Submission to the Finance and Expenditure Committee

Parliament Buildings, Wellington.

By: Chris Leitch, Leader
Subject: VENTURE CAPITAL FUND BILL 167-1

 

Introduction
 

This bill, if enacted, cannot benefit our country’s economy beyond the very shot term. It is yet another attempt by a Labour-led government to inject vigour into the flagging equity and debt markets while ostensibly offering aid to capital-deficient businesses.
 

The bill

 

The proposed initial transfer of $300 million from government revenues into the care of the NZ Superannuation (“Cullen”) Fund is further proof that the government still clings to outdated supply-side theories at a time when demand-side solutions are urgently needed. Surely, Treasury advisers understand that production is a function of demand.
The Prime Minister’s call for our country’s history to be taught in all schools should
present a challenge to members of her own party, and its coalition partners, to examine Labour’s proud performance on stimulating economic activity when it first occupied the Treasury benches in 1935.
Without the “benefit” of capital markets, it drew on the newly nationalised Reserve Bank to fund, at minuscule interest, the construction of thousands of state houses, plus bridges, roads and schools. In stark contrast to those facts is the Hon. David Parker’s introduction to this Venture Capital Fund bill when he asserted that “..lifting New Zealand’s productivity requires well-functioning capital markets....” Such a statement flies in the face of Labour’s own history which proves those comments are nonsense, and must be refuted.
In reality, lifting New Zealand’s productivity requires a government and a Finance
Minister prepared to take actions that benefit the majority of kiwis, not just a few private sector investors.
Fortunately some words of wisdom are being heard from officialdom.
We welcome Reserve Bank Governor, Adrian Orr, advocating more spending by the
government - ‘heavy lifting’ - in order to stimulate the economy. The Reserve Bank
Governor himself has the capability to provide credit-funding from his publicly owned
bank for essential infrastructures. This would increase the national income and facilitate its equitable distribution, where small-to-medium firms and farms benefit most from the work involved, and additional cost for taxpayers through the necessity to pay interest to private sector investors is not incurred.
Treasury itself, in a paper to the Government in May advocated ‘unconventional
measures’ may need to be adopted. Quantitative Easing was one, and it’s that
recommendation that the Reserve Bank and Government would be implementing if
credit-funding above was activated.

Another unconventional measure suggested by Treasury was “Helicopter Money’ – a
direct distribution of money into peoples’ bank accounts to provide spending power for Kiwis and activate another action to stimulate the economy. This could, and should, also be funded from Reserve Bank credit-funding.
Provisions already in the Public Finance and Reserve Bank Acts could be invoked
immediately given the political will. These mechanisms are so much more efficient than the complicated and expensive proposals in this bill.
Approximately $20 billion of new money is created by the commercial banks each year in the process of granting loans (they don’t lend depositors savings).
The Reserve Bank could instead assume that new money creation and give government first use of it for things that benefit kiwis. The proposed amount of $300 million in this bill is a drop in that $20 billion bucket, and lacks real commitment to business, when compared to what would be possible under our proposals.
Clause 40 - We are alarmed at the prospect of the Guardians being empowered to
create Investment Vehicles and appoint the boards charged with making the investment decisions. An additional worry is that the Official Information and Ombudsman Acts would not apply to Guardians decisions in response to requests for information about Venture Capital Fund vehicles.
We fear that overseas companies may be favoured over Kiwi firms under the cover of
commercial sensitivity. Assurances that this would not eventuate should be backed up by the inclusion of a clause in the Bill that requires the Venture Capital Fund vehicles to be accessible to Official Information Act requests and the Ombudsman.
Nonetheless, even if that was included it would not affect our opposition to the bill as it is fundamentally flawed from the start, as it does not set out to do what it claims to, in the most efficient and cost effective way.


Conclusion
 

Social Credit welcomes this opportunity to comment on the bill.
We request time to enlarge on some of the issues raised at the Committee’s verbal
hearings.

Authorised by Anne Leitch, Secretary, 42 Reyburn House Lane, Whangarei

secretary@socialcredit.nz

Copyright Social Credit Party 2019