Local Ownership – Does it Matter?

Broadband. We can complain as much as we like but it’s a problem of our own making. Our main telecommunications provider, Telecom, is twice removed from community control, firstly through its private ownership and secondly through its overseas control.

At the time of its sale in 1990 we were told “Local ownership doesn’t matter – it’s the investment and the service that count.”

It’s one of those arguments which sounds like common sense in a single sentence and was one of the main arguments used to justify the selling of many of our public assets to overseas investors under Labour in the 1980s and National in the 1990s.

There are really two issues here – is private ownership better than public ownership? and if so should we allow them to be bought by overseas interests?

The answer from Labour and National has generally been yes to both questions with minor variations.

Labour’s Mike Moore as Minister for example insisted on keeping a token “kiwi share” in Telecom to placate huge community unease when it was sold to American interests. With Telecom’s track record since it’s something politicians would prefer we never recalled. It was always a sick joke. The punch-line was understood by the American buyers who were staggered at their good fortune. The private monopoly over our phone lines which they purchased has cost us many billions of dollars since with the current broadband debacle just the latest abuse hoisted on us by an appalling government decision 16 years ago.

It’s no surprise to learn as we did last year that the cost of business access through Telecom is the highest in the OECD; low data users pay 80% above average and medium users – families on home computers – pay 160% more than the OECD average.

The Telecom example points to some of the inevitable trouble from private ownership of community assets. This includes the shift in focus to the interests of shareholders rather than the wider community with the financial benefits siphoned off into small numbers of well-lined pockets. In the case of a monopoly like Telecom it becomes little more than legalised theft.

These same problems are present when an asset is privatised locally but they are exacerbated if the ownership is overseas.

Another good example is our banking sector. The same frenzy which saw public assets privatised also saw our trustee banks sold so that instead of being owned by the account holders they are now owned by shareholders who insist on a big slice of the financial benefit. More often than not these shareholders are overseas.

Taranaki Savings Bank withstood the privatising tide and remains the only trustee bank where the financial benefits accrue to the customers and the community. It’s not surprising TSB scores consistently highly in customer satisfaction surveys.

Overall New Zealand has the highest degree of foreign bank ownership in the world with our big four New Zealand banks – BNZ, ANZ, Westpac and ASB – all having Australian based ownership.

Besides the expropriation of huge sums of money out of the country the focus of the banks is on their wealthy Australian shareholders with barely a nod to New Zealand.

They have been far from forthcoming in paying tax here with their combined unpaid taxes estimated to be as much as $1.63 billion. 

In terms of economic direction our government has been almost pleading for us to save more and spend less. Are our big banks in tune with this policy? No. They are off on a mission of their own on behalf of their shareholders.

The BNZ sent credit cards with $3000 to $5000 limits to prospective customers just three weeks before Christmas.   This was a particularly cynical move to exploit families under pressure and was described as “ethically reprehensible” by David Russell of Consumers Institute.

Westpac has required its employees to “sell debt” to its customers with the employee pay rates linked to how much debt the customers take on. It is rare for bank staff to take strike action but the Westpac staff who did so at the end of last year did us all a huge service by drawing this abysmal practice to public attention.

Westpac also keeps its monthly credit card repayments as low as 3% of the total owed.   Again the Consumers Institute has criticised this practice as one designed to keep people “in hock” for longer.

Small wonder that Australia expressly prohibits foreign control of their banks while our so-called centre left government leaves us to the mercy of rapacious foreigners whose policies and attitudes are in sharp conflict with government policy and our community interest.  

Local ownership does matter but public ownership and quality leadership can give us the best of all worlds.