Two days after revealing plans for loyalty bonus shares in state asset sales, Prime Minister John Key has been forced to talk down the likely price of the scheme in the face of speculation it could impose huge costs on taxpayers.
Labour had warned that bonus schemes, starting with Mighty River Power, could cost $1 billion if applied to all five state businesses on the block.
And one media report had extrapolated from a Treasury report to suggest the sweetener could cost up to $500 million if the assets raised $5b.
Mr Key yesterday said that details of the scheme, open only to long-term Kiwi retail investors, had not yet been finalised.
But if one extra share went to investors for every 15 shares held, and 20 per cent of shares went to "mum and dad' buyers, it would cost about $60m-$80m across all five businesses.
He later said the cost could even be zero, or positive for the Government.
"Brokers think far from being a cost, there may be a gain to this because it encourages others to pay more, namely institutions," he said.
"I don't think it's as clearcut as saying we will definitely get less because we have a loyalty bonus."
But his assurances sparked a fresh round of attacks from political opponents.
Labour leader David Shearer said Mr Key was "all over the place" and it was incredible that just two months out from the sale of Mighty River Power, he could not say how much the bonus scheme would cost.
"It is simply irresponsible. This asset sales process will see New Zealanders who can afford to buy shares benefiting from a loyalty scheme that is subsidised by every other Kiwi. That's not fair."
Greens co-leader Russel Norman said Mr Key's $60m-$80m figure relied on only a small percentage of the shares being held by "mum and dad" investors.
"Even if only a third of shares sold went to retail investors, with one bonus share per 10 bought, it would cost $200m."
Mr Key rejected that.
But he did concede he may need approval from Parliament to allocate the shares, after earlier denying that.
Dr Norman said Mr Key had changed his position on that "because it is a kind of spending one way or another" and was not covered by the Budget.
"However that's resolved, it's a transfer from the vast majority of New Zealanders to those [who] can afford the shares, and that's not fair."
Mr Key said if the Government simply wanted to maximise the price it received it would sell 100 per cent of the asset and not worry about who bought them.
- © Fairfax NZ News
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