Maligned minister passes licence test

23:07, Apr 20 2011

I come to defend Steven Joyce, not to bury him. In the fracas over the Government's decision to let radio companies pay for their licences over five years, rather than pay $96 million up front, he has taken more than his fair share of unfair criticism.

It is true that after more than 200 pages of turgid, repetitive official information on the topic you are left with a sense of unease; that businesses can succeed with special pleading against the initial advice of officials - and in the face of consistent advice from the Treasury not to go ahead.

You can sympathise with officials as they try to corral media lobbyists to one department while they are attacking on all fronts, from the prime minister down.

You might even wonder if the pressure applied to local subsidiaries by the financial requirements of their overseas owners - in this case MediaWorks' owners Ironbridge - should be ignored for fear it will be used to "game" extra concessions from the Government.

But describing the arrangement in the strong terms the Opposition has adopted goes too far in an effort to make a sow's ear out of a silk purse.

Suggestions that Mr Joyce, the communications and information technology minister, had some sort of conflict of interest in helping out the Brent Impey-led company (that Mr Joyce established) survives only till you know that Mr Joyce and Mr Impey are . . . errr . . . not close.


Mr Impey, with Canwest, led a successful "unfriendly takeover" of MediaWorks in 2001- that is, one bitterly opposed by Mr Joyce. The minister initially opposed any deal with the commercial radio sector. To protect himself further, he also sought advice from the Cabinet Office and was told he did not have a conflict of interest. It might have been wiser politically for him to step aside anyway, but that is miles away from any wrongdoing.

It is largely semantics whether the five-year payment regime put in place is a loan, a hire-purchase deal or a deferred-payment option. The closest common parallel is probably vendor finance for a house sale.

But whatever it is called, from the taxpayers' point of view the deal presents minimal risk.

The downside is limited. It may be seen as a precedent and there were fears from advisers that the Government was taking on "a credit financing role in lieu of existing market mechanisms".

There is also a lingering risk the Government may be forced to seize and on-sell the licences, if MediaWorks or one of the other radio minnows who took up the deal falls over or fails to make payments.

But on the bright side, the interest rate on the assets or "loan" - 11.5 per cent - is set at a commercial rate: the Treasury's 9.5 per cent rate plus a top-up for inflation. Over five years it will be fiscally neutral for the Government. It is far less of a "sweetheart" deal than the Radio Broadcasters Association's wishlist, which included payments spread over up to 20 years. And it is not clear who else would have bought the licences.

Of course, it fits Labour's narrative of a Government pandering to the few not the many, feathering the nest of its rich mates and acting as lobby-fodder for business.

But is Labour saying it wants a hands-off approach to business, whether or not that involves job losses?

WE SHALL never know what would have happened had MediaWorks been denied the payment relief and asked to stump up the full $42m at the end of 2009 - as advertising rates were falling, the economic outlook was bleak and banks were ultra-cautious about lending.

If one or more major media companies had failed, more than 1000 jobs could have been on the line. The Government would have faced the same issues of seizing and on-selling the licences, except that it would have gone to the market at the worst possible time.

Mr Joyce is also blunt about the political fallout if the Government had said "get stuffed" and one of the big companies had collapsed. Once it was known the Government had rejected a deal at commercial interest rates with all the frequencies held as collateral, ministers would have been pilloried as hard-hearted, far-right, hands-off ideologues.

Officials were also ramping up the doomsday rhetoric, warning of spillover damage to the country via Mediaworks' TV3, which with its higher profile "may lead to international commentary on New Zealand's overall economic position".

It may not have been an ideal situation, but instalments have so far been paid and it is hard to see how the taxpayer is any worse off from the deal finally agreed.

For that, Economic Development Ministry officials and Mr Joyce deserve some praise.

The Dominion Post