English told quit over 'epic' SCF bill

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

A $331 million blowout in the taxpayer bill for the South Canterbury Finance failure has sparked calls for Finance Minister Bill English to resign.

Crown Financial Statements for the eight months to February 28 released yesterday contained "a $331 million revision in the estimate of recoveries relating to the deposit guarantee scheme which was not forecast".

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.

That latest revision upped the Government bill for the failed finance company 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.

"Losses have already reached $1.2 billion and are still climbing," he said.

"The extra $700 million lost to the taxpayer is in effect roughly equivalent to all the new money John Key has just cut out of this year's budget.

"It just doesn't stack up. Reputable bidders like the New Zealand Super Fund, Ngai Tahu and a major international investment bank were turned away. Assets were left to rot in receivership, and it's no surprise their value collapsed."

Mr Cunliffe said he had predicted the cost blowout six months ago and was sorry it had come to pass.

But Prime Minister John Key earlier said none of the offers on the table for the company before it went into receivership would have relieved Government of its South Canterbury Finance liabilities.

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, he said.

He emphasised the shortfall in recoveries related to South Canterbury's loans to "related party" borrowers.

That includes the company's management as well as friends and associates of Mr Hubbard.

The news yesterday did not relate to the company's other assets which include helicopters and apple packing and export businesses.

Mr Key would not rule out further losses 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.