4 April 2012 MEDIA STATEMENT

Treasury block a bad look for Government

At the same time the Government was announcing more red ink in its Crown accounts, National Party MPs were block-voting to stop Treasury being called in front of the Finance and Expenditure Committee, Labour’s Finance spokesperson David Parker says.

“The Finance and Expenditure Committee (FEC) has been blocked from following up with Treasury its mishandling of the Crown guarantee of finance company deposits, despite the Auditor-General’s findings showing it needed scrutiny.

“The Auditor-General’s advice to the Committee last week showed that during the first five months of the guarantee scheme Treasury did not monitor whether finance companies were engaging in more risky lending on the back of the Crown guarantee,” David Parker said.

“The Minister of Finance also confirmed in Parliament last week that Treasury did not even once report to him in writing during this period on the rapid growth in the Crown’s risk.

“The Auditor-General found that South Canterbury Finance increased its guaranteed deposits by an astounding 25 per cent in the four months after joining the guarantee scheme.

“The funds were used for increasingly risky new loans, including capitalised interest and second mortgages, which added to the Crown’s losses.

Treasury’s excuse that it did not want to interfere in financial markets was not accepted by the Auditor-General, who pointed out to the FEC that the grant of the guarantee was already a substantial interference.

“The estimated net loss to taxpayers under the Crown Guarantee Scheme is $500 million. The gross loss is even higher. A substantial part of that loss could have been avoided.

“The refusal of Government members to allow the FEC to take Treasury to task, or hold it to account in light of the Auditor-General’s criticisms, is clearly wrong.

“We should not pretend select committees perform this role when the Government members block it from doing so.

“The Committee is not even meeting during the next two or three weeks, so obviously has the time available to question Treasury

“Mismanagement of Government finances totalling hundreds of millions of dollars should be looked in to. It is one of the reasons why the latest Crown accounts are so poor. This is more than nonchalance from Treasury. It is costly mismanagement.

“It is of course embarrassing to a Government which pretends to be a good manager of the economy,” David Parker said.

ends

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