Budget 2012: Call for details on assets windfall

Finance Minister Bill English with his wife, Mary, in his Beehive office after presenting the Budget in Parliament. Photo / Mark Mitchell

Money from sale of state-owned firms could be better used: accountant.

The Government has done a poor job of explaining how the proceeds from the partial sale of state assets will be invested and is merely using the cash to fund existing commitments, KPMG says.

The accountancy firm says the money could be better used to fund economically transformative projects or housing for struggling families.

Yesterday's Budget revealed the Government expects to raise $560 million from the "mixed-ownership model" during the 2012-2013 financial year. The programme to sell up to 49 per cent stakes in the state-owned power companies Solid Energy and Air NZ begins later this year with Mighty River Power, which is valued around $3.7 billion.

All of the proceeds will go into the Future Investment Fund for reinvestment in a variety of other assets, including hospitals, schools, and large-scale irrigation projects.

However, Finance Minster Bill English yesterday said $250 million from the fund would be used as the final payment to the Government's $750 million turnaround plan for KiwiRail.

Deloitte energy and infrastructure leader Paul Callow said the Government's explanation of how the sale proceeds would be invested "has been handled poorly" and he criticised the Future Investment Fund, which Mr English himself acknowledged yesterday was just a "notional" entity.

"Tagging the proceeds in this way doesn't really fool anyone: money is money and the fact that the Government has just sold a stake in an SOE simply means it has more to spend or needs to borrow less," Mr Callow said.

He noted the KiwiRail investment was a longstanding commitment for the Government.

"The important thing about the fund is the opportunity it presents to do something different and send a strong message about the Government's economic priorities and what it plans to do to achieve them."

The Government had announced it would set aside $400 million for investment in irrigation schemes, "along with some vague recent comments about building and modernising schools and unspecified major hospital redevelopments".

"This lack of detail is a shame as the licence to innovate which the fund can bring has the potential to transform many areas of our economic infrastructure. Social housing, for example, could benefit enormously from a Government-backed lease-to-buy model for tenants who the private sector won't fund."

Read all of nzherald.co.nz's Budget coverage here.