Bollard admits risks in depost guarantee scheme

The NZ Herald reports Alan Bollard discussing some of the flaws in the Government’s hastily announced deposit guarantee scheme.

I am going to touch on that in a later post. First I want to reflect on whether Governor Bollard and Secretary Whitehead have acted properly during this period of Government. A reader (a former senior official in Government) makes the case in e-mail to me that Bollard and Whitehead should have insisted that the Government consult with the Opposition on the scheme, before announcing it. The reader says that “in his day” the Governor and Secretary would have threatened to resign rather than damage the independence of the public service and the Reserve Bank.

This scheme provides a guarantee of $150 billion for deposts – the largest contingent liability in history. It is being done without parliamentary sanction and by a Government in the period just before an election. Traditionally in this period major decisions are not made unilaterally, let alone one of this magnitude.

Did Bollard and Whitehead advocate for bipartisan consultation, and if so why did they not insist on it? Would consulting with the two people who might be Prime Minister and Finance Minister in less than a month have detracted from economic stability and constitutional integrity or enhanced it?

Think of what a disaster it would have been if the Government announced the scheme and the Opposition then did not back it? The result would have been worse than never announcing the scheme in the first place.

I say this with great hesitation and respect for the Governor and Secretary. But their actions have undermined confidence in a neutral public service. To not insist on consultation with the Opposition for a $150 billion guarantee, just four weeks before an election, was misguided at best, and reckless at worst.