7. Hon DAVID CUNLIFFE (Labour—New Lynn) Minister of Finance) Link to this
to the Minister of Finance
to theIs it correct that Treasury was in the Prime Minister’s office “week after week, month after month” telling him South Canterbury Finance was going bankrupt?
Hon BILL ENGLISH (Minister of Finance) Link to this
Yes, it is correct. Both the Prime Minister and I received regular updates from Treasury on South Canterbury Finance. The advice for some time was that the company was in difficulty and that there was only a slim chance that it could trade its way out of its difficulties, although for quite a long period that was always possible. In the event, it was not able to raise capital or trade its way out. South Canterbury Finance was placed in receivership in August 2010, and payments were made to deposit holders under the Crown Retail Deposit Guarantee Scheme, which was implemented by the then Labour Government.
Hon David Cunliffe Link to this
After receiving these warnings, according to the Prime Minister, from the day he was elected, “week after week, month after month”, did the Government put South Canterbury Finance into statutory management by mid-2009 to insulate the taxpayer from risk; if not, why not?
The process for statutory management is a different one. It is done by a recommendation of the Securities Commission, and it did not make that recommendation. As a general point, because of the size of South Canterbury Finance and a belief that there was always a chance that it could trade its way through, the Government ensured that there was every opportunity for South Canterbury Finance to fix its own problems before there was a call on the taxpayer. As it has turned out, it appears that the company was in so much trouble even by early 2009 that whatever we did would not have made much difference.
Hon David Cunliffe Link to this
After receiving such warnings from the day he was elected, “week after week, month after month”, did the Government end the Crown guarantee to South Canterbury Finance to insulate the taxpayer from risk, or did it agree to renew the guarantee; if so, when?
At all times South Canterbury Finance remained in compliance with the original deed of guarantee. The member will be familiar with that deed of guarantee, because it was his Government that drew it up. Actually, South Canterbury Finance was signed into that guarantee on the morning of the day the current Government was sworn in. So it was not a decision made by us; it was made by Treasury, and it was consistent with the scheme that that member put in place.
Hon David Cunliffe Link to this
I raise a point of order, Mr Speaker. I asked the Minister whether he had made a decision to renew the company’s guarantee, and instead he answered that Treasury—
Mr SPEAKERThe member will remember what I said about members resuming their seats immediately. If that was all the member had asked in his question, his point of order would have been fine, but he preceded that part of the question with another part, and the Minister answered the other part of the question.
Jo GoodhewNot at all. What advice did the Government receive on options to recapitalise South Canterbury Finance and the impact these would have had on the taxpayer?
Both Treasury and their independent advisers dealt with a number of propositions over a period of time, and their advice was consistent—all propositions would have resulted in extra cost and risk to taxpayers, and none of them were recommended to the Government. Anyone who wants to check this out can look through the over 100 documents that have been published on the Treasury and Reserve Bank websites. I will take just one piece of advice from KordaMentha. It said: “SCF promotes the offer as crystallising the Crown’s loss.”—this is referring to one of the offers—“This is not correct. [The] proposal does however cap the Crown’s recoveries. In essence, the Crown carries the downside risk under this structure but has no ability to access any potential upside.” In short, the Government would have been mugs to accept any of the proposals that were put to it.
Hon David Cunliffe Link to this
What did he do to save taxpayers $1.2 billion when auditors Ernst and Young in April 2010, 6 months before South Canterbury Finance went under, stated that South Canterbury Finance’s directors’ assumptions “contained ‘uncertainties’ regarding the ‘adequacy of funding and liquidity; sufficiency of capital, and compliance with regulatory requirements’ in its trust deed and its trustee waivers.”, and did the Government renew the South Canterbury Finance guarantee after that warning?
There is nothing in that that was news. A lot of it was known by mid-2009. I just want to remind the member that the guarantee he put in place did not guarantee the company; it guaranteed the depositors. It was a deposit guarantee scheme. The Government’s job, bearing in mind that we had an obligation of $1.6 billion to the depositors, was to give the company every opportunity to trade through in order to meet its obligations to depositors before taxpayers. If we had leapt in earlier, there would have been no opportunity for the company to fix its own problems.
Hon David Cunliffe Link to this
Will the Minister release in full the offer documents from Permanent Investments, Ngāi Tahu, and the New Zealand Superannuation Fund, which were declined in September 2010; if not, how can he justify his claim that it was prudent to decline this offer, which would have limited taxpayer liability to around half a billion dollars instead of the $1.2 billion and climbing so far taken to book?
The reason the Government will not issue the full offer documents is because those offers are made under confidentiality agreements. If we release those documents, we will never be able to do business with anyone again. Secondly, the member is simply wrong about that proposition. The proposition was scrutinised by officials; his $500 million figure is wrong. Like other propositions, it was going to ensure that the buyers made money and the Crown took all the losses. KordaMentha would make the same conclusion about that proposition as other offers. That proposition meant downside for the Crown and no upside and should not be accepted.
Hon David Cunliffe Link to this
I seek leave to table a Treasury document showing that as of 23 March 2010 Treasury’s estimate of liability in South Canterbury Finance was $696 million, a far cry—
Hon David Cunliffe Link to this
I seek leave to table a Treasury document quantifying in February 2010 the South Canterbury Finance liability at $696 million, and showing the derivation of that amount.
Hon David Cunliffe Link to this
I seek leave to table a Treasury document that sets out a number of resolution options for the Government, none of which conveyed an estimate of liability anywhere near the liability that has actually come to pass.
Hon David Cunliffe Link to this
I seek leave to table a Treasury file note recounting a meeting that took place between Treasury and the Reserve Bank on 3 August 2010, which shows the debate on whether South Canterbury Finance should have been placed into statutory management.
Hon David Cunliffe Link to this
I seek leave to table a Treasury report dated 3 August 2010 that updates the Minister on proposals made that would have limited the Crown’s liability to debt—
I raise a point of order, Mr Speaker. As I said in answer to the question, all of these documents are available on the Treasury and Reserve Bank websites. Generally, you have drawn a bit of a line on tabling between those things that are readily publicly available, such as press clippings or items from Government websites, and those that are not. We could go through the whole hundred if the member wanted to table them, but they are all available on the websites.
I think that is a pretty sensible point the member makes. I mean, I am not to know whether documents are available on departmental websites when members seek to table them, but those who are particularly interested in following issues clearly are. I will seek the member’s guidance: if those documents are from the Treasury website, then I think we have taken sufficient time tabling them.
Hon David Cunliffe Link to this
I raise a point of order, Mr Speaker. Under your ruling, earlier leave to table documents was put to the House; on some occasions members objected, and on some occasions they did not. I seek your advice: for those times where members did not object at the time, why would we be revisiting that—
I am on my feet. My advice is very simple: members should use their discretion when seeking to take the time of the House to table documents. Had the member tabled one or two documents from a website there may have been no objection to it, but since he has taken considerable time of the House to table a number of documents available on the Treasury website, members are clearly not happy. I must say that as Speaker I am not happy about that, either, and that is why we will not consider any more documents from the Treasury website today.
Hon David Cunliffe Link to this
I raise a point of order, Mr Speaker. If it were a question of timeliness, why did the Minister of Finance leap to his feet only after I had completed—
That is unnecessary. The House accepted in good faith the member seeking leave to table a number of documents. That went on for a considerable period of time, and I think he became unreasonable. If the documents were all unavailable to the public I would have no objection, but since they are readily available to the public I think we are taking unnecessarily time in the House.