English resignation call just a Labour 'leadership bid': Key

A $331 million blowout in the taxpayer bill for South Canterbury Finance has sparked calls for Bill English to resign. Photo / Paul Estcourt

Prime Minister John Key has dismissed Labour's calls for his Finance Minister Bill English to resign over the blowout in the taxpayer's bill for the South Canterbury Finance failure.

Crown Financial Statements released yesterday revealed a $331 million deterioration in the value of former finance company assets the Government holds to offset against the $2 billion in taxpayer funds it has paid out to investors in failed firms.

Mr English later confirmed most of this shortfall in forecast recoveries related to Allan Hubbard's South Canterbury Finance which failed in August last year triggering a $1.77 billion taxpayer-funded payout to investors under the deposit guarantee scheme. The largest part of this loss was on "related party" loans to company insiders and associates.

Mr English said this would push the Government's net loss on the scheme from $900 million to $1.2 billion.

Labour has called that a "disaster of epic proportions". Its Finance spokesman David Cunliffe called on Mr English to resign for "grossly mishandling" the issue by rejecting recapitalisation offers in favour of putting the company in receivership.

Mr Cunliffe says two bids from a consortium led by Sydney-based businessman Duncan Saville - one before the company was placed in receivership and one afterwards which involved the NZ Superannuation Fund and Ngai Tahu could have saved the taxpayer hundreds of millions of dollars.

But Mr Key said Mr Cunliffe's call for Mr English's resignation "sounds like a leadership bid not serious economic policy".

Mr Key repeated the Government's view that the bids to buy the firm would not have saved money as Mr Cunliffe claimed.

"The simple bottom line is in South Canterbury Finance, we inherited a mess. There was no one who wanted to buy it and that's because there was no value there and the only people who wanted to buy it wanted to put up tiny amounts of cash and have the Government basically insure them for any downside losses. Well, that's no different from the position we find ourselves in where we actually liquify assets."

Mr Key said the Government had again checked with Treasury yesterday and "No deal we were every presented with came anywhere near being better than what we've actually done".

Meanwhile Labour leader Phil Goff would only partially back Mr Cunliffe's call for Mr English to resign because of the South Canterbury Finance affair. Mr Goff said Mr English should resign but for a range of reasons related to his management of the economy not just South Canterbury Finance.

Mr Key says the net losses in relation to the retail deposit scheme would be offset by the $500 million in fees collected leaving the final loss at about $600 million to $700 million.

However, he would not rule out further losses yesterday despite the "good work" in recent months by the company's receivers.

The Serious Fraud Office in October last year launched an investigation into SCF related party transactions while Reserve Bank documents later showed the bank was worried that the company's related party transactions potentially breached the terms of the retail deposit guarantee scheme more than a year before it failed.

South Canterbury's Government-appointed receiver Kerryn Downey said the new losses were calculated by Treasury from information he provided relating to 30 loans, some of which were already under investigation by the SFO.

"Some of these parties I presume have been friends of Hubbard and so forth and likely had difficulty raising financing from elsewhere, but that's guesswork on my part," he told Radio New Zealand.