Treasury contemplates turning SOEs into co-ops

I was at a conference recently about co-operatives and their role in the twenty-first century, and heard something interesting from Girol Karacaoglu, the Treasury’s chief economist.

Karacaoglu, who used to run what is now the Co-operative Bank and has been a big supporter of this conference, was chairing a session entitled ‘Cooperatives as an alternative to state owned enterprises’.

The idea – which has been used by the UK Conservative party – is that public agencies could be spun off into separate bodies, but rather than simply being privatised, they could be turned into co-operatives in which every staff member has a say in running the organisation.

The idea has had a mixed reception even among people who like co-operatives, because they see it as part of breaking up the state and something that will end up with privatisation anyway, because these co-operatives will (in most cases) have to compete for contracts with much bigger multinationals, and inevitably lose out.

Anyway, Karacaoglu’s presence was a clear signal of Treasury interest in the idea. And when asked directly, he said Finance Minister Bill English had been in the UK two years ago, heard about the idea, and come back and said: “This is something we should be looking at.”

Not that action was imminent, Karacaoglu added: “Nobody in New Zealand as far as I know is very interested in it … It’s a matter of putting these arguments in front of decision-makers … Yes, there’s interest, but at the moment no-one is actively pursuing it.”

So it was hardly a ringing endorsement – but even a minimal level of interest (by Karacaoglu, if not his colleagues) is interesting.

Karacaoglu’s other comment of note was on the possible sale of state houses to community groups – and, if that fails, to companies interested in running state housing.

Since charities may not want (or be able) to buy state houses at their current market value, ministers have been asked if they will sell them off at bargain basement prices, as happened in the 1990s.

So far ministers have been a bit coy on that question, but Karacaoglu was more direct. “Government is willing to wear the valuation consequences of that [sell-off], if we can get to the right solution,” he said.

“We are fully aware that the transfer could be painful in a valuation sense.”

That sounds like a below-market-price sell-off is in the works, then.