8. Hon TREVOR MALLARD (Labour—Hutt South) Link to this
to the Prime Minister
Did he tell a meeting in Timaru last week “The entire time I’ve been Prime Minister I’ve had Treasury in my office week after week, month after month, telling me South Canterbury Finance was going bankrupt”?
Rt Hon JOHN KEY (Prime Minister) Link to this
I do not have the transcript with me and I cannot recall exactly what I said, but I certainly received regular updates from Treasury on South Canterbury Finance. The Government was aware of the company’s financial difficulties, but our advice was that there was a chance, however slim it might have been, that South Canterbury Finance could trade its way out of its difficulties. In fact, that did not happen. South Canterbury Finance was placed in receivership in August 2010, and payments were made to deposit holders under the terms of the 2008 Crown Retail Deposit Guarantee Scheme devised and implemented by the then Labour Government.
Hon Trevor Mallard Link to this
If Treasury advice was that there was a chance that the firm was going bankrupt, why did he tell people in Timaru that Treasury told him it was going bankrupt?
The point was that unless the firm could find a buyer and therefore a capital injection, it was highly likely that it would go bankrupt. In fact, it could not find a buyer and it did go bankrupt.
Hon Trevor Mallard Link to this
How much would the Crown have saved if the Government had taken the initial Treasury advice and not allowed South Canterbury Finance into the guarantee scheme because, as Treasury advised him, it was never compliant with the scheme?
My understanding is that that was arranged by the previous Labour Government, and as per the ministerial statement to Parliament, South Canterbury Finance was admitted to the scheme on 19 November 2008, which happened to be the day that this Government was sworn in.
Hon Trevor Mallard Link to this
Was the signature that brought South Canterbury Finance into the scheme that of John Whitehead, on behalf of Bill English?
It was most probably on advice given to the then Labour Government on the scheme it devised at the time. But I think it is worth remembering why Michael Cullen wanted South Canterbury Finance to go into the scheme.
Yes, Michael Cullen did. The reason was quite simple: if South Canterbury Finance, along with other finance companies, had not gone into the scheme, as the member would know as a former associate finance spokesperson, those companies would have gone bankrupt. The level playing field was changed at the point that the then Labour Government—by the way, at the Labour Party conference at the start of Labour’s election campaign—announced the scheme.
Jo GoodhewWith hindsight, is there anything that this Government could have done differently in order to lower the cost to taxpayers?
No. Once the Crown guarantee was made available to finance companies by the previous Government and South Canterbury Finance was admitted to the scheme in 2008, the die was effectively cast. It became evident over time that the company had made bad loans, and under the terms of the scheme taxpayers were legally obliged to make good any losses to deposit holders. No amount of wishful thinking and none of the arrangements suggested by the previous prospective buyers can alter that fact. It is sad that the Labour Government did not work that out when it announced the scheme at the Labour Party conference.
Hon Trevor Mallard Link to this
Subsequent to the initial bringing into the scheme of South Canterbury Finance under the signature of Mr English, were there two further opportunities to take it out that the National Government decided not to take up, which therefore cost the Crown over an extra billion dollars?
No. Firstly, as the Minister of Finance said in his ministerial statement to Parliament on South Canterbury Finance, despite the deteriorating position South Canterbury Finance remained in compliance with the deed of guarantee, and as such there was no ability or cause for the Crown to withdraw its guarantee. Secondly, South Canterbury Finance failed under your scheme, not the—
Mr SPEAKER
Hon Rodney HideHas the Prime Minister seen Phil Goff’s call, in the wake of the South Canterbury Finance collapse, for the entire Government to resign, and what is his response to Phil Goff’s secret election strategy?