Hands On Government And The People's Bank
Speech by Rodney Hide to the National Press Club and British/NZ Trade Council, Wellington 7:30am, Thursday, August 16, 2001
On election night, Jim Anderton committed Labour and Alliance to 'hands-on' Government. The problem for Jim Anderton is that I have my 'hands on' the documents.
The documents that Mr Anderton would prefer New Zealanders didn't see provide the facts of the 'People's Bank', outline what's happening to New Zealand Post, and make clear that the Jim Anderton's public promises are at total variance with the facts.
The documents show that this Government has been no better than any other at picking commercial winners.
It's easy to see why Jim Anderton is upset. He's been caught out. The official advice contradicts what he's been telling us all along.
He's said he's got a plate ready for the whistle blower's head. He has accused CCMAU of the leaks without evidence and declared them to be waging a public campaign against the 'People's Bank'.
It's a turn-around of Steve Maharey proportions.
Minister of State Services Trevor Mallard declared in the Dominion on 9 February 1994 that there should be protection for public servants who genuinely believed there was wrongdoing on the part of their minister or department and who blew the whistle. Jim Anderton is quoted as agreeing with him.
Minister of Justice Phil Goff was reported in the Dominion on the 7th April 1994 saying that "the unfortunate truth is that without the protection of legislation, any individual who speaks out in the public interest will be persecuted, harassed and victimised." He declared accountability and openness to be "the essential elements of a democratic society."
Minister of Housing Mark Gosche told Parliament on 16 October 1997 that "We want to make sure that ' workers can freely offer information to the system, to the ultimate payer of the bill'the taxpayer."
Minister of Broadcasting Marian Hobbs in the same debate declared that "individual whistle blowers need protection' Whistle blowers need to be protected so that they can blow their whistles in the general public good."
That was then. This is now. The taxpayer is now coughing up to pay the wages of an over-paid investigator who assesses his own chances of finding the culprits as 50:50. Still, he's already served his purpose. Mr Oughton has diverted attention away from the real argument: whether the 'People's Bank' is a smart idea and whether the facts support the proposal.
The tap has been turned-off to CCMAU with Ministers from the Prime Minister down declaring them untrustworthy. Their only crime has been to offer sound advice fearlessly. The government's first mistake was to ignore it. Their second mistake was to attempt to keep it secret. Their third mistake was to make public comments at variance with the facts. The Government has now been caught - as they rightly deserved to be.
It will take a more diligent soul than me to catch them out on all the gaffes now exposed but let me mention a few.
On the 3 February 1999 Jim Anderton declared in the Christchurch Press that the 'People's Bank' "would not cost taxpayers any more money because NZ Post would absorb the cost of setting the bank up within its business operation". Not true. Taxpayers are having to cough up $83 million.
In the same paper on 18 December 2000, Jim Anderton said that the "Cameron and Associate's assessment did not question the viability of the bank, but did say it could take longer for it to become profitable". Not true. He said in a speech on 23 February 2001 that "the business case for the new bank is strong and it has been supported by independent scrutiny". The only independent scrutiny done was by Cameron & Co. They concluded that the key assumptions underpinning the business case were overly optimistic and that the People's Bank is likely to result in negative value (i.e. it will not recover its cost of capital). That's fancy way of saying it's a dog.
In a speech on 10 April 2001 Jim Anderton declared that the focus of the People's Bank will be on personal service. Well, maybe. But the documents show that "telephone Kiosks connected to customer service centres will be used in smaller outlets, enabling customers to deal with more complex matters over the telephone".
A post shop with a phone in it hooked up to a call centre is not personal service.
The same night Jim Anderton declared that "the Government is going to release all of the advice we have received about the bank". That's a whopper. He said on Morning Report this week that, "Nothing is new in these papers. All of these papers were released in April. This is now August. I released them under the official information act. In fact I had a press conference and released them to all media". That's not true. The papers containing the advice that Mr Anderton had breached the Securities Laws and exposed Ministers and members of the New Zealand Post Board to civil and even criminal liability were never made public.
The October 2000 Treasury document headed up "New Zealand Post Limited ' Proposal to Enter the Banking Market" that contains all the juice was never made public.
Key facts from the January 2001 Treasury document were censored out. Here's just one. The key finding of Cameron & Co that the "People's Bank" is likely to result in negative value (i.e. it will not recover its cost of capital) was entirely blanked out.
Let me conclude with the policy issues. The government has no role in business. The best thing it can do for business is to uphold private property rights, enforce contracts, control spending and cut taxes. This is the exact opposite of the Labour-Alliance Government's agenda.
For its part, the Bank's a dog. New Zealand Post have made the mistake of assuming that dissatisfaction with banking services means people will happily jump across to the "People's Bank". They have done no research on this.
They assume that existing banks will sit by as 100,000 profitable customers walk out their doors never to return. Their business case has no competitive response to their supposed success. As Cameron & Co observe, the response in such a scenario from the existing banks is likely to be sophisticated and focussed.
The People's Bank will have a problem with assessing credit risk. Seventeen hundred staff will need to be trained up to be bankers. Those of us having trouble with bad debts and poor credit ratings will be quick to line up at the "People's Bank". Those newly trained-up staff will have a tough time sniffing credit risks out.
The customers jumping to the People's Bank will have a high propensity to jump out just as quick.
The $83 million capital injection is not enough. It started off at zero. It was then going to be a 51:49 government/private split. But Jim Anderton blew his mouth off, breached the Securities Laws and sunk the float. The entire $83 million is now coming from the taxpayer. But Cameron & Co concluded that "to meet capital adequacy requirements and to have sufficient financial flexibility, the "People's Bank" will require at least $100 million (at least $17 million more then NZPL seek)". That information was censored too.
Jim Anderton spent his time in opposition and then as Deputy Prime Minister whining about the excessive profits of existing banks. His answer was the "People's Bank". The never-before released documents declare, "NZPL's business case assumes profit and interest rate margins that exceed industry averages". The business case that Jim Anderton signed up to has the so-called "People's Bank" having a profit margin above existing banks.
Jim Anderton also promised cheaper fees. Well, he is still promising them. But it turns out that the "People's Bank's" fees will only be $22 a year cheaper than the ASB.
And remember access? That too was to be solved. Taxpayers in the country would have a Bank near them. You won't find this in the documents Jim Anderton's released. But officials advise that "of the 250 new bank branches only nine would not be in close proximity to other existing bank branches".
But don't take my word for it. You can now read the truth about the "People's Bank" for yourself at www.act.org.nz.
The members of the New Zealand Post Board can now read these documents too. They will be a revelation to them. They can read them ' and then reflect on their duty as directors.