Liam Dann: Hey Mr Key, tell me why I have to pay

Photo / Sarah Ivey

For most New Zealanders, only one question about South Canterbury Finance matters - why am I liable for this mess?

This was a big question in April when the Government bent over backwards to ensure the company was allowed into the extended guarantee scheme.

It is an even bigger question now the Government has handed over $1.7 billion of taxpayers' money.

We didn't get a straight answer in April, and we're not getting one now. But for that kind of money, we deserve one.

A lot was already wrong with South Canterbury when it had its public guarantee extended.

For a start it was effectively in breach of its trust deed and had failed to file audited accounts. Having a look at the numbers is usually considered important when assessing a business decision.

The Treasury - which officially makes the call on who gets in to the scheme - could have waited months before accepting the finance company.

But it didn't. It rushed South Canterbury in to safety because the Government knew it was a goner without the guarantee - although in the end it was a goner anyway.

When those accounts finally arrived a few days later, the auditors highlighted serious concerns about the company's viability.

Six weeks later, ratings agency S&P downgraded South Canterbury Finance to a level that would have made it ineligible for the scheme.

In June S&P dropped the rating again. But it didn't matter. All the risk belonged to the taxpayer.

The only conclusion is that the Government believed this company was too big to fail.

John Key is sticking to his guns on the final cost to the taxpayer being $600 million after the assets are realised.

That is pure spin. In three years of finance company failures, when have original projections for recovery ever been realised?

Without fail, the news for investors gets worse with every report from the receivers.

As the final cost grows, it will come in dribs and drabs - an extra $23 million here, $60 million there and so on. Nothing too significant - unless you are a hospital or school board.

It may be that Key and Bill English had strong advice suggesting South Canterbury's collapse would damage the economy more than the cost of paying out investors.

What makes this failure more damaging than the likes of Bridgecorp is that it has so much good business tied up with the bad.

Key and English need to spell out the economic case for taxpayer support.

Otherwise they leave open the possibility that they were sold a fast one six months ago.