John Armstrong: For sale - one set of old Treasury ideas

Photo / Mark Mitchell

It may sound barmy, but maybe the Treasury should be added to the list of state assets that National has singled out for post-election share floats.

While the share price would have to be heavily discounted because of the department's dismal track record in spurring economic growth, the Treasury, as the branch of the bureaucracy most forthright in urging asset sales, might benefit from some of its own medicine.

Exposing it to the real world might infuse it with some much-needed competition - the competition of ideas. The Cabinet would at last get some contestable advice, rather than the inflexible, undiluted free-market stodge that the department has served up to ministers for the best part of 30 years.

Joking aside, this week brought an admission of sorts from the Treasury's acting chief executive, Gabriel Makhlouf, that he and his officials do not have a monopoly on ideas.

But his speech to the Institute of International Affairs - which included a strong defence of sales of New Zealand land to foreigners - proved only that some ideas still have a monopoly within the Treasury.

The myopic view of the world held by the Government's main source of economic advice has been given renewed sustenance with the return of the Prodigal Son in the guise of the Minister of Finance.

Bill English, a former Treasury staffer, is happy for its chief executives to take a political position in public.

This may make nonsense of constitutional notions of accountability. But it is shrewd politics. The Treasury's position is almost always extreme and consequently out of touch politically. So the Government can take a less extreme stance and look moderate.

Such is the case with National's privatisation policy. Background papers show the Treasury clearly frustrated that National is not disposing of all of the Crown's shareholding in the state-owned enterprises tagged for partial sale.

Nor is the department deliriously happy with the conditions likely to be imposed on the share floats - especially those on foreign investors.

But it will be more pleased with National's shaking up and shrinking down of the public service.

English, who is driving this policy, insists he is not following some preconceived master plan.

It beggars belief, however, that his never-ending demands for "cost efficiencies" are motivated solely by his ambitious timetable for getting the Budget back into surplus.

It also beggars belief that someone who thinks long and hard about things does not have a pretty clear idea of what he wants by way of lasting reform.

Such a strategy is evident in the largely unnoticed Supplement to the 2010 Investment Statement accompanying last month's Budget. The document - once cleansed of Treasury mumbo-jumbo - lays out what is little short of a revolutionary shift in the relationship between the state and its citizens.

This revolution goes far beyond the sale of minority portions of state-owned electricity generators Genesis, Meridian and Mighty River Power, and coal producer Solid Energy, plus the reduction in the Crown's Air New Zealand shareholding.

It goes beyond a new approach of using the proceeds from those sales for capital spending on hospitals, schools and other "social assets" - rather than the cash being dedicated solely to debt repayment.

It goes beyond English wanting far greater flexibility on the holding or disposal of the Crown's estimated $220 billion worth of capital assets.

Of course, many of these remain untouchable. But English is advocating greater "freeing-up" and "recycling" of capital to reinvest in areas of priority, with public-private partnerships the preferred vehicle for such reinvestment.

Where this revolution really shows itself is in the document's push for much greater private sector involvement in state agencies' delivery of public services.

Where practical, English wants that to be the norm rather than the exception.

He has put a lid on departmental budgets to fast-track a return to surplus. That is also a way of forcing departmental chief executives to find cheaper ways of doing things.

National's reforms have not, so far, seriously altered or undermined fundamental roles of the state. It wants a leaner but not necessarily meaner state sector.

However, add all this together - asset sales, a stripping back of the core public service, and extensive contracting out of management and service delivery to the private sector. Then add the opening up of accident compensation to competition.

Then add welfare reform to cut back the number of beneficiaries and you start to get the real picture of National's slimming of the state's apparatus and ipso facto its role.

Governments usually undertake major reform only in their first term because the public backlash kicks in thereafter. Bucking convention, John Key is now seeking a mandate for a second-term agenda which is radical and transparent.

This has had little if any effect on National's sky-high poll ratings. That may be because voters have yet to realise National's agenda is much greater than the sum of its parts. It may be because voters are not hearing Labour's shrill warnings.

But it is probably because English's revolution is incremental rather than "big bang". It is also probably because the focus of the privatisation debate is on the partial asset sales.

National believes Labour has misread the polls. While there is roughly two-thirds against to one-third in favour, National believes feelings no longer cut very deep on this issue.

To prove that point, the Prime Minister is making the job of selling the sale of state assets a personal crusade. He will be helped by the conditions placed on share floats on top of the restriction of a maximum 49 per cent of any enterprise.

The Treasury won't be happy about that. The more conditions, the less the proceeds from the sale.

But having botched asset sales in the 1990s - notably Telecom and New Zealand Rail - the Treasury might concede that here, too, it does not have a monopoly on wisdom. Fat chance of that, however.