Joyce's comments trigger dividend debate

5:50 am on 15 July 2016

Power Play - The willingness and ability of Steven Joyce to comment on a wide range of issues is usually a strength, but this week it has proven to be a liability.

The government says the Labour Party is obsessed with the issue of this government accepting dividends from Crown Agencies, but it was comments from Cabinet minister Steven Joyce that put discussion about the rights or wrongs of taking dividends front and centre this week.

Steven Joyce at bridge run.

Steven Joyce Photo: RNZ / Alexander Robertson

Part of Labour's housing announcement last weekend was that a Labour-led government would effectively turn Housing New Zealand (HNZ) into a public service agency, so it would not have to operate under a commercial imperative, and turn a profit.

Currently it is a corporation, and according to its own Statement of Intent is "first and foremost a social housing organisation that provides homes to those most in need".

Read HNZ's Statement of Intent

As National's campaign manager, Steven Joyce took to Twitter and the airwaves to declare Labour's policy would not make any difference, as it had already been agreed HNZ would not deliver a dividend this year or the next.

His Cabinet colleagues say they knew about it, but it came out of the blue for everyone else, and ended up putting the focus squarely on the practice of successive governments accepting dividends.

It is a good financial discipline, argues the government, as it requires HNZ to operate commercially, and to effectively manage its sizeable asset base.

Not that Labour could argue with that, because as the previous government it too was happy to take dividends from the surplus profits produced by HNZ.

But now the debate is centred around whether the government is - to quote Labour - using the corporation as a "cash cow", in times when there is a great demand for social housing, and increasing pressure on Housing New Zealand to upgrade and expand its existing stock.

HNZ receives government funding so it can offer subsidised, income related rents to its clients, and, in most years, extra money for capital spending. It also returns an annual dividend to the government based on any net profit it makes.

Figures supplied by the Finance Minister's office show that since 2005, under both Labour and National, the net gain for HNZ has averaged about $500 million, if you take the money the government puts in for rent subsidies and capital, minus the dividend. The largest dividend paid since 2002 was $176m under Labour in 2003, the next two biggest dividends were under National; $132m in 2009 and $108m in 2014.

The amount paid for rent subsidies has steadily risen under both governments, from $280m in 2002 to $740m in 2016.

The main difference in government funding can be seen in the capital injections, however, with that money slashed under National in the last four years in particular ($4m in 2015, nil in 2014, $3m in 2013 and $4m in 2012). The annual amount from 2002 to 2010 ranged from $42m to $155m.

Finance Minister Bill English, Budget 2016, Parliament.

Finance Minister Bill English addresses Parliament during his Budget announcement. Photo: RNZ/Chris Bramwell

If you compare both governments over a seven year range (Labour 2002-2008, National 2009-2015), Labour spent on average $104m a year on capital and National $29m.

"We put more into Housing New Zealand than we take out" has been the mantra of National Party ministers when challenged about taking dividends, and that is true.

The problem for the government is the debate about HNZ's dividend has erupted during a time when it is struggling to control the housing crisis, and Mr Joyce's ad hoc "announcement" adds to the impression the government is scrambling for policies and ideas.

HNZ and senior ministers say it has been apparent for "some time" a dividend would not be forthcoming, mainly due to its $2 billion programme of buying and building new state houses over the next three years.

But the work HNZ is doing with Treasury to nail down the final figures, including the formal declaration of no dividend, is still a work in progress, and therefore had not been made public.

The likely outcome had obviously been communicated to relevant ministers, and Mr Joyce could not help communicating it more widely, in response to a Labour policy that had been well traversed before, but had not sparked up until Mr Joyce's contribution.

The other problem was his comments were contradicted by both the most recent HNZ Annual Report and the Budget documents, released eight weeks earlier.

This was explained away by Finance Minister Bill English who said "the Budget documents would be based on Treasury's formal process, connected to what will become out of date, previous plans with Housing New Zealand".

He could more easily have said his colleague Steven Joyce just jumped the gun.

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