John Armstrong: A textbook example of crisis management

Prime Minister John Key. Photo / Mark Mitchell

Watching John Key and Bill English dispose of South Canterbury Finance yesterday was a bit like watching a python swallowing an antelope.

Except it all happened a lot quicker.

The Prime Minister and the Minister of Finance must have swallowed hard at the prospect of forking out $1.6 billion under the Crown Retail Deposit Guarantee Scheme.

They had no choice. But they did have plenty of warning of the likely receivership. So the Government was ready with a plan.

That involved wrapping its jaws around the company, swallowing it whole and spitting out anything which might have stopped it becoming the sole creditor.

That way the Government is now calling the shots, even though the failed company is technically under the control of receivers.

That way the Government can relax and take its time to digest the remains and avoid a rash of fire sales of its assets.

That way South Canterbury Finance is consigned to oblivion.

That way taxpayers outside South Canterbury may not dwell too long on their forced generosity. Or so National hopes.

It will take months, probably years, to realise value from the company's good assets and claw back some of the $1.6 billion to be distributed to some 35,000 depositors within the next month.

But that process will continue largely out of sight - and thus be out of mind.

That would not have been the case had the Government participated in a bailout of the firm. The big risk was that a bailout might have also come unstuck, forcing the Government to go cap in hand to taxpayers for a second time.

National's strategy was simple. Act decisively. Deal with the problem in total in a day. Get it off the political agenda. Bury it, don't just sweep it under the carpet.

This meant making some decisions to simplify and thus expedite the payout by, for example, not worrying about such criteria as a depositor's citizenship and tax residency. This will cost an extra $20 million.

The extent to which the Government is concerned about how taxpayers feel about all this came into sharp relief when English urged the citizens of South Canterbury to show some gratitude for their savings being saved by taxpayers throughout the rest of the country.

It was a rare, but brief, loss of cool on the Finance Minister's part.

Otherwise, this was one of the smoothest crisis-management operations conducted by this Government.

It is on such days that the Opposition is better off displaying bipartisan support.

Phil Goff, instead, took the line that the firm might have traded its way out were economic conditions more favourable. It was the Government's fault that was not the case.

This line is truly hard to swallow given South Canterbury Finance's difficulties sprang from the heady boom times in the property market when Labour was in power.

Goff would have been better advised to have said nothing.