The Dim-Post

April 3, 2015

On performance

Filed under: Uncategorized — danylmc @ 9:44 am

Here’s a recent story I don’t think got as much attention as it deserved. This piece by Vernon Small revealing Finance Minister Bill English’s role in (basically) bankrupting Solid Energy:

Labour has tabled documents in Parliament showing that ministers put pressure on Solid Energy in 2009 to increase its debt levels and pay bigger dividends, despite warnings a falling coal price could crimp its profits.

Finance Minister Bill English confirmed the instruction in a letter from then State-Owned Enterprises Minister Simon Power to the state coalminer’s chairman, John Palmer.

“The Government, in its first term, looked at SOE balance sheets and decided many of them could carry more debt. It made a decision to allow Solid Energy to take on more debt,” English said.

He had approved a higher debt level in 2009.

Ronald Reagan was once asked if his acting background helped him become US President. Reagan replied, ‘I can’t imagine how anyone who wasn’t an actor could do this job.’

I think about that line whenever I see Bill English talking in his gruff, serious voice about belt-tightening and prudence and fiscal discipline. English is very respected around Parliament and among the pundits: the common-sense, no-nonsense Southland farmer who is balancing the books, running a tight ship, counting every penny etc.

Which is ironic, because English’s performance as Finance Minister has been one multi-billion dollar debacle after another. There was the great tax switch, which was supposed to be revenue neutral and stimulate consumer spending, but which the government still borrows $1.5 billion/year to pay for and which preceded a consumer recession. There was the finance company debacle. The botched partial privitisation of the asset sales. The ongoing housing crisis. The seventy billion dollar debt and series of stealth tax increases and feeble accounting scams to pretend we’re back in ‘surplus’. Now his role in Solid Energy’s collapse.

English’s actual performance as Treasurer is mostly awful but his performance as a dour, gruff very competent and serious Senior Minister is flawless and, politics being what it is, the latter is what counts.

47 Comments »

  1. But he is a good balance for our chief performer “Mr smile and wave” paleo

    Paleo Martin

    Comment by paleomartin — April 3, 2015 @ 9:55 am

  2. exactly what I have been saying to anyone who’ll listen for some time

    Comment by Rick Bryant — April 3, 2015 @ 9:57 am

  3. Southland farmer ? Pleese.

    He left the parents farm when he got to high school, boarding at St Pats Silverstream, and probably thought good riddance to the sheep farm. Then it was on to University- two degrees, none of which were related to you know, farming. Then a policy analyst at Treasury in Wellington and becoming Haitaitai branch chair of the National Party.

    Only when the existing Soutland MP gave out that he was retiring , did Bill ditch the Treasury job and high tail it back to Dipton FOR A FEW MONTHS before the election. After the counting of the sheep… mmm votes was over Bill returned to his family in Wellington, essentially for good.

    Even now as a list MP, there isnt any office address provided by parliamentary services, unlike every other list MP.

    Comment by ghostwhowalksnz — April 3, 2015 @ 10:39 am

  4. What a complete pile of utter tosh. “Preceded a consumer recession”.. well, goodness me, perhaps this is because there was, in fact, a recession and there would have been a recession regardless of any taxation changes. “Botched partial privatization”, hardly – it was no different to most IPO’s and even if the price was totally out of wack, this still isn’t the finance ministers fault. “Housing crisis”. Good gods man, perhaps these are the result of the world that we live in now? I mean, for goodness sake, the housing crisis has been a long time in the making. If you look at construction rates and house prices over the past 10-15 years, you’ll see that the problem didn’t just spring up on National’s watch, and there is no easy solution to this problem now. And finally Solid Energy; a letter pushing for the company to deliver solid dividend performance and not to rely on government money, does NOT magically make Bill English culpable for the failure of a coal company. They would have received similar pressure in the outside world from investors, and the board must take responsibility.

    Bill English has been the finance minister through some quite extraordinary times of turmoil. Most business people understand , because they know how messed up the whole world has been these past 6 years. Projections have gone out the window, we’ve had brutal recessions, turmoil, a pair of awful earthquakes to deal with, prices of resources have soared, dived, the whole shebang. In contrast, Michael Cullen (a fine finance minister in his own right) presided over 9 years of pure growth, when the world economies were roaring. Now we’re looking at the opposite of that, and no, it’s not down to this government as fault. In fact, our economy is actually doing far, far better than most of the rest of the world, and it’s not just Christchurch (which is what Labour likes to claim).

