13 Sep 2013

English defends ignoring Treasury advice on smelter

10:19 pm on 13 September 2013

Finance Minister Bill English is defending going against official advice to not pay a subsidy to keep the Tiwai Point smelter open.

Cabinet papers show the Government rejected Treasury's advice to not get involved in negotiations on the aluminium smelter and that there was no economic justification for a government subsidy to ensure the smelter's continuing operation.

Bill English.

Bill English. Photo: NATIONAL PARTY

The Government announced last month it would give New Zealand Aluminium Smelters a one-off payment of $30 million.

That payment is on top of a new contract the company negotiated with Meridian for lower electricity prices.

Mr English says by the time the payment was made Treasury's advice was that a one-off payment to achieve certainty may be justified.

"In the end we made the judgement relative to the jobs, supporting the jobs in Southland; certainty in the electricity market; the upcoming Meridian float; we made the judgement that a one-off payment was worthwhile."

But Labour Party's state owned enterprises spokesperson Clayton Cosgrove says the Government was just desperate to get a deal over the line before Meridian is partially sold.

He described the subsidy as corporate welfare. "So the taxpayer got nothing; the Treasury knew this was a complete crock. This was a dead duck deal and Mr English and Mr Key went ahead blindly for one reason - and one reason only - and that was to get this situation locked down so they could keep selling assets."

Mr English rejects that, saying the partial float was only one of the factors considered.

The Green Party says the Government was only thinking about saving its asset sales programme when it stepped in.

Energy spokesperson Gareth Hughes says the Government acted against consistent official advice so it could continue with its plan to partially float Meridian.

Mr Hughes says there should have been a robust and transparent process, not a political deal done over the phone.

He says it was obvious Mr Key picked up the phone to "save his asset sale agenda".