Sth Canterbury loans cost Govt extra $331m

Photo / Sarah Ivey

The government's finances have taken a $331 million hit, largely due to problems recovering money from failed South Canterbury Finance's tangled set of related party loans.

Finance Minister Bill English says the combination of previously undisclosed information about South Canterbury's loan book along with the impact of the Canterbury earthquakes on recoveries meant the expected final bill to the taxpayer from the retail deposit guarantee had climbed from $900 million to $1.2 billion.

The Crown Financial Statements for the eight months to February 28 were released this morning and although affected by the early impact of the second Canterbury earthquake which occurred on the 22nd, Crown expenses at $44.3 billion were slightly lower than forecast.

Treasury said that was mainly due to underspending of $574 million across a number of departments "offset by a $331 million revision in the estimate of recoveries relating to the deposit guarantee scheme which was not forecast".

English later confirmed most of this shortfall in forecast recoveries relates to South Canterbury Finance which failed in August last year triggering a $1.6 billion taxpayer funded payout to investors under the deposit guarantee scheme.

"The receiver has provided updated information on South Canterbury's lending business not available previously."

In addition, said English, the expected effect of the latest Canterbury earthquake has been factored into likely recoveries.

"Overall, we now expect a net loss from the Retail Deposit Guarantee Scheme of around $1.2 billion, compared with earlier estimates of around $900 million."

The Serious Fraud Office (SFO) in October last year launched an investigation into SCF related party transactions.