Public Private Partnerships - a taxpayer rip off
Mention has been made in this column several times of the huge financial cost being imposed on taxpayers by the so called public private partnerships. This is where the government of the day gets private groups to fund the building and servicing of public infrastructure projects.
The private groups borrow money from the banks -at interest - and commission companies to do the work. It would be cheaper for the government to borrow the money from their own central bank, interest free, but then this would not enrich certain groups.
The latest revealed rip off in Britain [London Sunday Times 11-7-10] - to add to the others- has been the scheme to provide air-to-air refuelling and air transport for British forces.
Construction costs and maintenance, according the British Treasury, would total $10,185 million. However the taxpayer must cough up, in financing costs- interest- and profits, an extra $11,865 million.
This does not appear to represent "value for money" - the usual rationale trotted out for a gullible public -but rather, as one defence industry expert neatly put it, a total rip off of the UK taxpayer.
American spends $7.8 million to create employment for a farm manager
At the same time as I note that the New Zealand government has reintroduced immigration visas for those who can buy their way in to settle, a Marlborough Sounds farm, said to be the most scenic place in the world, has been sold, allegedly to an American futures trader for $7.8 million.
The Overseas Investment Office (OIO) which approved the sale of 427 hectares at Waitaria Bay, Kenepuru Sound is reported to have said that the investment would benefit New Zealand by creating employment for a farm manager. It said it would also protect an area of significant native vegetation and create access to a scenic reserve of national significance. Hadn't the previous owners done that?
New Zealand's overseas debt is so enormous that anything can be for sale as long as it brings in money.
This is confirmed by Allen Cookson's recent review of New Zealand's international accounts. He commented that there is much more money going out of the country from foreign owned investments here than comes in from Kiwis’ offshore investments. This is the main source of our exponentially increasing external debt. Our consumption is in large part being funded by foreign money. We continue to sell our assets to acquire this money.
John Key - do you want to know what is "best practice"?
In extracts from his book The Black Swan: the Impact of the Highly Improbable, Nassim Nicholas Taleb offers wise advice such as:-
The economics establishment lost its legitimacy with the failure of the system in 2008. It is irresponsible and foolish to put our trust in their ability to get us out of this mess.
Complex financial products need to be banned because nobody understands them, and few are rational enough to know it. We need to protect citizens from themselves, from bankers selling "hedging" products and from gullible regulators who listen to economic theorists.
Using leverage (high borrowing) to cure the problems of too much leverage is not homeopathy; it's denial. The debt crisis is not a temporary problem; it's a structural one
Don't depend on financial assets as a repository of value and rely on "expert" advice for retirement. Economic life should be decentralised. We should learn not to use markets as warehouses of value: they do not harbour the certainties that normal citizens require, in spite of "expert" opinions.
Smith's spin
Dr Nick Smith, MP for Nelson, in his budget update said We're cutting income taxes across the board and increasing GST. A young Nelson couple on the average wage told me they will use their tax cut of $27 a week to increase their mortgage payments on which there is no GST. These are the sort of choices National wants to encourage.
Nowhere in the taxpayer funded document was there any mention of how the young couple are to pay for the increased charges of GST on their food, rates, utility bills etc. etc.
Surely a slip?
When former failed British prime minister Brown said in Parliament that his actions had saved the world, when he should have said his actions had saved the British economy ( which it didn't), this was seen as a freudian slip.
I wondered whether this had happened to Dominic O'Connell, Business Editor of the London Sunday Times in what I see as his usual pro business, pro financial status quo column [11-7-10] when he said, in commenting on a building society, access to financial services is a basic need of modern life, so it sounds sensible to run those services in the interests of the common good,on a not-for-profit basis.
Deficit reduction
Decision-makers and mainstream commentators appear to be totally unaware that monetary reform could change our prospects dramatically for the better by providing a very significant contribution to paying back our huge deficit. [www.jamesrobertson.com/newsletter - July 2010]
- contributed by Colin J. Whitmill, UK correspondent