4. Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
to the Minister of Finance
What was the maximum estimated Crown liability under the recapitalisation bid proposed by Permanent Investments Ltd in August 2010, as assessed by KordaMentha in its report to Treasury of 26 August 2010?
Hon BILL ENGLISH (Minister of Finance) Link to this
There was no maximum estimated Crown liability, and certainly no terms of contract that would limit the Crown’s liability. The member should read the advice of the receiver, who scrutinised the contract documents in detail; he will find that the assertions he is making in public are simply wrong. That is reflecting on his competence, not on the deal.
Hon David Cunliffe Link to this
Can the Minister confirm that the KordaMentha report estimated that the Crown’s exposure to placing South Canterbury Finance into receivership was “approximately 500 million dollars”, and that its exposure to the leading recapitalisation proposal was “between $400 and $500 million”; if so, can he explain why he chose the more expensive option?
The nature of the deal that the member is referring to is similar to any number of other approaches that Treasury and the receiver had about South Canterbury Finance. First, the people making the offer expected the Government to lend them the money to buy the company, and, secondly, there was no limit on the Crown liability. Any loans that the buyers found that they did not like were going to be handed back to the Government. So the assertion that there was some limit on the Crown’s liability is simply wrong.
Hon David Cunliffe Link to this
Noting the email from Treasury dated 25 August 2010 that states “The Minister has developed an appetite for receivership, so it might pay to clear the table of other options.”—
Hon David Cunliffe Link to this
—oh dear—can he confirm that the Treasury email in fact reflected his instructions or preferences?
No, I cannot confirm that, but what I can confirm is that there was no deal put to officials that limited the Crown’s liability. The deals that were considered involved—
Hon David Cunliffe Link to this
I raise a point of order, Mr Speaker. The question was very straight and very specific. It referred to an explicit email—
Mr SPEAKERWe established yesterday that when I get to my feet, all members resume their seats. The member’s question was answered quite explicitly. The Minister said he could not confirm that. But he was going on further than the question asked, and I think we had heard sufficient, because the question was a very limited one.
Hon David Cunliffe Link to this
Given that KordaMentha’s estimate of Crown exposure under the recapitalisation proposal of $400 million to $500 million was similar to the Opposition’s estimate of “around $500 million”, why did the Prime Minister state the Opposition’s estimates were “nonsense” when they were nearly identical to those made by his own leading specialist adviser?
Probably because most of the things the Opposition has said about this have been nonsense. No such deal exists as the member has been talking about. The real problem with South Canterbury Finance was the large number of bad loans, and it took a couple of years to get to the bottom of that heap. The member is talking nonsense.
Hon David Cunliffe Link to this
Given that the final cost to the Crown of the bail-out of South Canterbury Finance will be around three times the Crown’s original estimated cost, how can New Zealanders have confidence that the cost of supporting AMI Insurance will be limited to the $500 million equity injection he has so far disclosed; and if it is not the full estimated cost of supporting AMI Insurance, can he please advise the House now what the total cost is estimated to be?
Hon Dr Nick SmithA very good question: what was Labour doing for the 9 years it was in Government about regulating the insurance industry?
Hon David Cunliffe Link to this
I raise a point of order, Mr Speaker. A straight question was asked: what was the final estimated cost of supporting AMI Insurance? It is a serious matter. The Minister is not at liberty to answer—
The member has made his point of order. We do not need to go on any further. I think the Minister could have made a better attempt to answer the question. The question was not quite as simple as the member portrayed at the end; it was a much longer question than that. But the Minister should make some attempt to answer it.
The public can expect the Government will manage the arrangement with AMI Insurance in order to minimise the taxpayers’ losses. I might say we will be relying on the same kind of advice we relied on with regard to South Canterbury Finance. The member should listen to what KordaMentha, which he is quoting, said about the offer he is promoting: “[South Canterbury Finance] promote the offer as crystallising the Crown’s loss; that is not correct.” And the member promotes the offer as crystallising the Crown’s loss. This is not correct. So he knows that it is not correct but continues to say so, trying to trade on what credibility he might still have.
Hon David Cunliffe Link to this
I seek leave to table the report to Treasury of 26 August 2010 by KordaMentha on South Canterbury Finance, which quantifies the Crown’s estimated loss on this receivership proposal as around $500 million. [ Interruption]