    Most people who actually work in the real world, as opposed to writing political punditry and complaining about the government, actually know this. They tend not to blame single instances, such as Solid Energy, because they realize quite well that Solid Energy would have failed regardless of whether Labour or National was in government. They realize there was more behind the scenes than a single letter. The overall results matter; the single incidents don’t.

    Comment by nightform — April 3, 2015 @ 10:40 am

  5. There was the finance company debacle.

    Was that English? Wasn’t the die cast when Labour created the scheme before the 2008 election?
    [Genuine question]

    Comment by Graeme Edgeler — April 3, 2015 @ 11:06 am

  6. This isn’t a particularly good argument. Having to leave out details such as he collapse in coal price and Cullen having set up the finace bailouts to reach the conclusion I don’t think is good form.

    It’s not helpful either I think coming from someone who believes in govt intervention in the economy. If this intervention just becomes another excuse for partisan attacks then that undermines the justification for give intervention.

    Comment by NeilM — April 3, 2015 @ 11:15 am

  7. govt intervention

    Comment by NeilM — April 3, 2015 @ 11:16 am

  8. Solid Energy is yet another example of National politicians thinking that their ‘business nous’ puts them ahead of their critics. Fair enough: it must seem that way from inside the Beehive.

    The $70 million bridge bribe was rightly ridiculed by our free press. But the much larger roading bribe has been studiously ignored. The Roads of National Significance almost all have a negative benefit cost ratio, meaning they are of no benefit to New Zealand. Many cost in the hundreds of millions, some cost billions. All of these have were hand-picked by Joyce without Ministry review and approved by ‘financially savoy’ Key and English. Yet unlike the IRD disaster, the commentary on their cost is almost non-existent. This is despite concerted opposition comment on each of these projects – it can’t be claimed that they are unaware or that the opposition ‘isn’t doing it’s job well enough’.

    Steven Joyce was simply following a model that he introduced years ago. He just got the timing wrong. If he had announced this during the election campaign then a horde of journalists would have followed him round in orange vests and written uncritical copy, not once questioning him about their cost or utility. We know this, because this is exactly what happened.

    Comment by George — April 3, 2015 @ 11:20 am

  9. This isn’t a particularly good argument. Having to leave out details such as he collapse in coal price…

    That’s the entire point.

    Commodities are volatile and vulnerable to price-movements. That’s why you don’t leverage massively. Coal was and is also predictably vulnerable to a stall or reduction in consumption due to governments reducing coal consumption to reduce their CO2 emissions. That is what has happened in China, at the same time as a domestic substitution takes place.

    Comment by George — April 3, 2015 @ 11:24 am

  10. George, none of those roads had negative BCR’s, just low BCR’s I believe (happy to be proved wrong). Which is a valid argument against them. But you want to be careful about making this argument, because the Greens have frequently argued for public transport projects with appalling BCR’s (the lowest I recall I think was 0.05).

    Comment by nightform — April 3, 2015 @ 11:30 am

  11. To Graeme

    No, because English extended the guarantee to SFC against Treasury advice that there was a major problem and a big exposure for taxpayers. English overrode that and hey presto, SFO collapsed and the taxpayer paid, including $20m to foreign investors NOT covered by the guarantee.

    Comment by Tracey — April 3, 2015 @ 12:02 pm

  12. Nightform, unfortunately that’s wrong. The $630 million Kapiti Expressway (duplicating SH1 through Nathan Guy’s electorate) has a BCR of just 0.2, meaning it is only expected to deliver $120 million of benefits. Transmission Gully, which will cost $2.7 billion once private financing has been paid, has a BCR of just 0.3.

    Transportblog have done an excellent job of showing where the money is going: http://transportblog.co.nz/tag/rons/ Joyce ignores Ministry advice, and has directed MOT spending from high-value projects to his pet projects.

    As for the Greens, I’m not sure what you’re referring to. Cycleways typically have benefit ratios of 10-20, for example, making them excellent economic decisions.

