Should Government be involved in the markets?

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Should Government be involved in the power market?

By Mr Balarama Lauder

I was a member of the Labour Party for four years and before that a member of the Green Party for the same amount of time.  My time at the Labour Party I set up and was chairperson of Young Labour Nelson. As a member of the Nelson LEC I was one of their respective at last year’s AGM.  Where I was the main speaker  in support or the TPPA. As you can imagine speaking about free-market ideas and free-trade to the to the Labour Party at least I found not an easy task but in the end their repressive did vote for the TPPA. I have also studied economics and business for eight years. So here is what I think NZ Power will look like and some information on how it may work and some benefits to New Zealand.

As far as I know NZ Power will most likely be set up as a government owned company that will buy power at the wholesale price and on sell this to the New Zealand public. NZ Power will need to work out its cost price that’s  (fixed costs + variable costs) do this for all four quarters of the financial year, then take the average cost price then you times the  average cost price by three and you will have the best point of sales to the public.

That would cover NZ Powers cost expansion plans and a little profit. If the numbers are to be believed New Zealand power companies, market price is ten times the real cost price of the most expensive way we can generate power. You can see how this business model can make a profit, for the government and bring down the power the bill for the average Kiwi.

NZ Power will need to play by the rules of the free-market this will mean no tax breaks or government subsides. Once NZ Power is set up the company wins or loses on its own merits those are the rules of the free-market. There should not be any government intervention on the rules of the free market. The government has the right to set up government owned companies that operates in the free-market. These companies should make a profit and they need to play by the rules.

Some people believe that government should not make a profit but at the same time want a balanced budget less tax and more government spending on social services. You can see something will have to give. Is it more tax or spending cuts? But what if I told you there is a third a way where we can have balanced budget and at the same time not have the unpopular spending cuts. It’s to grow our economy that’s what most economist and business owners will tell you. The best way to get out of debt. Bring down unemployment and increase the government tax take is growth.

The more income the government generates in the free-market the less tax we could pay in the long-term. This will give the government more money to spend on improving social services.

But the government does not have the right to pick winners and losers in the free-market and needs to play by the rules and should never have that right.

Thanks for reading.

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