Rights, declared Muldoon’s instruction unlawful, even though the new government had a clear majority and would soon repeal the law.
Not that Parliament is always in charge. Told on another occasion that an action he was contemplating was illegal, Muldoon looked out of his Beehive window to Parliament below and cackled, “We have a little room down there to change the law.”
He sometimes found a way around the limits of Parliament’s power, as when he gave Think Big schemes secret guarantees. Parliament found itself with huge financial commitments to honour when some of the projects went belly-up, even though it had no foreknowledge of them.
The subsequent Public Finance Act requires that Parliament be advised about such guarantees; otherwise they are not enforceable. The result of that law is the Government has to push even its most unpopular legislation through Parliament, enabling the public to assess it and identify any mistakes.
So it was with the proposal to partially privatise some state-owned enterprises. You may not like the proposal – polls suggest more than 80% of the population do not – but it is the law and the Government can now sell a chunk of them. Our redress is how we vote at the next election, if we think it important enough.
To make privatisation more palatable, the Government has said it will sell shares to small investors. To avoid them “stagging” the sales – that is, bidding for shares and flicking them on at a profit – it has said it will give bonus shares to those who hang onto them for three or so years.
As I write, the details are not available, but it has been suggested the cost of the bonuses may be between $60 million and $500 million. You may think there are a lot of other things the money could be better spent on (reducing taxes, say), but apparently the Government considers that is its best use. That’s politics.
Prime Minister John Key has said the bonus scheme will contribute to a shareholding public. However, when former British Prime Minister Margaret Thatcher tried the same strategy during her privatisation binge, the public bought the shares, but a few years later had sold most to financial institutions, leaving the public largely shareless again (except for those held indirectly via KiwiSaver-type investments).
In effect, the Government is offering a group in the community the $60-500 million for free. It is a wealth transfer from the taxpayer to the well off, turning an honourable policy of deepening capital markets into a tawdry bribe. Meanwhile, Government policies cut back the incomes of those really in need. That is an expression of its priorities.
How is this giving away of taxpayers’ money to be reconciled with the Bill of Rights? The Treasury is recommending that the subsidy be treated as a parliamentary appropriation. That means Parliament will approve the grant to those wealthy enough to afford to buy shares when it passes the Budget in its annual appropriation of expenditure, which gives the Government the power to spend taxpayers’ money.
The bonus proposal involves the constitutional basis of New Zealand Government – it’s a matter that should be treated with the utmost seriousness, whatever one’s position on the privatisation. It looks as though we shall not have to behead the Queen – or the Governor General who represents her – after all.