When a mandate is not a mandate

The “mixed-ownership model” is set to become law this week. It will pass by one vote, 61-60, against around a 70 per cent objection in opinion polls. This is “representative democracy” in action.
John Key claims a “mandate”. But does he have one?

He can say, correctly, that from January last year he openly stated his intention to sell down four energy companies and Air New Zealand to 51 per cent government ownership. Actually, there was little room for doubt from before the 2008 election.

Key can say also that Labour made asset selldowns its core attack issue in the 2011 election campaign and that Labour’s vote went down and National’s went up.

All true. But actually that does not make a “mandate” except in the sense that politicians have for generations misappropriated the word.

What Key undoubtedly got in November was a mandate to govern. National and allies got 50.4 per cent of the vote and 52.9 per cent of seats. But, while that implies a mandate for National’s general policy approach, it was not thereby a mandate for any specific policy.

This was illustrated in reverse last term. Key in 2008 promised not to raise GST. Eighteen months later he raised it. Did he have a mandate? On his SOE selldown reasoning, he had a mandate not to.

But Key did have a mandate in 2008 to govern — and to govern in a way that broadly reflected what people understood to have been National values, which included lower taxes on the better off.

So he might claim his broad mandate to govern in 2011 included a mandate to sell down state-owned enterprises, since National is broadly understood by voters to favour private sector ownership of commercial firms over state ownership.

Except that voters do occasionally object to specific items even while generally endorsing a party’s broad policy line. There can be no doubt a majority of voters objected to SOE selldowns last November and still object.

That objection stems from of a history of private sector mismanagement or plunder of some privatised SOEs: the Bank of New Zealand, Air New Zealand and what is now known as KiwiRail are grim examples of high costs to taxpayers of private failure or rapacity. You might add Telecom, sold without proper regulation which allowed it to use its market preponderance to reward shareholders at consumers’ cost.

If Key did have a specific mandate to sell down the SOEs, there would be no doubt that a referendum for the selldowns would pass. In fact, if opposition parties succeed in getting up a citizens-initiated referendum, a no-selldowns result is highly likely.

But Key does have a mandate to govern. And that includes persuading voters through argument and conduct that the selldowns are a good thing. That is one of the big unknowns through the 28 months till the next election.

Before the 2011 election National tested the proposal in focus groups. The message it took from them was that when all the facts were laid out group participants’ attitude mellowed.

The government’s gamble now is that the Mighty River sale will not result in one of the first sales round’s costly bungles and that instead large numbers of small investors will pile in and feast on steady, reliable dividends. In fact, the first energy company sold, Contact Energy (1999), still has a large sharebook of small investors who obviously value its dividends.

The government’s gamble is that those who get Mighty River shares will be pleased and general public opposition will cool.

There are two complications (at least).

One is that Mighty River is a well-run company possessing specialist geothermal technology in demand overseas and domiciled in a moderately stable economy in a stable democracy and thus will be highly attractive to international investors in an unstable global economy looking for somewhere to park money and earn a good return. That offshore interest might heighten public worries about economic sovereignty.

The other is that if ministers manage the politics of the selldowns as poorly as they have other matters in the past six months, they could lose the debate. Over time there have been four different rationales for the selldowns.

If the government gets the Mighty River sale right, the SOE selldown bogey will fade. Key will parade some school and hospital investments as the payoff and invite endorsement in 2014, while painting Labour and friends as itching to buy the shares back at large taxpayer expense. (Labour and Co won’t but election rhetoric and reality often diverge.)

But if the government gets the selldown wrong, Key will find out he didn’t have a mandate after all. And the result of that may be that some other parties have instead a “mandate” for all sorts of contrary things after 2014.

* Next week: our wrong-way economy.