The Government is a terrible bank

The Herald reports:

The Government’s flagship regional development body has more than half of its loan book flagged as at risk after recording a surge in impairment write-offs over the past year.

Crown Regional Holdings (CRH) warehouses government regional development initiatives and manages hundreds of millions of dollars in loan and equity funding provided to businesses.

Most of its balance sheet covers the Provincial Growth Fund (2018-2021) and the Regional Infrastructure Fund (2024-) championed by Shane Jones during his two recent stints in the Government.

CRH’s provision for loan impairments for the year to June 2025 increased sharply from $19 million to $28m. The notes record now more than half of CRH’s $433m loan book is considered at risk of – or is currently in – default.

I’m not a huge fan of any corporate welfare. There are a few discrete industries where you can make an economic case such as film/TV subsidies as you are globally competing with other locations. But overall I’m am very sceptical.

It seems to me loans are the worst form of corporate welfare. If a venture is commercially sound, they should be able to get a commercial loan. But when they get a loan from the Government, they feel less pressure to repay it, because the Government is less likely to hold them to account for late payments etc. So we end up with a massive proportion of loans at risk.

If there has to be corporate welfare I would almost prefer it is just a straight out grant. If there is a case for an art museum in Kerikeri, then you give then a couple of million, but after that it is up to the entity running it to make it break even. But when you do a loan or equity from taxpayers, you have an ongoing exposure.

There has been an exception such as the fibre to the home programme which was done primarily through loans, and was a stunning success. However that had a very very clear objective, and was done through established companies who were not risky.

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