    Comment by George — April 3, 2015 @ 2:04 pm

  13. George – thank you for that link, I accept that number is lower generally than I thought – although I note that that number for Transmission Gulley is debatable as the number used elsewhere is 0.6. I note that the Puhoi-Wellsford number is higher, at between 1.1 to 2.0 – which incidentally is similar to the City Rail Link, which is between 1.1 to 2.0. The City Rail Link needs to include WEB’s (Wider Economic Benefits) in order to rise above 1.0, which I understand that the Puhoi-Wellsford does NOT include. However, the Puhoi-Wellsford BCR is based on a 4% discount rate which is quite a long-term outlook – don’t actually know whether this is what the CRL is based on. So I think it’s very arguable, for instance, that these two projects have similar BCRs and yet I know the Greens have argued that the Puhoi-Wellsford project is wasteful.

    However, again I would argue plenty of spending by the Greens would not meet that requirement. Below are a few links to Wellington – the Greens have argued for light rail, which has a BCR of as low as 0.05.

    http://www.stuff.co.nz/dominion-post/comment/columnists/9141474/Bus-Rapid-Transit-is-Pilates-for-Wellingtons-spine
    http://www.tram-train.org.nz/

    We are installing a number of cycleways already, it’s not like these are not happening. I think it’s actually a very difficult call to argue that National are being wasteful simply because the BCR’s that they have looked at are low. There are always going to be projects with low BCR’s but we still do them; because the electorate at large wants to see them or because they have wider economic benefits not considered, or they open up new areas to expansion and industry.

    Bottom line is; I don’t object to the Greens too much, but they want to be very careful before they claim that National is being uneconomic. When they eventually get into power, I bet we’ll find a bunch of projects that don’t meet BCR requirements but they’ll do them anyway, because they’re “Green” and they believe in public transport blindly and stupidly, just the same way as National believes in roads blindly and stupidly.

    Comment by nightform — April 3, 2015 @ 2:30 pm

  14. When they eventually get into power, I bet we’ll find a bunch of projects that don’t meet BCR requirements but they’ll do them anyway, because they’re “Green” and they believe in public transport blindly and stupidly, just the same way as National believes in roads blindly and stupidly.

    Difference being, the Greens are quite open about wanting to transform society/the economy by doing things that are “uneconomic” under current lifestyle models. National are all about being prudent and careful with public money and only doing things if there’s justification for it under existing circumstances because it isn’t the State’s business to dictate to people how they choose to live.

    If National’s mantra was “we’re pro-road and car and will spend money on these no matter the rationale”, then there’d be equivalence with the Greens. But, as Danyl’s post argues, they perform as one thing and actually behave in another.

    Comment by Flashing Light — April 3, 2015 @ 2:52 pm

  15. “I think it’s actually a very difficult call to argue that National are being wasteful simply because the BCR’s that they have looked at are low. There are always going to be projects with low BCR’s but we still do them…”

    Take a look at MoT’s review of capital spending on roads, which I’ve reviewed in four parts on Transportblog. MoT’s analysis shows that:
    * BCRs for state highway projects dropped significantly around the time that National got into office and ramped up spending on the RONS: http://transportblog.co.nz/2015/02/10/mots-review-of-capital-spending-on-roads-part-2/
    * Achieving better value for money would require us to de-fund most large state highway projects and fund other, competing projects instead: http://transportblog.co.nz/2015/02/23/mots-review-of-capital-spending-on-roads-part-3/

    In other words, the Government _could_ have chosen projects with higher BCRs, but didn’t.

    “The City Rail Link needs to include WEB’s (Wider Economic Benefits) in order to rise above 1.0, which I understand that the Puhoi-Wellsford does NOT include.”

    At the board of inquiry hearing on Puhoi to Warkworth, NZTA claimed that they hadn’t calculated a BCR for the project (http://transportblog.co.nz/2014/09/22/economics-and-the-puhoi-warkworth-board-of-inquiry/). So it would be more accurate to say that there is no economic evidence for the motorway whatsoever. Also, I’d note that it is challenging to robustly calculate BCRs for public transport infrastructure projects, due to (a) evaluation methods that were not really intended to be applied to PT projects and (b) the use of transport modelling outputs that have, in the past, systematically under-predicted demand for PT projects. (As shown here: http://transportblog.co.nz/2014/11/20/rapid-transit-has-passed-the-acid-test/ and here: http://transportblog.co.nz/2014/10/24/can-new-roads-pay-for-themselves/)

    In other words, there is some reason to suspect that BCRs for public transport projects are under-stated.

