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Labour's Cunliffe calls on Finance Minister English to resign over South Canterbury Finance handling

Labour's Cunliffe calls on Finance Minister English to resign over South Canterbury Finance handling

The Labour party is calling on Finance Minister Bill English to resign over the government's handling of South Canterbury Finance last year, saying bids for the failed company's loan book should not have been turned away as government moved to put SCF into receivership.

Cunliffe's comments followed news yesterday that the government's accounts would take another NZ$300 million hit from the downward revaluation of South Canterbury Finance related party loans. Gross losses from SCF would now be in the region of NZ$1.1 billion, Prime Minister John Key said yesterday.

South Canterbury was placed in receivership in August 2010 owing 35,000 investors NZ$1.6 billion. On top of that, government paid NZ$175 million to SCF's leading creditor Torchlight so that the Crown would be first in line for proceeds from the receivership of the company.

Prime Minister John Key reiterated to journalists this morning that government would be worse off in terms of losses sustained from the collapse if it had accepted any of the bids it had on the table, due to provisions that government would underwrite losses that arose.

The bids Key referred to included this one from Sydney-based businessman Duncan Saville, which did not offer any cash up-front. meant the Crown carried any downside risks, and was not eligible for any upside risks from the loan book.

'English should resign'

Labour Finance spokesman David Cunliffe this morning made the call for English's resignation, saying the National Party's mishandling of South Canterbury Finance was a disaster of epic proportions.

“Bill English and company turned down recapitalisation offers that would have limited taxpayer costs for SCF to around NZ$500 million,” Cunliffe said.

“Instead National insisted on throwing it into receivership. National has grossly mishandled the issue. Losses have already reached NZ$1.2 billion and are still climbing,” he said.

“The extra NZ$700 million lost to the taxpayer is in effect roughly equivalent to all the new money John Key has just cut out of this year’s budget.

“It just doesn’t stack up. Reputable bidders like the New Zealand Super Fund, Ngāi Tahu and a major international investment bank were turned away. Assets were left to rot in receivership, and it’s no surprise their value collapsed," Cunliffe said.

However, Labour leader Phil Goff this morning would not say whether Labour would return to bids made for SCF's loan book from private bidders last year. See Goff's comments in the video above.

'For goodness sake'

Prime Minister Key said Cunliffe's comments lacked any economic sense.

“Just listening to David Cunliffe to me it sounds like a leadership bid, not serious economic policy," Key told journalists this morning in Parliament.

"I mean, for goodness sake, if you go and have a look at the bid that was put up by the investors he’s talking about, clearly if he’s relying on them he must be relying on they tell one thing in public and another thing in private," he said.

"What I can tell you is, as late as yesterday, we asked Treasury again, no deal we were ever presented came anywhere near being better than what we’ve actually done."

The reason the government was in this position was because Labour signed up to a deposit guarantee scheme toward the end of 2008.

"South Canterbury Finance had massive loans, those loans went broke, there were inter-party and related party loans. The receivers have now discovered they were worth a lot less than they were, and every bid we heard from any consortium that came to the government always had a provision that said, because they were unable to quantify the loses, then the government had to underwrite all of those losses," Key said.

"So frankly David Cunliffe doesn’t know what he’s talking about," he said.

The losses sustained by government if it accepted such a bid would have been worse than from the action government took, based on Treasury advice the government received from Treasury last night.

“The situation is there were big unknowns when we took over that book. As we know, the SFO (Serious Fraud Office) have been investigating both Hubbard Funds Management and Aorangi Securities, they’re, as I understand it, progressing, but it’s been a very complex web of financial transactions," Key said.

"In the end, what we’ve discovered is that a lot of those transactions don’t stack up, there’s no value in them," he said.

Treasury were monitoring South Canterbury Finance for 18 months before its collapse.

“But it’s taken a long, long time to get an understanding of that position. It’s been very complex, there’s been bad record keeping [by the company]. Even now, they’re still struggling to come to terms with some of the loans that were made,” Key said. 

“The reality is the government doesn’t want to be the owner of a failed finance company. I’ve got a lot better things to do with hundreds and hundreds of millions of dollars of taxpayer funds than try and go through a receivership of a finance company. If there was a decent bid out there, we’d take it," he said.

