No tender yet for Government banking contract

DANYA LEVY
Last updated 08:02 04/09/2012

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The Government has not tendered its lucrative master banking contract more than a year after Prime Minister John Key said opening it up to competition for the first time in 23 years would be ''healthy''.

Westpac acts as the Government's banker and holds the accounts of all government departments, but not Crown entities or state-owned enterprises. It is thought to be the largest banking contract in New Zealand and was last tendered in 1989.

In 2010, Finance Minister Bill English indicated he would run a procurement process for government banking to ensure the Crown was getting value for money.

But it is understood the Government is concerned the cost of tendering the contract could outweigh the benefits, because it already negotiates fee reductions with the bank, and there are complex arrangements with government departments.

In reply to questions from the Greens, English has now said the Treasury and the Business, Innovation and Employment Ministry are assessing the scope of the tender and the possible funding it would need.

''The decision on a date for a tender will be made once these matters have been considered.''

Last year English said he expected taking the contract to the market in this financial year.

The issue made headlines last year when the Greens questioned the amount of corporate hospitality the Government received from Westpac  at a time when the  contract was under review.

It was revealed that nine Cabinet ministers had enjoyed sporting events, corporate meals and a Bon Jovi concert at the bank's expense.

In the past year former Cabinet minister Simon Power became the head of Westpac's private bank, and  English's former press secretary Grant Fleming became Westpac's government relations manager.

Greens co-leader Russel Norman says that shows there is a "cosy" relationship between the bank and the Government.

''Given the evidence of the very close relationship, I would have thought it was even more important that the Government go to lengths to demonstrate it hasn't been captured by Westpac and the best way to demonstrate that is to tender the contract.''

The Government had ''quite rightly'' demanded value for money from government departments and its suppliers.

''Why does it not apply to Westpac when it seems to apply to everyone else? When it comes to banking, Westpac seems to have a dream run.''

A spokesman for Westpac said the bank provides hospitality to politicians from all sides of the political spectrum ''without prejudice or expectation''.

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