    Comment by Peter Nunns — April 3, 2015 @ 3:05 pm

  16. @ Graeme Edgeler: ” There was the finance company debacle.

    Was that English? Wasn’t the die cast when Labour created the scheme before the 2008 election?”

    The scheme was indeed created by Cullen, with the support of all parties in Parliament, as I recall. He has since blamed Kevin Rudd for panicking and introducing a broad-ranging scheme in Australia, thus forcing the NZ government’s hand. He has said that, had the government not introduced a similar scheme, there was a real risk of large-scale money flight from NZ to Australia.

    With regard to SCF, it was accepted into the scheme only after the 2008 election. It was subsequently accused of entering the scheme by deception: related party loans weren’t covered under the scheme, and SCF hadn’t, I believe, disclosed the fact that it had a number of such loans. I also remember Treasury being caned over officials’ lack of rigorous due diligence over SCF’s application to join the scheme. There was suspicion in some quarters that its admission was a political, rather than financial, decision.

    Comment by D'Esterre — April 3, 2015 @ 4:04 pm

  17. With SCF it was a bit of a failure by Treasury but then SCF was run by crooks who hid a lot of details.

    However both Labour and National could be held responsible for not making sure Tresdury had the necessary skills. But it was a very rare event so its not surprising mistakes were made.

    Cunliffe did for a time act as the spokesperson for the Hubbard cult. Which was weird but last year the penny dropped for most people that he is weird. Thankfully Clark had Cullen.

    Apart from that Labour voted for every piece of legislation that enabled the SCF bailout to occur.

    That’s not ment to be yet another well Labour did it too argument. Rather that govt intervention, such as Cullen’s, is necessary but the temptation is for politics to take over as with Cunliffe going postal on the bailout.

    If one thinks that govt intervention is necessary then it doesn’t make a lot of sense to focus on the few particular instances where intervention has had mixed results. Especially with hindsight.

    Comment by NeilM — April 3, 2015 @ 8:02 pm

  18. Found in the discussion on this topic at The Standard, this meticulous timeline by Frank Macskasy is an essential read: http://thedailyblog.co.nz/2013/05/17/solid-energy-a-solid-drama-of-facts-fibs-and-fall-guys

    The sort of work our investigative ‘journalists’ should be producing.

    Comment by Sacha — April 3, 2015 @ 9:07 pm

  19. The thing is, I believe in government intervention for the promotion of the public good. I don’t believe in government intervention for private gain, or government intervention for short-term political wins, or…

    Comment by Keir — April 3, 2015 @ 9:31 pm

  20. The tax switch didn’t precede the recession. The finance company guarantee was set up by Cullen. The partial privatisation programme was successfully executed other than solid energy. I find it a stretch to put the housing crisis at the feet of the minister of finance. MBIE and local government would be more appropriate. You might want to elaborate on the accounting scams. What is an appropriate level of government debt after the worlds worst post war economic crisis? The government doesn’t borrow money for tax cuts, the borrow money to spend.

    Comment by Matthew W — April 3, 2015 @ 9:55 pm

  21. “I find it a stretch to put the housing crisis at the feet of the minister of finance.”

    Economic settings that favour importing cheap credit to stoke mortgage finance is a major part of our housing market’s failure. Which other Minister is most repsonsible for that?

    Comment by Sacha — April 3, 2015 @ 11:20 pm

  22. Recent story? You mean in geological terms? Was well covered in early 2013.

    The OAG’s report last year I think was a *ahem* solid piece of work on what happened.

    Of particular note – as has been pointed out many times – Solid’s heroic assumption about where coal prices were going compared with the market concensus at the time and what actually happened.

    http://www.oag.govt.nz/2014/solid-energy

    Comment by Adam Bennett — April 4, 2015 @ 1:57 am

  23. The tax switch didn’t precede the recession.

    No. It was done even though we were in the midst of a consumer-spending trough. So how smart (prudent/wise) was it to continue to apply a policy even though the circumstances had radically changed?

    The finance company guarantee was set up by Cullen.

    And the decision to extend it to SCF – which cost us the most – was taken under English. Not to mention the fact that Treasury’s screwing up the implementation of the scheme all happened while he was Minister of Finance – see here: http://www.interest.co.nz/news/55946/auditor-general-says-treasury-lacked-financial-prudence-administering-crown-retail-deposi

    The partial privatisation programme was successfully executed other than solid energy.

