Scoop Election 08: edited by Gordon Campbell

Selling our defence bases to property speculators

April 22nd, 2009

The proposal to sell our defence bases and lease them back to the armed forces from their new, private sector landlords is a pretty good example of the short term thinking that is driving the whole process of public private partnerships. Any wishful thinking that such a sale and leaseback operation would not impact on the effectiveness of the armed forces is dreaming. Any short term gains from the sale would be more than offset by the costs of renting (otherwise, where’s the profit incentive for the landlords?) and those costs would eat into the money available to equip, pay and recruit our defence personnel.

Remember, those costs would be accruing within defence budgets at a time when, as the government also said yesterday, the C130 Hercules, P3 Orions and two Anzac frigates all need to be replaced by 2020, and there would be no significant increase of the 1 per cent of GDP New Zealand spent on defence. It would mean that this rent money would be joining defence salaries as a fixed cost, just when major re-equipment needs are coming on stream. There is an alternative. Rather than carry out a firesale of defence properties nationwide, the government would be better advised to revisit its commitment to retain Whenuapai, which in the light of this fresh proposal, looks even more irrational than ever.

As with all other PPPs, the detail of the contracts will crucially determine whether these deals will merely privatise the profits and socialize the losses. Right now with interest rates around 3% there would be a lot of property speculators able to raise money to buy defence bases that will have a guaranteed long term return on investment. But lets suppose that when the recession eventually ends, the legacy of inflation causes the Reserve Bank to crank interest rates back up again – to damp down the inflationary fires that are likely to be raging in the wake of various kinds of stimulus policies.

What happens then? Will those leases be insulated to protect the investor from any such variations in future? And if so, how? And if not, how will the contract protect our defence forces from having their premises re-sold out from under them in mortgagee sales, and their tenancy reviewed upwards by the new landlord? Do we really want our armed forces to have the same security of tenure as a flat-ful of university students?

Plainly the terms of these leases will have to be very carefully calibrated to ensure that the armed forces’ long term security of tenure does not come at an exorbitantly high cost to a limited defence budget. The alternative would be not to go down this path at all, to sell Whenuapai and to cancel the next round of tax cuts. Because this is the kind of necessary capital expenditure nightmare that governments get into, when they allow themselves to indulge a mania for tax cuts that rob them of the revenue to pay for necessary functions.

Hopefully, the upcoming defence review will not also jettison the perspectives that were set out in the Quigley Review, called Defence Beyond 2000. One of the great advantages of that review was that it sought to put defence procurement decisions on a rational footing. Rather then being driven by inter-service rivalry or the latest toys for the boys brochures, or by the desire to keep up with the Joneses in Canberra and Washington, the Quigley Review recommended that our procurement decisions should be based on the conceivable risks within this region over the next 15 years. And on any rational basis, the Quigley Review suggested, those risks in this region were minimal.

Quigley has been proven right. It is not as if there would be no conflict at all, but that this would be at a manageable level. Instead of the prior focus on an alliance largely determined by our partners in Canberra and Washington, New Zealand would play out its international role under the UN umbrella, and concentrate domestically on the protection of our own resources, particularly within the maritime exclusive economic zone. Sensible stuff.

On RNZ this morning, some defence analysts seemed more than ready to throw that rational framework out the window. The defence needs in the South Pacific, it was suggested, should be approached as if this region faced the same threats as anywhere else in the world, including the Middle East. Right, that makes so much sense. Bougainville, Baghdad – who can tell the difference?

By that logic New Zealand plainly needs a missile shield just like the one that the Americans are planning for Poland, to shoot down the nuclear missiles that Iran will surely be sending our way. Maybe we could tack the monthly rental for a missile shield onto the lease conditions that New Zealand will be signing with the property speculators who will soon be owning our defence bases.

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    1. 23 Responses to “Selling our defence bases to property speculators”

    2. By stuart munro on Apr 22, 2009 | Reply

      I think that one of the reasons that NZ’s anti-nuclear stance was received with such bitterness in Washington is that it is a long held ideal among the wild right wing that frames much of US foreign policy, to charge the world for the cost of military ‘protection’.
      The missile shields are merely the latest version of that particularly dubious enterprise.

    3. By Morgan on Apr 22, 2009 | Reply

      That is a shocking idea. How many people have brought apartments in Aucklands CBD not knowing the full extent of having a building on lease hold land costs. How many times do they get reviewed and how expensive are the payments per year (in some cases they are usually extremely high like 12,000 per year, the cost of renting most places out in the suburbs). This has to be the dumbest idea I have heard and I hope its not true.

