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Ad hoc loan to firm sets poor precedent

Katherine Rich MP
National Party Economic Development Spokeswoman

7 September 2006

Ad hoc loan to firm sets poor precedent

The Labour Government ignored Treasury advice in giving an ad hoc interest-free US$8 million loan to a Silicon Valley-based firm with a base in Auckland, says National Economic Development spokeswoman Katherine Rich.

"This US$8 million interest-free loan, announced by Helen Clark, sets a very poor precedent.

"Cabinet, in agreeing to this deal, rides roughshod over Treasury's advice that the loan has a 'low probability of resulting in net benefit to NZ'.

"It also begs the question how many other firms will now go cap in hand to the Government for such loans? Many other Kiwi firms could put an equally compelling case.

"This loan is also bad process. This direct intervention by Cabinet cuts across all other funding processes overseen by the likes of the Foundation for Research, Science and Technology, NZTE grants schemes, and the NZ Venture Investment Fund.

"We are concerned by Treasury predictions that this deal with one New Zealand company could potentially cost taxpayers $3 million per annum.

"The issue in the minds of many other Kiwi businesses is fairness.

"There are many hundreds of New Zealand companies that would like interest-free loans and cash subsidies. Most companies have to go a bank for a loan - and they get charged interest.

"The Government needs to explain why the needs of just one company were so unique that it required a direct funding decision from Cabinet."

ENDS

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