LEGISLATIVE ASSEMBLY Friday, 21St May, 1993
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LEGISLATIVE ASSEMBLY Friday, 21st May, 1993 ______ Mr Speaker (The Hon. Kevin Richard Rozzoli) took the chair at 9 a.m. Mr Speaker offered the Prayer. PUBLIC FINANCE AND AUDIT (SPECIAL DIVIDENDS) AMENDMENT BILL Bill introduced and read a first time. Second Reading Mr J. H. MURRAY (Drummoyne) [9.6]: I move: That this bill be now read a second time. The aim of this bill is to end the Government's dividend raids, through its demands for payment of special dividends by various government trading enterprises, commonly known as GTEs. The object of the bill is to require dividends payable by the principal GTEs, such as the Maritime Services Board, State Rail Authority, State Transit Authority, ELCOM, the Water Board and county councils to be calculated in accordance with a predetermined formula prescribed by regulation. It also provides that asset purchases from the State by those authorities are to be referred to the Auditor-General and the Public Accounts Committee if the payment is in excess of $1 million and does not represent an official dividend or repayment of capital. Also, a report will be required to be made to the Parliament on whether the payment is a fair price for that asset. The dividend of a GTE is not to exceed the dividend calculated in accordance with the formula prescribed by regulation. Under the provisions of the bill, different formulas may be set for different authorities, but the Government will not be able to camouflage special dividends through bogus asset sales or capital repayments. If the Government wants to draw additional funds from GTEs - these special dividends which are part of the Government's armour at the moment - it will have to do so by means of special taxing legislation that will need the approval of this Parliament. The GTEs should not be used as de facto tax collectors for the Government. Their charges in many cases are already far too high. Those charges are damaging the economic prospects of New South Wales and hurting hard. Mr Hartcher: What rubbish! Mr J. H. MURRAY: The Minister does not believe that our water prices which are the highest in Australia - and which, by world comparison, are extremely high - are not damaging small business in New South Wales. The Minister is out of touch. As Minister for the Environment he should know more about what is happening in the economy. High charges are damaging the State's economic prospects and hurting hard-pressed consumers. If the Government wants to raise taxes it must seek approval from Parliament. Honourable members will recall Premier Fahey's edict to Government business enterprises - to aim at a target rate of return on shareholders' funds and or to pay 50 per cent on their profit as dividend. Unfortunately, the Fahey Government has gone further and is making unheralded demands for special dividends. This has proved unsettling for GBEs, which are feeling the impact on the disruption of the business plans. Many such organisations, when established, were established with the good will of the Opposition. In fact, the Opposition set up plans for corporatisation of many of these organisations. The House will also recall the actions of Mr David Harley, the Chairman of the Sydney Water Board. He was a Government appointee. When Mr Harley took on the Government he did so with some fervour. Last year he resigned when his organisation was directed to return $100 million to the Treasury. His resignation letter, which was obtained under freedom of information legislation and was not given readily by this Government, expressed concern that the $100 million approximated the funds raised by the Sydney Water Board's special environment levy. The Fahey Government's demand and receipt of a second $100 million from the Sydney Water Board has been overlooked. In other words, the Sydney Water Board has been stripped of $200 million in special dividends over two years. This is totally outrageous. It has been done without the knowledge of Parliament. The only people who knew anything about it were the Minister in charge of the Water Board and the Treasury. The people of New South Wales and the pensioners who are receiving quarterly bills for $164 discovered, when they looked at their bills, that $160 was for infrastructure cost and only $4 was for water usage. Time and again I have explained to this House the process whereby the Water Board is nothing but a taxing authority. The bill introduced by the Opposition is aimed at protecting the interests of the families in western Sydney and the pensioners of New South Wales who are being ripped off unmercifully by this Government through its call for dividends from the major government trading organisations. Mr Hartcher: You do not even believe that yourself. Mr J. H. MURRAY: The Minister said that I do not believe it but I am here, when I would rather be at home, to protect the interests of small business, families and pensioners of New South Wales because of his Government's misuse of government trading enterprises. Though recent publicity has focused on dividends sought from the Water Board, the most notable example of the use of special dividends was the Greiner Government's 1990-91 demand that Page 2604 Elcom - now Pacific Power - pay a special dividend of $400 million. The GTE that faces the biggest hits in 1992-93 is Pacific Power, with projected payments in dividends and tax equivalents of $483 million. The story of the Government's policy in dealing with the electricity industry must wait for another day. Eventually, the people of New South Wales will have to pay because there is no way in the wide world that county councils and Pacific Power can carry out their maintenance programs and pay dividends. It is an example of raiding the hollow logs for a short-term gain. In the long run, maintenance cannot be put off. Raids on Prospect Electricity will result in power facilities throughout the State blowing up regularly, and power cuts in the Riverina and western Sydney. No maintenance on infrastructure will be carried out because government business enterprises are being asked to rip out the heart of their industry and give it to Treasury. If the Government's golden geese, the water and electricity authorities, are to operate as monopolies, they should be allowed to operate effectively. At the moment those monopoly industries are creating very strong cash flow and both are good little earners. New South Wales Government figures for the past two years reveal that the Sydney Water Board has produced rates of return on assets and shareholders' equity of 3 per cent to 4 per cent, but it must be remembered that not all Government accounting procedures show, in the real light, what the return is. In part, these low rates of return reflect the impact of write-ups which have increased the book value of Sydney Water Board's infrastructure asset from $6.5 million in 1990 to $12.2 million in 1991. Write-ups have increased the nomination on the rate of return on assets or equity and also affected many other areas, thus allowing the Government to introduce higher charges. If the Sydney Water Board used private sector accounting techniques it would have reported an operating return in 1991 of approximately 12 per cent, which is higher than the average of 7.4 per cent for companies listed on the Australian Stock Exchange. On that basis the Sydney Water Board generated earnings, before interest and taxes, of approximately $57,000 per employee, which is close to nine times the average operating earning of the ASX listed firms established at only $6,624. This does not mean that the Water Board has to have its operating capital ripped out but, in the long run, when all water lines and underground sewerage connections in Sydney are to be renewed, no money will have been put aside to do that. It is part of the Government's rationale for privatisation. When it occurs the Government will come into the House and say, "We have to privatise the Water Board. We, as a Government, cannot afford to fund the capital works required to replenish and upgrade the water reticulation system in Sydney". The reason the Government does not have funds and the reason it will want to privatise the Water Board is that it is ripping funds out of the Water Board to pay for the Eastern Creek fiasco of Premier Greiner and Premier Fahey of past years. And not only that. The new guru of the National Party comes into this place and tells honourable members that there is a new breed in New South Wales, the National Party now has accountants. Honourable members will assess how well the honourable member for Upper Hunter has performed as the Assistant Treasurer when the Budget is brought down this year, detailing the blowout in the deficit. The blowout is one of the reasons why special dividends are being ripped out of the heart of organisations that have world wide standing. The Water Board dividend call was nothing but a subterfuge. The board was a taxable milch cow, used to cover the inadequacies of the Government's poor economic performance. This is best illustrated in correspondence between Premier Fahey and the Minister responsible for the Water Board, the Minister for Planning in another place. Minister Webster announced that he was transferring assets of the Sydney Water Board to the Government a week after the denial that the Government was ripping off special dividends from the Water Board.