    If by “successful” you mean “the companies are now only 51% owned by the Government”, then true. But if you mean “the anticipated value was realised and ordinary New Zealanders diversified their investments away from housing” – you know, the actual reasons given for doing it – then not so much.

    I find it a stretch to put the housing crisis at the feet of the minister of finance.

    What Sacha said.

    You might want to elaborate on the accounting scams.

    https://blog.greens.org.nz/2015/03/05/govt-managing-our-money-for-political-ends/

    Comment by Flashing Light — April 4, 2015 @ 7:42 am

  24. I can’t for the life of me recall the tax switch being said to be aimed at boosting consumer spending. Link?

    Comment by Rob Hosking — April 4, 2015 @ 9:31 am

  25. “However both Labour and National could be held responsible for not making sure Treasury had the necessary skills”

    That made me laugh out loud. They certainly put much time and effort into telling everyone else how to run ‘their’ show.
    For a short term assignment like oversight of Finance companies, there is plenty of outside contractors who could do the job.

    Which is funnily enough, what Treasury often tells other government departments.

    The real truth is that they are a bunch of idiots, who like the Jesuits, have one of their number as pope, with Bill English as Finance Minister. No doubt Bills colleagues when he was a junior analyst have moved mightly up the ladder

    Comment by ghostwhowalksnz — April 4, 2015 @ 11:56 am

  26. There was the finance company debacle.
    Was that English? Wasn’t the die cast when Labour created the scheme before the 2008 election?

    Labour did introduce the scheme – put together in a very small number of days in response to a similar scheme in Australia, but the problems did not arise until renewal of the guarantees was needed. At that time my understanding is that at least SCF was not meeting the requirements set by Labour; there was also the opportunity then for National to have changed the conditions for renewal. Again from memory, National renewed the guarantee for SCF against the recommendations of Public Servants. It was presumably a step too far to take a principled and prudent approach to allow a large company to go under (for that is what removing the guarantee would have been seen to ensure), especially when considering the number of National constituents who may have investments in the company. There was rumoured to have been a loophole which allowed high effective returns to be offered through a mix of discounting and interest rates – reflecting a risk of investments in the company that the government preferred to ignore – they would presumably have been paid out in full, possibly with some of the return tax free, when the company did fail. It would be interesting to have the true story told some day.

    Comment by Ed — April 4, 2015 @ 12:17 pm

  27. “And the decision to extend it to SCF – which cost us the most – was taken under English”

    An operational desicion by treasury once the scheme was set up. Cullen chose to include finance companies despite them not representing a systemic risk to the financial system.

    Re the partial privatisation, other than solid energy, the anticipated value was realised. Retail investors bought shares, some of them would have been their first share investments.

    Cheap foreign credit has not prevented houses being built. Also a lot of NZers have benefitted from the same. So it’s not clear what the magical policy response was you had in mind.

    Your link didn’t outline any kind of accounting scam, it detailed actual spending and revenue options for the government.

    Regarding the tax switch. Prior to 08 the economic boom was largely a result of unsustainable credit expansion by households and associated consumer spending. The current account deficit was out to over 8%, and inflationary pressures were very strong. It was widely considered to be desirable to have economic growth not based on these factors. The NZ economy, almost alone in the western world, has recently been expanding briskly without inflation and with very modest credit growth. Is that a result of moving taxation from income to consumption? Well that was the idea and it seems to have worked.

    Comment by Matthew W — April 4, 2015 @ 12:50 pm

  28. The above was in response to flashing light.

    A couple of other things: your link about the deposit guarantee scheme doesn’t say what you said it does- SCF was in from the start in October 08.

    Also, it seems we are agreed that Danyls factual claim about the tax reform preceding the recession is wrong. This is the most factual, verifiable claim he made. What of the others?

    Comment by Matthew W — April 4, 2015 @ 1:11 pm

  29. Bill English wasn’t responsible for admitting SCF into the retail deposit guarantee scheme. But he is responsible for Treasury’s decision to let SCF in after it became apparent that SCF was not complying with the conditions of the deed. If they had chucked SCF out when they had the chance it would have saved the taxpayer an awful lot of money – albeit at the expense of a lot of retired investors.