    4. By dw on Apr 22, 2009 | Reply

      Great post again Gordon. It should be obvious that defence policy and acquisitions be driven by rational threat assessment, but many commentators utterly fail to understand this point. Re the selling bases etc into some form of PPP, when will politicians see through this sham? PPP almost always fails to deliver its supposed benefits, instead almost exclusively favouring the private party to the PPP – just look at the UK and the complete disaster health and transport PPP’s have been. Time to stop feathering the nests of politicians business cronies and forget this stupid idea.

    5. By Cookie on Apr 22, 2009 | Reply

      Defence bases today – schools tomorrow. At some point the landlords will want/need to sell the land. They raise the rents – kick off the tenants and divide up the land for sale.

    6. By Nick on Apr 22, 2009 | Reply

      One can only gasp at the stupidity of the ideologues who believe that PPPs are a good thing for defense. And those who downplay the need for a robust defense strategy where ever we may be. Its bad arithmetic aswell.

      Those who read history can site some great examples of why you do not allow the private sector anywhere near defense, for example Pepys diaries on naval supply to the Royal Navy and the resultant corruption and defeats, or more recently Blackwater and Haliburton in Iraq. Where private interests get involved servicemen die, it is as stark as that, even if it is just the innocuous selling off of facilities, surplus equipment and the introduction of private sector practices (hmmmm look where they have got our economy lately).

      On the need for defense we need only look at Fiji today, the boat people issues in Australia and piracy on shipping lanes we utilise. We have a substantial economic resource around our coasts, just because we are remote does not mean we wont in future have to defend it. Take that stance and you hear “Now dont be silly Winston, those Germans are really very nice guys”.

    7. By Peter Johnstone on Apr 22, 2009 | Reply

      Thanks for highlighting this stupid idea. I’ve seen sale & leaseback in the private sector, where it’s generally used by organisations who are chronically short of cash, or by short sighted managers who think it’s a good idea, and who are generally no longer around when the true costs of doing this are apparent.

      I believe any business should always own its assets if it can afford to, if you are paying rent to other people, you are at their mercy to a large extent, and can face sky rocketing rents in prosperous times.

      DW is right on this – PPP’s in the Health sector in the UK have been a financial disaster.

    8. By Margaret on Apr 22, 2009 | Reply

      Why are people suprised John Key is starting down the track of Privatisation, It is the National way. Dont you remember,
      “the National Party was formed in 1926, in opposition to the Welfare State, Where everyone could stand alone and be totally responsible for themselves”.
      This speech was said by the National Candidate at every forum I attended before the election last year.
      I am not surprised by anything these ruthless businessmen try to impose on the taxpayer of New Zealand, they are creating a country of endentured slaves to their system.

    9. By Adolf Fiinkensein on Apr 22, 2009 | Reply

      Margaret, you don’t quite seem to understand that Clark and Cullen already have created a country of indentured slaves to socialism.

    10. By Mary Hart on Apr 23, 2009 | Reply

      Privatisations & pp partnerships are a lazy slobbish method of generating income which while making a council or government temporarily solvent only creates huge intergenerational debt for our children and their children. Quick-fix solutions such as these are characteristic of drones, clones and half-wits.

    11. By Joe Blow on Apr 23, 2009 | Reply

      It shows how confident NACT has become, when only months into it’s 1st term it’s selling assets. Not that you would get honest John calling it asset sales, more like Pragmatic Privatisation.

    12. By Adolf Fiinkensein on Apr 23, 2009 | Reply

      No no joe Blow. Realists call it selling state owned liabilities. You need to grow up.

    13. By AndrewN on Apr 23, 2009 | Reply

      Personally I’m not too keen on selling land and facilities that are used and needed but the RNZN already subcontracts the running of the Devonport dockyard to Babcocks. This seems to have run pretty successfully. Surely there is room for the Services to subcontract the running of the industrial/commercial aspects of their operations?

    14. By Tom D on Apr 24, 2009 | Reply

      Hey Adolf, talking about selling off state owned liabilities. I would give them $50 for the National and Act MPs and then send them over to Chavez to gain some education.

    15. By senzafine on Apr 24, 2009 | Reply

      Margaret:

      Can you please explain to me how standing alone and being responsible to self makes one a slave?

      I think that you’ll find the opposite is true by definition.

    16. By VCD on Apr 24, 2009 | Reply

      National call it selling state owned liabilities.
      No need for your childish insults.