"But the bids were, ‘we’ll take any upside, you wear all the downside, we can’t quantify it.’ And by the way, there was no cash up-front, you [government] have to fund the entire transaction.

Well, didn’t sound like a very good deal," Key said.

See the release from Labour finance spokesman David Cunliffe:

National’s mishandling of the South Canterbury Finance collapse is a disaster of epic proportions and Finance Minister Bill English must resign, says Labour’s Finance spokesperson David Cunliffe.

“Bill English and company turned down recapitalisation offers that would have limited taxpayer costs for SCF to around $500 million,” David Cunliffe said.

“Instead National insisted on throwing it into receivership. National has grossly mishandled the issue.

“Losses have already reached $1.2 billion and are still climbing,” David Cunliffe said. “The extra $700 million lost to the taxpayer is in effect roughly equivalent to all the new money John Key has just cut out of this year’s budget.

“It just doesn’t stack up. Reputable bidders like the New Zealand Super Fund, Ngāi Tahu and a major international investment bank were turned away. Assets were left to rot in receivership, and it’s no surprise their value collapsed.

“I said this would happen six months ago, and I’m sorry to say it’s come to pass,” David Cunliffe said.

“Bill English must resign immediately, or release all the offer documents and advice he has so far withheld.”

(Updates with background, video, links, Key's comments, Goff line)

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....what grates on me with this whole thing is the inequitable nature of it. I have a friend who lost a small fortune in blue chip...poor, poor guy...he worked so hard to build up his savings and unfortunately was hawked out of nearly everything....these guys don't get a bean. Lots of other, particualrly elderly people, have lost their savings in other finance companies like Hanover...they don't get a cent from the taxpayer...but South Cant. Finance people get 100 cents back in the dollar....this is a very bad application of taxpayer funds

It appears to me that the only plausible reason that SCF has been bailed out by taxpayers is that the politicians had an inordinate amount of their own money invested in SCF.  What other reason, bearing in mind that JK has said recently that Treasury knew it was in trouble throughout the guarantee periods, for this choice of action?

I have heard this claim of politicians having money tied up in South Canterbury Finance a lot. Does anyone actually have any evidence of it?

Don't be daft, Gareth...of course, there's no evidence of corruption and pollies protecting their interests....the usual conspiracy theorists love this idea but alas not true!

info like that is easy to find as all pollies have to declare their investments on public record.

as for blue chip folk...the govt. " bought " over a billion in assets potentially qwhen they baled out SCF...there was no ssets to buy in blue chip...that was the whole point.

"info like that is easy to find as all pollies have to declare their investments on public record."

How about, say, their brother? Or close farmer and business mates?

The naïvité displayed by some is as breathtaking as it is tragic. Either that or they are wilfully blind fanboys of - and apologists for - Double Dipton.

rp : You're so right , buddy ....... The whole thing is an inequitable sham . .....

.. Take the Gummster family for instance , we ditched all the Nathans Finance and other such rubbish that lobbed unsolicited into our letterbox , year after fecking year of it .....

...... And we thought that Richard Long and Colin Meads were no great financial luminaries .......... so we ignored their entreaties to biff our munny into their  " sponsers " products  .......

Innocent of any foolishness or any wrong doing , yet the previous Labour government , and now the Nats , have lumbered us ( as taxpayers ) with bailing out the greedy and the dumb-arses who let themselves get suckered in . .....

........ Inequitable is the word , so very true .

...imagine if you''re weren't that smart and had lost money in a non-guaranteed one as well....a double have the indignity of losing your own money, then your taxes (as now you have to work more to re-build savings) go to bail SCF Finance investors as well...the whole thing is wrong

rp : If you've suffered the misfortune of reading any of my blogs , you'll quickly realise that I'm not that smart . But I make up for that with some plain boring old commonsense .

........ Such as that the libraries of NZ contain screeds of finance books , all there for free , all there to assist the investor .

And if something in finance , such as higher than market rates of interest , looks too-good-to-be-true , then it jolly well is ....... Always look a gift horse in the mouth .

........ Colin Meads is a rugby legend ....but  Gareth Morgan / Brian Gaynor / Carmel Fisher / Martin Hawes are financial legends ........ Who do you accept munny advice from , Meadsy ?