    Comment by heathergatley — April 4, 2015 @ 7:52 pm

  30. Is it also English’s fault that the Australians also completely failed to predict that China would stop buying coal?

    Comment by rsmsingers — April 4, 2015 @ 8:31 pm

  31. This takes me back a few decades to the days when Bill Birch was “Mr Fix-it” according to the received opinion among journalists… “A safe pair of hands”. So every time Bill Birch got his mitts on a ministry or a big-budget project and drove it off the road into a crash-&-burn disaster, the word in the media was that this just showed the kind of difficult jobs continually being foisted on him, further proof of his competence.

    Comment by herr doktor bimler — April 4, 2015 @ 8:56 pm

  32. Yip Danyl, running up that huge debt to maintain the core services of Health, Welfare and Education was just plain wrong…. English should have carved 15 % off all 3 categories as the tax revenue base collapsed as the GFC hurt the economy….. but if he had done that you would beat him for that anyway.

    Solid Energy was a dog before China went ballistic and started buying ore and coal from everyone, it has returned to its natural state…. if it was private investors funding Solid Energy we would have all been better off

    Comment by dave1924 — April 4, 2015 @ 9:42 pm

  33. Danyl have you been reading Glenn Greenwals or something?


    Glenn Greenwald and the Irrelevance of Electoral Politics

    On 17 September 2014, three days before the New Zealand general election, Pulitzer-Prize winning journalist Glenn Greenwald gave an interview that, were it properly analyzed and circulated globally, should turn geopolitics on its head and destroy the critics who claimed he was taking a political “side” in his appearance at ‘The Moment of Truth‘.

    Greenwald’s answers to leading Kiwi political commentator and new media aficionado Russell Brown get to the heart of the largest conceivable electoral issue: one that makes it clear our politicians are little more than reality TV stars in a projected fantasy; an illusion of democracy and governance that masks our true rulers.

    Comment by ropata — April 5, 2015 @ 12:13 am

  34. @ Matthew W: “A couple of other things: your link about the deposit guarantee scheme doesn’t say what you said it does- SCF was in from the start in October 08.”

    No it doesn’t; and SCF wasn’t in the scheme from the beginning. Have a look at this, from the mouth (as it were) of the Treasury, no less:

    http://www.treasury.govt.nz/economy/guarantee/retail/approved/p-s

    If you look through the entire list, you’ll find that more financial institutions – including finance companies – were admitted to the DGS after the election (8 November 2008) than beforehand. That includes SCF (admitted 19 November 2008). This may of course be a reflection of the time it took for applications to be approved by Treasury. Or there may be other reasons: some institutions were, after all, admitted before the election.

    @ dave1924: “running up that huge debt to maintain the core services of Health, Welfare and Education was just plain wrong…. English should have carved 15 % off all 3 categories as the tax revenue base collapsed as the GFC hurt the economy…”

    I think that those working in said core services may point out that about 15% is what has been carved off those budgets, when frozen or reduced funding is juxtaposed with ever-rising costs.

    English’s so-called “tax switch” was at least in part predicated on the notion that consumption needed to be reduced and saving and investment – but not investment in property – needed to increase. This doesn’t seem to be working quite as intended, at least in Auckland, where it really matters. It seems that the take from increased GST doesn’t make up for the loss in income tax revenue, either, so Danyl’s right about the government needing to borrow to cover the shortfall.

    http://polity.co.nz/content/english-lies-impact-tax-switch

    “….if it was private investors funding Solid Energy we would have all been better off”

    Like we’re better off in respect of Rio Tinto, for instance?

    Comment by D'Esterre — April 5, 2015 @ 2:33 am

  35. The link posted did in fact say that D’Esterre. So SCF was formally admitted a day after National took office. Is this an official left wing conspiracy? Has anyone OIAed Bill’s diary for the day?

    With regard to property investment, credit growth associated with borrowing for housing has been low, about a third of the rate of the noughties boom.

    I have had a look at the 2010 budget media commentary. It doesn’t appear it was sold as being revenue neutral.

    Comment by Matthew W — April 5, 2015 @ 7:15 am

  36. Solid Energy was a dog before China went ballistic and started buying ore and coal from everyone./?????

    It was a business with a billion in revenue , profits over $100 mill and a dividend of $60 mill to the government. This was in the year ending Jul 2009.

