Government ignored warning over People's Bank says Shipley

12.15 pm

The $80 million cost of the People's Bank is the price Helen Clark paid to buy Jim Anderton's support for the coalition, Opposition Leader Jenny Shipley said today.

Mrs Shipley said release of information under the Official Information Act shows the Government has wilfully disregarded repeated warnings over the People's Bank for the sake of political expediency.

"The experts at Treasury, CCMAU (Crown Company Monitoring Advisory Unit) and the Reserve Bank were unanimous in their verdict - don't do it! But the Government ignored those warnings, and is gambling $80 million of taxpayer money on a rank outsider," Mrs Shipley said.

"That's not decisive or courageous decision making; it's a foolhardy use of taxpayers money to secure the Government's junior coalition partner."

An independent report from investment bankers Cameron & Crowe released in October last year also warned the bank would not attract sufficient customers, Mrs Shipley said.

However NZ Post said the Cameron & Co report shows that the new bank would be profitable.

New Zealand Post released the report today as well as correspondence between the board and shareholding ministers.

New Zealand Post chief executive Elmar Toime said the report took a more conservative view than New Zealand Post of the number and value of customers switching to the new bank.

"In making its decision to recommend the banking business case the Government, the Board of New Zealand Post debated the risks outlined in the report. The Board concluded that these were based on conservative assumptions that were unlikely to eventuate."

Mr Toime says New Zealand Post has further developed its strategies so that the new bank will have the flexibility to reduce these risks.

The Coalition gave approval in February for the bank to be set up by the state-owned enterprise NZ Post.

The Alliance campaigned heavily for the bank last election and its approval was seen as the quid pro quo for the junior Coalition partner's backing Labour's superannuation fund proposal.

The as-yet-unnamed bank, due to open next year, would have a family focus. Accounts for children would be free, and it would open at the weekend. Its fees would be up to 30 per cent cheaper than those of existing banks.