Finance Minister Bill English is under fire for backing a losing horse while keeping the relevant ministry and the Treasury in the dark and side-stepping normal Government processes.

Documents obtained by the Herald show that after meeting Pacific leaders in Auckland, he decided to grant a little-known private company, the Pacific Economic Development Agency (Peda), $4.8 million for Pacific youth programmes.

When his office informed the Treasury in March, officials asked the Ministry of Pacific Island Affairs for information, but no one at the ministry knew of the initiative.

When ministry officials told the Treasury they know nothing, a Treasury analyst responded: "We are even more in the dark on this one - there are no Cabinet papers or anything else ... maybe worth asking your minister's office."

A few days later, the ministry had evaluated Peda as untested, inexperienced and with a track record of not working well with others. But it proposed working with Peda to mitigate these risks in a robust purchase agreement.

The Cabinet did not approve the proposal until a month after Mr English's instructions to the Treasury to include the money for Peda in the Budget.

The money was announced in May as going to Peda, but in August the ministry opened it up to a competitive tender process. Just before Christmas it announced four providers for the contract. Peda was not among them.

Labour Party leader Phil Goff said the whole process was a disgrace.

"Usually if you're making a proper decision, you'd be looking for advice from Treasury, advice from the relevant ministry, and normally you'd run a tender process to ensure you were getting the best value for money."

He also criticised the timing of the release - two days before Christmas, to minimise the impact.

A spokesman for Mr English said the contract was an injection of new money for Pacific problems and it should be celebrated. "Ministers oversee the Budget process - officials don't make Budget decisions," he said.

The documents also included a note - from the Treasury - of lessons to be learned. These included:

* No Budget initiative was prepared nor was the Treasury even aware of it until after ministers agreed to it.

* The Treasury received no written documentation on the initiative from the offices of Mr English or Pacific Affairs Minister Georgina te Heuheu.

* When the Ministry of Pacific Island Affairs was asked about it, it was clear it knew nothing, and very little about Peda. It then advised the minister that Peda had shortcomings.

Peda chief executive J.R. Pereira said he was disappointed to be excluded from the contract, but he was proud of the allocation of extra money.

Labour MP Grant Robertson, writing on the party's Red Alert blog, highlighted Mr English's comments in June, when the Finance Minister was asked if he had driven the deal without the normal standards of transparency, accountability, and due diligence.

"That is simply not correct," Mr English replied.

Mr Robertson said Labour would pursue the issue when Parliament resumed next month.

IN THE HOUSE JUNE 22, 2010
Phil Goff: Why does the minister not simply come clean and acknowledge that he, rather than Mrs te Heuheu, negotiated this deal, and that it was done without the normal standards of transparency, accountability and due diligence that should have been followed before he included the commitment to a specific untested agency in the Budget?

Bill English: Because that is simply not correct.