Cash snag delays People's Bank

By JOHN ARMSTRONG political editor

A last-minute hitch has delayed the final go-ahead for the state-owned People's Bank, and the minority Labour-Alliance Coalition is now seeking crucial parliamentary backing from the Greens or New Zealand First.

Setting up the Kiwi Bank does not require legislation. But ministers need the Greens or New Zealand First to provide the necessary majority parliamentary approval for between $40 million and $80 million of taxpayer money to be injected into NZ Post to establish a banking arm.

Sources said last week that a cabinet committee had given approval for the bank and that recommendation had gone to the full cabinet yesterday to be formally approved.

But, after the meeting, the Prime Minister, Helen Clark, said a decision was still at least a week away. She refused to say what was behind the holdup, saying only the cabinet had not "finalised" the decision.

Sources indicated there were no major sticking points between the Coalition partners.

Instead, it is understood a decision to seek an appropriation of public money, rather than New Zealand Post borrowing to raise capital or forgoing annual dividends, has forced the Coalition to seek third-party backing.

The Greens have previously questioned whether a nationwide People's Bank is the best method of providing cheaper banking services, preferring a combination of existing New Zealand-owned banking operations and community-run regional initiatives. NZ First is thought likely to be more sympathetic to the Alliance-backed proposal.

Greens co-leader Rod Donald last night said he had only just become aware of the possible need for an appropriation, and his party had yet to discuss it.