    What sort of dog is that ?. Sounds like best in show to me

    Comment by ghostwhowalksnz — April 5, 2015 @ 9:46 am

  37. @ Matthew W: This is what that link said about companies in the DGS:

    “Ultimately nine finance companies with deposits covered by the scheme, which ran from October 2008 until October 2010 failed including South Canterbury Finance, causing the Crown to pay out about NZ$2 billion of taxpayers’ money to depositors.”

    That doesn’t say when those companies entered the scheme, just how many failed that had been in the scheme. The Treasury list notes the date of admission for each company; SCF wasn’t admitted until 19 November (certainly not the day after the election); many of those finance companies were similarly admitted after the election, in some instances, some months afterward.

    Accuracy in such matters is important. That great debate-ending epithet: “Left wing conspiracy” isn’t helpful here: getting one’s facts right is. Call me picky, but I think accuracy is of moment; there may or may not some significance attached to SCF’s – and other finance companies’ – date of admission to the scheme, but if we don’t pay attention to such things, we risk missing what is of significance, when it’s put together with other facts in a chain of evidence.

    “I have had a look at the 2010 budget media commentary. It doesn’t appear it was sold as being revenue neutral.”

    Oh yes it was. Take a look at this, again from the horse’s mouth:

    http://www.beehive.govt.nz/release/tax-cuts-strengthen-economy-and-help-families

    And to provide support for Danyl’s comments, this:

    http://www.scoop.co.nz/stories/PA1205/S00225/greens-challenge-english-to-back-up-tax-switch-claim.htm

    “With regard to property investment, credit growth associated with borrowing for housing has been low, about a third of the rate of the noughties boom.”

    This is a pretty coarse-grained statement. It may well be the case for NZ as a whole, but it’d be necessary to dig around in the detail to find out what’s happening in particular areas. For instance, in Auckland, where – if we are to believe the breathless reportage in the media – property prices keep rocketing up. Somebody’s buying those properties, and if they ain’t borrowing to do it, there must be a hell of a lot of cash sloshing around in the system. First-home buyer restrictions have certainly dampened sales and prices, most particularly in the provinces where those measures largely weren’t needed, but appear to have had zip effect in Auckland, where the need was greatest.

    Comment by D'Esterre — April 5, 2015 @ 4:09 pm

  38. D’Esterre, you are right re the link I misread it.

    As for dates and accuracy, you might want to recheck these given your pickiness. National didn’t make it in to government the day of the election, they took office on the 18th.

    ” Broadly fiscally neutral” is not exactly a definitive claim.. The same PR says the vast majority will be better off. The fact is the bottom didn’t drop out of revenue and we are heading back to surplus years early than Labours policy settings, with low inflationary, low current account deficit, low credit growth, economic growth. Well done that man!

    Re house prices, never reason from a price change. Just because prices have been going up doesn’t mean investment has increased. I’ll take credit growth stats over breathless reportage thank you very much.

    Comment by Matthew W — April 5, 2015 @ 6:13 pm

  39. So I have read the Greens PR. It had some gaps and was based on 9 months of data (seasonally adjusted?) It’s now 2015 and Danyl has claimed we continue to borrow 1.5 billion a year. Can anyone provided a link to the updated analysis based on the four years of data available? I also note the deficit for this year is forecast at 0.5b or does Danyls think we will end up at 1.5?

    Comment by Matthew W — April 5, 2015 @ 6:37 pm

  40. “I have had a look at the 2010 budget media commentary. It doesn’t appear it was sold as being revenue neutral.”

    Come now. The Com-Post recycled a Govt press release at the time:

    How the wealthy dodge tax And how the Budget will make them pay
    A $3000 million tax dodge — by which half the country’s rich don’t pay the top tax rate — will be cracked by changes tipped for tomorrow’s budget.
    Prime Minister John Key said yesterday that tax-avoidance loopholes were being targeted….
    Mr Key said the Budget would include “a number of areas” in which tax liability was increased.

    To be sure, if you read past the lede you discovered that the “targetting” of tax avoidance had the special meaning of “legitimising”, and that the main drive of the budget was to calculate how little tax the elite were getting away with paying, and to make it official. Hence the implication that taxation was being increased somewhere to ensure revenue neutrality

    Comment by herr doktor bimler — April 5, 2015 @ 8:14 pm

  41. “we are heading back to surplus years early than Labours policy settings”

    That is the opposite of reports in last year’s election campaign about their detailed alternative budget. Wherever are you finding all these fantasies?