Cunliffe is desperate to move the public attention away from buggery and failed Labour leadership...he is grasping at straws....fool.

Yeah, saw Phil Goof on Breakfast this morning desperately tiying to turn the table.  Whilst Goof doesn't look a strong leader, there has been no one stepping up/out from the senior ranks.  Where's Annette King, Mallard, Cosgrove, Parker etc...?

Annette king is busy drumming up potential fodder to make election promises to...she has this silly look on her face but it's not there to mislead...she really is always on the lookout for issues demanding to have other peoples money thrown at her.

Labour know that they can't win this election, no matter who leads the party. That's why Goofy is still there... sacrifical lamb.

The next election though, that's a different story.

you got that right ,wolly !

Buggery Wally......? what is this Buggery you speak of..........?who was engaged in this buggery....come on man out with it...

Personally I think Bill English is doing a decent job, he seems to have a grasp of the issues the country faces. That may not sound like much but its far ahead of most politicians ability.

Brings new meaning to the saying that Goofy and mob are buggered!

Bring back Darren Hughes I say.  The malicious accusations leveled against him were unkind.  All he did was invite a young male student around to his digs for a cup of tea and a couple of ginger nuts.

Ginger who?

Quite right Plebian.......Why should young master Darren be damned into political exile for demonstrating little more than he is,... at least an equal opportunist.

How do we know this was not a purge by the Phillistine to rid himself of these self serving fringe elements who hired on under Queen Helens reign....the Carters ..the Tizards...if you follow my mousse.

Yes well I think I'd flee screaming too if I had to chow down on a couple of ginger nuts. I mean where I grew up we learnt to eat them one at a time.


Does Cunliffe really think the opportunistic SCF tyre kickers, looking to privatise profits and socialise losses, would've picked up this $300 million tab?

How can we say that we have a capitalist system working effectively when we socialize the losses. In capitalism there are winners and looses, you invest in a business it does well you increase your capital. You invest in a business and it tanks you loose your capital - that's capitalism.

When you spread a private lose to the tax payers that's socialism, it's one rule for the people another rule for the rich.

If somebody could confirm for me - was the government guarantee brought in by Labor or by National?

Labour introduced it, National renewed it.

Thanks Gareth - that puts Labors finger pointing into perspective

Basically Labour was forced to announce it on a Sunday morning after Clark was told by Aussie PM Rudd that the Aussies were going to introduce one.

Cue rewriting of Clark's speech to start her re-election campaign.

They had such little time to do it they had to say everyone would be covered, and didn't really have any time to discuss criteria that in-depth.

It was typical of that Labour government to make policy on the hoof , without doing any " due diligence " studies of the posible impacts ...... such as the SCF debacle .......

........ National have no excuses to offer , they had plenty of time to do the needed research , yet carried on to honour Labour's promises , anyway  .

I agree neither party has an excuse for capitalism is supposed to be a fair society in which we avoid the deceptions of plutocracy.

It was argued at the time that this would help us avoid the financial meltdown that was happening in America, instead, we brought the one rule for the rich and one for the poor cold which is currently epidemic in the US here to New Zealand.

"...capitalism is supposed to be a fair society in which we avoid the deceptions of plutocracy". 

Fair? - Go and borrow a copy of the "Capital" by Karl Marx from your local library for a detailed explanation how "fair" capitalism is supposed to be...

As far as SCF and the "bailout", this is returns vs. risk. Those who invested in the Gov't Guaranted companies went for minimum risk. Those who invested in non-guaranteed companies took on higher risk which, in a number of cases, eventuated. What's there to discuss?

excuse me Alex13 but when people invested in SCF they didn't have a Govt Guarantee

Alex Tarrant - "they had to say everyone would be covered"

Oh. Really. Where do you get that from? Check out what Rudd did. It's in the public domain. It was posted here last year. Rudd only covered "deposit taking" banks with a cap of $1 million per individual. Finance Companies were specifically excluded, causing GE Finance to pull out of the AU market. Finance Coys are not "deposit takers". NZ was the only country in the world to cover Finance Companies. Always wondered why. The arm-twisting by someone must have been immense for that little oversight. Or Clarke and Bollard must have had the cloth covers on their ears.

