Another $30 million wasted | The Jackal

9 Aug 2013

Another $30 million wasted

Today, the NZ Herald reported:

The Government's $30 million subsidy to keep the Tiwai Pt aluminium smelter open removes a major perceived impediment to the successful part-sale of Meridian Energy. On no other ground, however, does it come close to passing muster. A short-term political focus has trumped clear-eyed analysis and produced a largely worthless reprieve for the struggling operation. The taxpayer-funded windfall for the Rio Tinto subsidiary that runs the smelter is money which need not and should not have been spent.

I couldn't agree more with today's editorial.

For decades, this country has given successive smelter operators extremely good deals. There is now, however, no need to bow to their every demand. Meridian, which supplies Manapouri power to the smelter, could sell its electricity into the wholesale market for as much, if not more, than it can get under any conceivable deal with New Zealand Aluminium Smelters. In purely commercial terms, it would not concern the power company unduly if the smelter were shut down. It, therefore, approached the renegotiation of the electricity supply contract from a position of some strength.

Government intervention effectively undermined that. Meridian will now charge a lower price for electricity supplied to the smelter.

So, the National government has cost taxpayers $30 million as well as the potential for Meridian Energy to charge a proper commercial rate for its electricity. Surely the government could have used that money elsewhere to help create employment opportunities in other industries...I mean $30 million plus a whole lot of lost revenue for a few hundred jobs until 2017 just doesn't seem like a good deal.

Sure, the government should look to secure jobs where it can, but when there is no financial benefit or longterm security, the choice should be to allow private businesses to close. National seems to think that welfare for private companies needs to be increased while welfare for the poor needs to be reduced. Such a defunct regime can only lead to even more inequality that will assuredly degrade our society even further.

Additionally, there is the Government's $30 million, which it says is the price that had to be paid to provide "greater certainty" for the smelter workers, the Southland region and the electricity industry. In each case, it does nothing of the sort. New Zealand Aluminium Smelters will be able to terminate the contract from January 2017 provided it gives 15 months' notice. In effect, the earliest closure date for the smelter has been moved back just one year. It would have taken a longer-term deal to offer anything approaching greater job security for its workers.

In that case the government has spent $37,500 to secure each job for just one extra year, which is stupid economics and flies in the face of the rights usual free market dogma!

How many cuts have we seen to essential services because apparently there isn't enough money to go around? Then all of a sudden National finds $30 million just waiting to be given to overseas companies.

Clearly National has only undertaken this deal to give their privatisation of Meridian Energy a free run at the line. With no real economic benefit for New Zealand, the partial privatisation of our most profitable assets is looking more like a lemon everyday.

That isn't stopping the ideologically blinded National government from smoothing the way with hundreds of millions of dollars to ensure the sales go ahead, even though interest in Meridian shares couldn't be lower. It's likely to be a monumental flop the likes of which even Roger Douglas would be proud of.

UPDATE: The government hasn't negotiated a clause to protect jobs at the Tiwai Smelter at all. National has once again tried to mislead the public.