Norman Russel William: Ministerial Statements — South Canterbury Finance—Receivership and Retail Deposit Guarantee Scheme 
Norman Russel William: Ministerial Statements — South Canterbury Finance—Receivership and Retail Deposit Guarantee Scheme 
[Volume:666;Page:13757] 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I stand to speak today on the bail-out of South Canterbury Finance. This Parliament has often had the debate about regulation versus non-regulation. That debate has raged back and forth in New Zealand politics and global politics for many years. The side that opposed regulation dominated New Zealand politics through the 1980s and 1990s. That side of policy making and those who supported a laissez-faire approach dominated policy making in terms of how we should regulate the finance sector. Today we are witnessing the end result of the victory of a laissez-faire approach to the regulation of the banking and finance sector. Today we should draw the conclusions that those who have advocated very strongly for nearly three decades that we should not regulate the private sector—those who have advocated against the regulation of buildings for example or against the regulation of the finance sector—were wrong. The New Zealand public are having to pick up the bill for the cost of the victory of the new right in the debate between those who wanted to regulate the finance sector and the building industry and those who did not. 
At the end of the day the reality was that the finance sector and the banking sector were too big to fail. All of us in this House decided that we needed to support a retail deposit scheme and a wholesale deposit scheme in order to protect the New Zealand economy because these institutions were too large to fail. Once the institutions were too large to fail there was little alternative but for the taxpayer to step in when they were in trouble. If the taxpayer has to fork out billions of dollars or the hundreds of millions of dollars to bail out finance companies surely the taxpayer has a right to ensure that those finance companies are run in a way that will not result in the taxpayer being exposed to a massive liability. Surely once and for all we should put to bed the idea that we can simply let the finance sector and the building industry and whoever else go ahead unregulated when the costs to the community and to the Government and taxpayers of New Zealand are measured in the order of billions of dollars. Let us remember that the leaky housing fiasco was a result of a laissez-faire approach to building regulation and it has cost the country somewhere in the order of $20 billion. The issue we have in front of us South Canterbury Finance will cost the country in the order of hundreds of millions of dollars. If the taxpayer and the people of New Zealand are to pick up the tab when these companies fail surely the taxpayer and the people of New Zealand have a right to regulate them in such a way that they will not expose us to these gigantic failures. For those who have been engaged in this debate back and forth in this House over many years I say that the verdict is in. The verdict is in front of us right now in this House with this bail-out of South Canterbury Finance. 
The next issue I shall raise is the overseas ownership of land and I would be very interested in the Minister of Finance’s view on this. South Canterbury Finance has Dairy Holdings which in turn is the owner of large tracts of South Island dairy country. I would be very interested in the Minister’s view about whether the Government can control whether that land falls into foreign ownership during the receivership process and whether the Government has a preference. I assume it does have a preference. If it has a preference what mechanisms are available to the Government to ensure that these large areas of farmland do not fall into foreign ownership? It is a critical issue that both the Prime Minister and the Minister of Finance have spoken about on numerous occasions. 
The third point I make is on what I would call the unsustainable development that South Canterbury Finance was involved in. One of the issues for New Zealand is that not only was it unsustainable financially but also it was unsustainable environmentally. The environmental impact of the great dairy revolution across the South Island of New Zealand particularly in Canterbury and Southland has been enormous. The giant dairy revolution has an enormous environmental impact. It is time we learnt the lessons about the sustainability of these kinds of developments not only in financial terms but also in environmental terms. I was recently in Dunsandel. The people of Dunsandel are surrounded by cows from Dairy Holdings and it has had a big impact on them. There are issues of environmental as well as financial sustainability. 
The fourth issue is farming for capital gains. South Canterbury Finance and a large part of the dairy boom have been farming for capital gains. There have been relatively small real returns. The main returns and the whole system were based on the idea of capital gains as the value of land went up and up and up. Farming for capital gain is totally unsustainable. If we think we can build a financial system in which the way everyone makes money is through increases to the value of rural land year on year on year we are not taking a sustainable approach to financial development. Those who thought we could continue on the dairy boom which was based on capital gains and the value of farmland held a completely mistaken belief. 
The fifth issue I wish to touch on is the issue of equity. New Zealand taxpayers will be handing over many hundreds of millions of dollars. There is some debate about the figure but I ask the Government to look at the issue of equity. We all understand the necessity of the Crown Retail Deposit Guarantee Scheme but while on the one hand we are handing over hundreds of millions of dollars on the other hand we are penny-pinching right across Government spending for very small gains. The abolition of night classes which saved the Government a handful of millions of dollars has to be seen in the context of a bail-out that has cost the Government and the people of New Zealand hundreds of millions of dollars. There is an issue of equity. When we are bailing out those investors as I think we all agree we have little choice but to do we also need to put into context the issue of equity and all the other cuts the Government is making. 
Another example involves people who are uninsured in Christchurch right now. The cost of paying out those people who were uninsured would be relatively small in comparison with the cost of these bail-outs of finance companies. Surely when we look at supporting those who are uninsured in Christchurch as an issue of equity we should look at the cost of this bail-out of South Canterbury Finance. 
The first of my last two points relates to the Minister of Finance’s very strong defence of the Government’s role in all of this. To some degree the Minister has attempted to answer Mr Cunliffe’s questions on the role of the Government. But if the Government has nothing to fear will it support an open inquiry into the question of how all this happened? I am sure that the members of the Finance and Expenditure Committee would be very interested in an open inquiry into the biggest bail-out in New Zealand’s history. If the Government genuinely has nothing to hide and if it feels that all sides of politics are implicated in this bail-out will it be open to a Finance and Expenditure Committee inquiry into the bail-out of South Canterbury Finance? That seems to me to be one of the critical issues. 
Finally I can only reiterate what Mr Cunliffe said in terms of the use of parliamentary urgency. Urgency should be used only when it is absolutely essential and the matters being considered are urgent. We put through the renewed Crown Retail Deposit Guarantee Scheme under urgency and we are now discovering that there are some very big issues associated with that legislation. It would have been much much better if we had gone through a proper select committee process. I encourage the Minister of Finance to look at that. 
I ask the Minister of Finance to address just two issues: whether he will support an inquiry into the bail-out and what he will do about overseas ownership of the land that was in effect owned by South Canterbury Finance.