Parker David: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeParker David: Questions for Oral Answer — Questions to Ministers[Sitting date: 05 November 2013. Volume:694;Page:14309. Text is incorporated into the Bound Volume.]4.Hon DAVID PARKER (Deputy Leader—Labour) to theMinister of Finance: Does he agree with IAG’s submission to the Commerce Commission that “there is real potential for major banks to begin underwriting their own general insurance products and to compete directly with the incumbent insurance companies at the underwriting level as they already do at a retail level of the insurance market”?Hon BILL ENGLISH (Minister of Finance): I have no responsibility for the opinion of IAG New Zealand but I can give the member the benefit of the experience of watching and working closely with the Reserve Bank to reduce the risks of our banking system to the New Zealand taxpayer. There have been 3 or 4 years where capital requirements have been increased the core funding ratio has been increased and we have put in place an open bank resolution system. The idea of a bank taking on moreinsurance risk is about the dumbest proposal that could possibly be made in the light on the events following the global financial crisis. The member should think very carefully before putting forward a policy that heads in exactly the opposite direction to where every other country in the world is heading.Hon David Parker: Am I correct then to infer that he does not support the creation of a Kiwibank-style insurer to serve New Zealand consumers which would reduce the dominance of overseas-owned insurers keep profits in New Zealand and bring added competition added flexibility and choice to New Zealanders?Hon BILL ENGLISH: That is exactly the misleading pitch around this proposition. If there is one thing every taxpayer in the developed world now understands but the Labour Party does not it is that the risk would be on taxpayers—taxpayers in Ireland Spain the US and the UK. A billion-dollar impost on New Zealand taxpayers arises exactly from financial institutions taking too much risk and loading it on to the Government. That is why his proposition is stupid.Hon David Parker: Why is spending hundreds of millions of dollars of taxpayers’ money on a failed asset sale programme and $30 million on a taxpayer subsidy for the benefit of Rio Tinto a better use of taxpayer-funded resources than creating a publicly owned insurance company that acts in the interests of New Zealanders?Hon BILL ENGLISH: Well I will tell the member why: in the case of the electricity companies everyone has now come to understand that electricity demand in New Zealand is dropping and secondly there is a significant risk around weather carried by those companies. We have now shifted half of that risk off the taxpayer to investors in the public market because we want to avoid the taxpayer having to take the kinds of risks that have destroyed public finances in other developed countries. That is why the Government taking on even more insurance risk than it currently holds is crazy. We have already got to pay the bill for $7 billion worth of Earthquake Commission risk. Why would we take on more other insurance risk?Hon David Parker: Does he agree with Steven Joyce that a State-backed insurance company acting in a competitive market would be “a radical shift into a state-controlled economy reminiscent of the 1970s”; if so why would John Key take a “radical shift into a state-controlled economy” by proposing the Crown consider an equity stake in Chorus rather than just enforce the ultra-fast broadband contract?Hon BILL ENGLISH: I agree with Mr Joyce. I recall the Opposition being very critical of the National Government having to pay out $1 billion under the South Canterbury Finance guarantee. We also have to pay out billions to back the Earthquake Commission. We already have taken a lot of insurance risk that has gone wrong and that is why I support Mr Joyce’s view because there are international markets and insurance companies that are better able to manage insurance risk. In the last 5 years we have had plenty of examples of why the Government and the taxpayer are not in a good position to manage that risk or pay the bills when it goes wrong. It is a dumb idea.Hon David Parker: Why would John Key take “a radical shift into a state-controlled economy” by proposing that the Crown consider an equity stake in Chorus rather than enforce the ultra-fast broadband contract?Hon BILL ENGLISH: First of all the Prime Minister has not proposed that. Secondly what is surprising here is that when we have had the biggest manifestation of risk it going wrong and its impact on taxpayers in 100 years the Labour Party still does not get it.Hon David Parker: Why should anyone accept what the Minister of Finance says about KiwiAssure when 10 years ago he was pouring scorn on Kiwibank saying it was “a small bank that has got no long-term viability.”?Hon BILL ENGLISH: It is a small bank and it has never paid a dividend. It is great that it meets the needs of New Zealanders but it is certainly not an argument for creating a parallel insurance company. It is absolutely clear from our experience with the Earthquake Commission AMI Insurance and South Canterbury Finance that when the taxpayer has to underwrite this kind of risk it can go wrong and taxpayers can be up for billions of dollars. Having low-income people working in the rain paying their PAYE and underwriting financial risk is as dumb an idea as you can have in the 2020s.Rt Hon Winston Peters: Why would any sane New Zealander believe that last diatribe given that just 10 years ago when the Cullen fund was announced he said the very same thing about that then went down just last week to its 10-year celebration and humbly had to admit what a fool he was?Hon BILL ENGLISH: Well as the member will know because he was there I did not say that. I did praise Dr Cullen for finding a way of stopping the Labour caucus spending billions of dollars in surpluses. If Dr Cullen had been there he would have said that that was why he set up the Superannuation Fund—to protect New Zealand from the Labour caucus.