Parker David: Questions for Oral Answer — Questions to Ministers 
Parker David: Questions for Oral Answer — Questions to Ministers 
[Volume:678;Page:1505] 
9. 
Hon DAVID PARKER (Labour) 
 to the  
Minister of Finance 
: What written reports did he receive from the Treasury during the 5 months after his appointment as Minister of Finance in late 2008 describing the increases in deposits in finance companies after they entered the Crown guarantee scheme as referred to in paragraphs 6.2 and 6.5 of the Auditor-General’s performance audit report on the Treasury’s handling of the Crown Retail Deposit Scheme and what did those reports tell him if anything about how much the Crown’s exposure to those financial companies had increased? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 Before I address the details of that question I just want to remind the member that the point of the deposit guarantee scheme which was set up by the previous Government in 2008 was to protect depositors in extraordinary financial times and administration of the scheme was delegated to the Secretary to the Treasury. The risk that finance company deposits would increase was recognised by the previous Government when it set up the scheme. Indeed allowing the institutions to continue lending was one of the scheme’s main aims. In terms of the member’s question I received no written Treasury reports specifically about the increase in deposits although I discussed the management of risks associated with the scheme regularly and intensively with Treasury.  
Hon David Parker 
: In the light of the fact that he received no reports during that period to that effect is he aware that the Auditor-General’s report says: “It took 5 months for the Treasury to begin monitoring” and that South Canterbury Finance’s deposit base increased by 25 percent in the first 4 months and it increased its loans including many new loans capitalising interest—in other words Ponzi schemes—and second mortgages all of which increased the risk profile under the guarantee? 
Hon BILL ENGLISH 
: I did not say I received no reports; I said I had received no written reports but the matters were discussed extensively. As the Auditor-General has already pointed out in the early stages of the scheme Treasury did not have immediately in place the kinds of arrangements you would expect for the management of such a large liability. But can I also remind the member that in early 2009 now 3 years ago South Canterbury Finance was regarded as a large strong sound finance company but in hindsight it now appears that its bad lending practices meant that regardless of the guarantee it was going to fail because of the impact of the global financial crisis. 
Hon David Parker 
: Has he heard that Treasury’s main excuse for not monitoring finance companies or advising the Minister—and I am not blaming the Minister here—as advised by the Auditor-General to the Finance and Expenditure Committee yesterday was that Treasury does not like to intervene in finance markets; and does he agree with the Auditor-General that that does not withstand scrutiny because the Crown had already intervened through the grant of the guarantee and should have been guarding against that risk growing unwisely? 
Hon BILL ENGLISH 
: Yes I have heard that but we need to bear in mind that the deposit guarantee scheme as set up by the previous Government was correctly focused on protecting the depositors. It was not intended as a means of running the companies. As I said to the member earlier South Canterbury Finance was regarded as a big strong successful soundly run finance company. It actually took most of 2009 for anyone to get enough information about its activities to understand that it was likely to struggle to survive and matters went on for another 6 or 8 months with every effort being made to protect the taxpayer by supporting South Canterbury to trade through. As it happened it could not. 
Hon David Parker 
: Will he support Treasury appearing before the Finance and Expenditure Committee to answer questions about the Auditor-General’s criticism of Treasury’s monitoring and its failures to advise you as Minister which may have caused $100 million or more extra and avoidable cost to taxpayers? 
Hon BILL ENGLISH 
: That is a matter for the select committee. It is not within the Minister’s purview. However I would ask the member to consider this issue: that although some people say there should have been more intervention no one has actually said what that intervention should have been short of becoming deemed directors of the company and therefore essentially taking over the running of it and that as I understand it was never the intention even of the previous Labour Government when it set up the guarantee. 
Hon David Parker 
: I raise a point of order Mr Speaker. My question was not whether he believed that the Finance and Expenditure Committee should have Treasury in front of it. That is for the Finance and Expenditure Committee. My question was whether he would support Treasury appearing in front of the Finance and Expenditure Committee to answer the Auditor-General’s criticisms.  
Mr SPEAKER 
: That was indeed the question. It would be helpful if the Minister were to answer that because that was the absolute thrust of the question—whether the Minister would support Treasury appearing in front of the select committee. The Minister made it clear he thought it was the select committee’s responsibility but the question asked for an opinion—whether the Minister would support it—and some attempt to answer that would be helpful.  
Hon BILL ENGLISH 
: I do not take a view about that. It is hypothetical. The committee will make up its own mind whether it wants to get Treasury in. All public agencies know they are open to parliamentary scrutiny.