    17. By RS on Apr 24, 2009 | Reply

      I wonder how long it will be before the Houses of Parliament end up on the market?

    18. By stuart munro on Apr 25, 2009 | Reply

      No Adolf Finklestein, the privatisation of state assets, unless it is rigorously scrutinised, is nothing more nor less than kleptocracy. Those responsible should expect to end their days in prison.

    19. By Adolf Fiinkensein on Apr 25, 2009 | Reply

      Joe Blow and FVD, you invite insults when you write gibberish such as “when only months into it’s 1st term it’s selling assets.”

      There is a Defence Review in which one of the many options for dicussion is the sale and leaseback of some capital assets and you conflate this into your hysterical comment which I have repeated here.

      The truth is, the assets will be sold and leased back under tightly controlled leases in the second term. Along with loss generating liabilities like Kiwibank and TVNZ which are a leech upon the public purse.

      Go suck on it.

    20. By Jum on Apr 26, 2009 | Reply

      New Zealanders shouldn’t be selling anything that endangers our autonomy or our survival, which can be anything from defence to communications, transport, water, food (Monsanto wanting control over the world’s seeds), energy. Given history’s lessons our friends and enemies often cross over.

      I do not trust this government, who promised not to sell any asset in its first term, but realised that they may not get a second term and their backers want to get their grubby little paws on our assets.

      With Douglas, Bassett, NZ Business Roundtable advising National, NZers’ interests will be ignored. As a country, NZ will now become a military target, thanks to the control of a warmongering government bent on playing with ‘the big boys’. Pathetic.

      The psychological games are already being played out on the NZ public by trivialising the work that Helen Clark and Labour put into creating a working formula for world communication and eventual forms of moratoriums on war, and her entry into an important part of the UN work in development for poorer countries.

      By this selfish attitude of cosying up to and assisting the military powers, JKeyll and Hydra will change the whole landscape of the Pacific and earn NZ the reputation as a country that is not interested in peaceful outcomes, but in pointing shotguns at people’s heads. Uni students are now being encouraged to adopt a military future as a bribe to lower fees.

      Labour spent 1% of its budget on defence. Australia spent 2%. Considering the resources at Australia’s disposal, it’s laughable to say Labour is trailing much.

    21. By Jum on Apr 26, 2009 | Reply

      Adolf, obviously you haven’t studied your ‘history’ on where indentured slavery began as I suspect Margaret has. Perhaps she might explain it to you.

      When Douglas and Richardson had finished poisoning our economy many people had to work 3 jobs just to survive. That is indentured slavery to me. There is no time to live, just survive. There is not enough money to progress your situation, just enough to pay a few bills, never all of them.

      There was an interesting doco on Denmark which has a hideously high tax bill, yet the Danish are a happy lot. So are/were NZers in a 2008 survey. We’ll see how long that lasts under the yoke of yokel Key and NAct.

    22. By Tom Semmens on Apr 27, 2009 | Reply

      To all the commentators here, I would be careful in bothering to even respond to this “Adolf Fiinkensein”. It just encourages him and he is one of biggest nutjobs on the blog circuit in this country.

      He believes, for example, that Helen Clark is part of a global conspiracy for “world domination by a UN with its own armed forces”.

      http://nominister.blogspot.com/2009/04/some-very-fishy-dots.html

      I suggest ignoring the troll and it will go away.

    23. By VCD on Apr 27, 2009 | Reply

      …and I thought the ditch jumping Adolf was John Key’s Cabana boy.
      Rude,spoilt,arrogant, (possibly sometimes quite drunk), wrong in historic facts (ie wholly blaming CC’s for all of nz growing mass foriegn debt)- but adolf is not a nutjob.

      Adolfs theory on how the creation of mass foriegn debt occured in NZ was flawed.

    24. By stuart-munro on Apr 28, 2009 | Reply

      The debt creation has also happened in the UK, also under a New Labour government, and one of the interesting comments on the Guardian site, was that this is what you get when politicians are not selected on the basis of some kind of real world success.
      The writer was suggesting the Queen dissolve the current government and try to assemble a bunch of people who were not chronic failures or academic lepers, to resolve the more pressing problems facing their country.

      Professional politicians in New Zealand have not improved the present economy, the long term prospects, the quality or degree of democratic representation, or the health happiness and welfare of New Zealanders.
      This makes a pretty strong argument for reducing their numbers. If they were livestock, you’d cull them.

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