    Comment by Sacha — April 6, 2015 @ 7:42 am

  42. @ GhostWhowalksNZ….. it was a dog 1999

    “Back in 1999 Solid Energy was facing significant issues resulting from the Asian crisis. Poor performing foreign currency deals had resulted in the Board being replaced, banking facilities being renegotiated and the Crown offering support.”

    2009 it was best in show??? Yeah nah. A company predicated on the classic the price is going one way argument…… It needed China sucking up resources at expanding rates regardless of price to be viable.

    The Board and CEO concocted a business strategy that was unsustainable….

    @D’Esterre
    “I think that those working in said core services may point out that about 15% is what has been carved off those budgets, when frozen or reduced funding is juxtaposed with ever-rising costs.”….
    Real versus nominal. The amount of dollars hasn’t dropped. The Tax revenue dropped… a deficit resulted. The borrowing criticised above was used to maintain services.

    Comment by dave1924 — April 6, 2015 @ 1:20 pm

  43. Let it go bankrupt, fold it up and stop mining coal.

    Comment by unaha-closp — April 7, 2015 @ 8:18 am

  44. An interesting question is whether the government is behaving legally with a business that’s teetering on the brink of insolvency (and which they claim firmly not to guarantee the debts of).

    They’ve been warned by the chairperson that Solid Energy is insolvent, they intervene regularly in the businesses affairs and they are allowing it to continue operating whilst there’s little hope of an increase in coal prices. Does that amount to reckless trading?

    Comment by richdrich — April 7, 2015 @ 9:43 am

  45. @NeilM- I think you will find in Judge’s summary that those “crooks” in SCF you refer too – were not crooks and did not try and hide any detail and enter the Government Guarantee by any sort of deception, furthermore the Treasury was held to account by the Audit General for failing to look at detail around SCF failure and its workings. That in itself raising massive questions (that were never questioned publicly by the media) around the actions of the Treasury.

    The SFO refused to call Treasury Mr Woodhouse (GG) on the stand at all which alarmed the Trial Judge and others. The SFO investigation under Feeley at the time (even with his external contractors and lawyers in consultation from day one) proved as I read in court documents to be inept and far below par. SCF failed as a direct result of the actions of the Government as far as I am concerned. And don’t forget Hubbard”s private companies with Powers “Fact”less sheet showing he removed $$ from Aorangi (the basis of that fraud matter and subsequent Statutory Management )was in fact incorrect. Hubbard had placed equity in to Aorangi …. too late the sheeple’s believed the spin, the investors confidence rocked further and SCF was guided in to receivership at a time and in a way that suited the state.

    The greatest liability on the Crown was far from SCF at the time it was “accepted” in to the GG, in fact another group of entities was a huge liability. A large rural services group with ties to this Government was a massive liability on the banks and NZ ecomony- first accepted in to the GG and extended scheme. But guess who was not independent and an investor in this group? And I wonder where SCF assets ended up?

    Mr “Torchlight” (SCF investor made a packet of out the receivership – paid out first when not required under terms of GG) appears to have shown his more true self in recent times given the wrangle, but who cares about detail and non transparency- and don’t attack Cunliffe , he was about the only person that seemed to know early on that something was not right and a better man than you it appears given your attack.

    There is plenty more but then again it would be a book! and most verified by OIA.

    Sarah T

    Comment by Sarah — April 8, 2015 @ 7:22 am

  46. Further to my comment – Once the Treasury had the entities it needed under its control ( and by default controlled the Trustee’s?) what do you think it was then able to do? SCF had multiple audits. Sandy Maier comment around related party transactions (Hubbard’s) disclosed that “they were all good related party transactions” backed by good assets – what situation “really” changed the value of the assets and rocked and destroyed the value in the related party transactions?

    Comment by Sarah — April 8, 2015 @ 8:47 am

  47. Still on Reagan, the concept of “strategic deficit” or “starving the beast” comes to mind.

    http://www.scoop.co.nz/stories/HL0508/S00023.htm

    Comment by Kumara Republic (@kumararepublic) — April 10, 2015 @ 1:00 pm


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