Sorry Ironcast... "They said that...

Right on RB ..... you could even say that the "old boy network" is alive and well within this whole SCF debacle.

Why should I , as a taxpayer pay for some finance deals going sour, to a group of "selected"  people .... while other people out there get shafted by Bluecheep and Han(d)over.

This whole financial game in Enzud stinks and I know there is some in this whole equation that are laughing all the way to the bank ! .... but to rub salt into the wounds of the everyday person, these are the ones who pushed this financial free market idealogy on us in the first place ! ie don't let the right hand know what the left hand is doing ..... true Roadhouse Blues...and they only socialised some people's losses (many investors in finance companies got nothing)

Updated with a video of Goff on this. I asked him twice then, and the once again later whether Labour would go back to the SCF bidders and look for a deal. You can see he didn't answer the first time, and turned away the second time.

The third time he said he had to go back into caucus.

I'd say he has less an idea of what's going on with this than most commenters on

The older hacks in the gallery were saying the resignation call was a return to 80s politics (apparently it happened a lot back then...?)

Anon good nurse

We've deleted your most recent comment because it makes potentially defamatory and specific statements that have not been backed up with facts admissable in a court and you have used abusive language (including at least swear words)



Maybe Anon good nurse= Phil Goof answering Alex Tarrant's questions?

Well Frankly...I think Billy Bob should at least get a public bitchslapping for being a lying SOB on so many levels of what ..he'...... thinks the public need to know.

Who was this...?   I am concerned.. we have borrowed far too much money over the last  year.......two weeks post that statement  when announcing the Govt. intended to continue borrowing he was asked if he was still concerned......."no not really...." was the response.

 I mean come on....somebody's gotta be bullshitting somebody here....... !!!

National will be returned..... but by default.....Goff will be off the menu post election....Cunliffe has been sniffing the breeze..... but he'll need to lose that squint..people just don't like it... either way MMP thatched Govt's will continue to give away your money to bribe and entrench their positions.

What a sideshow it is really.........Frank Bainimarama must just shake his head and giggle the snot nose.. know nothing.. piss weak ...candy arsed ....smarmy schoolgirl types...pretending to know what direction to take while they could'nt find thier hose in a fire station.......

N.Z.Politicians mantra............".Hard work never hurt anyone....but why take the chance"

Goofy has gone Looney asking English to resign after honouring a Governmant Gaurantee that his Labor party put into place two weeks before the last election .

Does Goofy think we are all dumb?

No but maybe the two of them have a bet on which will resign first - or be evicted!

ultimately both sides cocked up massively - one in offering the guarantee the other in maintaining it despite knowing what  pig it was and once again hardworking sensible people willpay the price for others greed.

We will see plenty more of this posturing and deflection from the issues from both sides over the next few months - Labour deflecting from thier total lack of ideas and innefectual nobodies until Phil loses and can be publically sacrificed with no fall out on the new leader and National hiding from all focus on their inefectual financial performance and after an initially heroic response by public and rescue workers an even worse and untimely response to the critical needs of Christchurch.

Maybe we should all count our lucky stars it wasn't worse and at least this is one lesson that will be learned by both sides - no more bailouts to greedy finance companies and banks let them wallow in their own mire


It would be nice if the dumbass media had a little talk to Michael John Cullen. 

YES ! .............. Abso-bloody-lutely !!!!!

....... Any journos here who are willing to do what the mainstream media are too dumb-arse to do ,  to give Cullen a grilling ?

I saw the headline & thought "Cunliffe & Goff are finally onto it!".  However, imagine my disappointment when I found they it was simply because they refused to take up some highly suss offers.

Where IMHO they might have had a legitimate point is in the Nat's handling of SCF after the Crown guarantee was put into place.  It amazed me how little due diligence was carried out.  And more to the point, apparently much of the reckless lending & related party deals took place after the quarantee was introduced.  If the taxpayer was guaranteeing any losses, surely there should have been a monitoring regime in place, over all major SCF transactions? To me that is the true scandal.

It may be that some of this occurred during Labour's watch, hence the lack of interest in it and desire to chase shadows.

Cheers to all.

Days to the General Election: 29
See Party Policies here. Party Lists here.