Monday, August 22, 2022

KiwiBank's "new" ownership

This morning, the government announced that it was buying KiwiBank. From itself. Because two of its current government owners - ACC and the Cullen Fund - wanted to sell it to someone else. So they had to shuffle money from one part of the government balance sheet to another to dodge that bullet. But maybe it would have been better not to have had to dodge it in the first place, by not having government agencies which want to privatise and loot public property?

But there is an interesting question about the ownership model chosen. KiwiBank - via new corporate entity, Kiwi Group capital - will be a Schedule 4A company under the Public Finance Act. There are a bunch of these - Predator free 2050 and Green Investment Finance are ones you may have heard of - and its not an especially unusual form of government ownership. At the same time, there are at least two other models that could have been chosen: a Crown-Owned Company under the Crown Entities Act, or a standalone State Owned Enterprise. These each have slightly different obligations, and its no easier or harder to place things under one model than another (its all done with Orders in Council). So why choose one rather than the other? The major differences seem to be that while SOEs and Crocs must be fully government-owned, Schedule 4A companies only need majority ownership - making them easier to part-privatise, or pull National's scam of forcing other government entities to buy them, effectively raiding their dedicated funds for ready cash. SOE's are also subject to an obligation to be a successful business, meaning as profitable as non-government companies, and to "exhibit a sense of social responsibility" (all three however have good employer obligations, as you would expect, and all are subject to the OIA). SOE's are also subject to Treaty of Waitangi obligations, and to a special regime to enable the return of stolen land. It will be fascinating to see which of these differences the government thought was an advantage, and which a disadvantage, and why it chose the ownership model it did.