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Tuesday, July 10, 2007

The privatisation of taxation

Given the disgraceful way in which Air New Zealand have treated their workforce this year it was with some surprise I found myself agreeing with their description of the way airports set their charges.

"A privately owned unconstrained monopoly with the statutory right to set fees as they see fit is tantamount to the privatisation of taxation."

I would like to think this is an indictment of how privatisation of strategic state assets is contrary to the long held constitutional principle that taxes should only, and can only, be levied by Parliament, but I don't think so. Sadly, I don't think they understood the full significance of what they said.

While the fuselage of the planes may be round, it is a long bow to make any comparison with a Roundhead.

Privatisation of essential services such as electricity and water are also examples of the privatisation of taxation, whether they be in private ownership or operating as State Owned Enterprises. Why are there no calls for Contact Energy to give tax cuts?

Some would argue the Reserve Bank's so called 'independent' power to raise the Official Cash Rate has a similar function to a tax. Earlier this year, Treasury and the Reserve Bank looked at economic stabilisation (read anti-inflation) measures they could use as alternatives to raising the Official Cash Rate. Interestingly, one of the reasons they cautioned against the introduction of a variable levy on mortgages was the real constitutional issues raised. These issues were also raised with the head of Charles I in 1649. Should a mortgage levy be increased by a Reserve Bank without recourse to Parliament? What say the Finance Minister implemented the levy on advice of the Reserve Bank? But this only shows the distinction between monetary and fiscal policy is a monetarist illusion. For me, the debate over the mortgage levy showed there is no such thing as an 'independent' Reserve Bank - it is an attempting to give over control of our economy to an undemocratic institution.

But back to Air New Zealand.

Some would argue their description of the airport companies could easily apply to Air New Zealand itself may times in its history. There have been many occasions where Air New Zealand and Qantas have tried to merge, only to be told there is too much danger they could become an privately owned unconstrained monopoly (merger plans usually involve privatisation). A recent code sharing arrangement with Qantas failed after concerns were raised by the Australian Competition and Consumer Commission.

If Air New Zealand were really worried about the 'privatisation of taxation' they would be calling for the renationalisation of the airport companies. This would allow airport charges to be treated as an economic development issue concerning the operation of an essential service. This could also assist climate change policy as more fuel efficient planes could be charged less.

Air New Zealand says airlines and airports should have the ability to negotiate on a level playing field, and call in an expert to only arbitrate if they could not reach agreement. I look forward to Air New Zealand applying this same principle when they cannot reach agreement with their workers and their representatives.

The Labour-led government try and pretend they do not own Air New Zealand. But they do - and they fail to take responsibility for the disgraceful industrial tactics of their own airline. Perhaps Michael Cullen thinks this will constrain inflation. Even worse, they allow the board of Air New Zealand to issue more shares - therefore diluting the shareholding of the Government. Air New Zealand's plans to contract out airline services also amount to privatision. So its privatisation by stealth under Labour - if they did not support the actions of Air New Zealand they would have fired the company board by now.

PS: I am flying Qantas to Christchurch tomorrow. While I would normally support a New Zealand owned company I detest the way Air New Zealand have treated their workforce under the leadership of Rob Fife. While their marketing department would like me to be thinking about 'amazing journeys' all I can think of is the chilling call of 'contracting out'.

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At 2:35 PM, Blogger Rich said...

Don't you think firing a few workers pales into insignificance compared with re-stealing Native Australians land, throwing children in concentration camps, etc?

Also, I'm not sure that a nationalised airport system would be treated as an economic development issue concerning the operation of an essential service - as opposed to a convenient cash cow after the fashion of water utilities.

I'd favour a more stringent approach to regulation - plus telling the RNZAF to hurry up and share/vacate Whenuapai so Aucklanders, at least, could have a choice of airports.


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