Cunliffe David: Crown Retail Deposit Guarantee Scheme Bill — First Reading Second Reading In Committee 
Cunliffe David: Crown Retail Deposit Guarantee Scheme Bill — First Reading Second Reading In Committee 
[Volume:657;Page:6079] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I rise to take a call in the Committee stage of the Crown Retail Deposit Guarantee Scheme Bill. I want to focus on two particular issues: first the level of consultation on the bill and second the costs in relation to the role of the banks. 
Let us begin with the costs because that issue—the participation or not of the banks and whether that makes a difference—has been raised by several of the speakers from Labour. So far we have been discussing that in qualitative terms. We have said it would be better in principle if those banks that were benefiting from the wholesale guarantee scheme were also in the retail scheme to spread the risk and I presume from the point of view of the fiscal system and the Crown to ensure that there was adequate fee revenue. But we have not yet gone into the details of what that fee revenue is so I thought it would be instructive to look at some of the numbers. 
Fees to date on the retail guarantee scheme in the regulatory impact statement are $87.4 million which is slightly more modest than the $119 million per annum forecast in the original proposal. Here is the rub: of the $87.4 million $81.9 million is fees from banks and only $5.5 million is fees from non-bank financial institutions. So if the banks are out which this Government is prepared to allow the revenue stream to the Crown collapses and arguably the Crown is left holding an elevated average level of risk in the face of a much reduced level of revenue offset. 
The position is even worse if one looks at the interrelationship between the retail guarantee scheme and the wholesale guarantee scheme. These numbers are really quite significant if we go back to the original projections. For the wholesale guarantee scheme overwhelmingly from the bank rather than the non-bank sector the figures are $300 million in the 2008-09 financial year; $450 million—and this is just the fees to the Crown—in 2009-10; $400 million in 2010-11; and $1.15 billion between 2011-12 and 2016-17. That is a total of $2.3 billion in revenue to the Crown in fees from financial institutions for the wholesale scheme alone. It is little wonder then that the banks are perhaps keen not to participate in some of those streams at their choice and the parent banks in Australia we understand are considering their options. 
The point is simply that if the Government is going to allow banks to pick and choose which of the schemes they will maintain a presence in the fee revenue to the Crown will collapse and the taxpayer will be left supporting a riskier bundle of assets. That is a significant issue and I call on the Minister of Finance to take a call to defend that and to say whether and how the remaining revenue streams will sufficiently offset the risk that the Crown is taking. 
There is another issue that has been much the subject of debate in the latter part of the first reading. It is the question raised by the Hon Lianne Dalziel about lack of consultation. Yes it is true as I have previously stated that the Minister has allowed officials to brief Opposition spokespeople and we welcome that. But as my colleague has pointed out that is a poor substitute for a proper select committee process where interested parties the public and members from around the Chamber get to ask formal questions on the record of officials and to deal with the matter in submissions. We do not believe that with the existing scheme going as long as October 2010 there was a necessity to rush this bill through in urgency without at least a limited select committee process. We think that is a matter of regret. 
I guess there is a growing feeling in the community that one of the hallmarks of this Government is either the refusal to consult or the setting up of processes best described as sham consultation. A couple of examples might serve to illustrate the point. The first is of course the Auckland legislation in several tranches. The first one which terminates the existing territorial authorities was rammed through under urgency with no consultation and no select committee process. It terminated the existing institutions thereby making change a veritable fait accompli. The second issue was the subject of the Maori seats for the Auckland super-city. A special committee was set up but the Government did not even refer to the results of that select committee because it had not yet reported. The decision was made in Cabinet without reference to the report and poor old John Carter a decent bloke was left presiding over a select committee that was not a real process. He the Minister responsible for the bill— 
The CHAIRPERSON (Eric Roy) 
: The member will come back to the bill. 
Hon DAVID CUNLIFFE 
: A further example of the lack of consultation is the adult and community education cuts—a matter that I am sure the Government will— 
The CHAIRPERSON (Eric Roy) 
: Can you talk about this bill. 
Hon DAVID CUNLIFFE 
: The reason this is relevant is that this bill is yet another example of the Government dispensing with the select committee process at its behest at its fiat saying: “The poor little public does not need to be troubled with the details of this. We the learned and important members of the Government benches shall decide for the peasants and inform them when the decision is made.” Unfortunately those peasants vote; those people vote and it is very very important— 
Hon Dr Jonathan Coleman 
: Peasants—like they did in the last election! 
Hon DAVID CUNLIFFE 
: That was a quote from the Government. I say to Mr Coleman the electoral maestro of Mt Albert that I would be rather careful if I were him in this regard. 
I sum up the position as follows. The objectives of this bill are reasonable. The option that the Government has chosen which is to broadly extend under somewhat tighter circumstances the life of the retail scheme to match that across the Tasman is a reasonable position to take. I note that the Government is not foreclosing on the option of a permanent deposit guarantee scheme when further research has been done and we look forward to consultation on that matter. 
The issue is in the fine print. The regulatory impact statement was not publicly available. It is on Treasury’s website and people can go to that but it was not publicly available with the bill. The select committee process has not happened at all and we are doing this under urgency for something that does not fall due until October next year. It is not clear why that has been required. The Government has not maintained crucially the position of the previous Government to very politely but firmly say to the banking sector that if it wants the benefits of the wholesale scheme it should be in the retail scheme as well. The numbers prove why that matters. Ninety percent of the revenue to the Crown that covers the Crown’s risk exposure—around $180 billion of risk exposure—is through the banks’ participation in the scheme not the non-bank finance sector’s participation. 
Something we are all agreed on is that the non-bank finance sector needs further work. Of course it was the previous Government that brought in legislation to expand the oversight of the Reserve Bank into that sector and we hope that the current Government will continue the work to clean up and tidy up the non-bank financial institutions. The question that we will find out from hindsight is whether the BB rating and the move to require participation on that basis will be a step too far for some. We hope that the Government will continue to work constructively with the sector and with the Opposition to iron out those speed bumps and we look forward to working with the Government on the long-term deposit guarantee scheme if that occurs. Thank you Mr Chairman.