Republished with Permission
Bryce Edwards
I am Political Analyst in Residence at Victoria University of Wellington, where I run the Democracy Project and am a full-time researcher in the School of Government.
You might not have noticed, but another report has been put out about the dangers of corruption in the New Zealand political system. Released precisely two weeks ago by Transparency International New Zealand, their research is merely the latest warning about rising corruption to be published and ignored.
The problem is that this report largely reflects the prevailing conservative and cautious orientation to corruption issues in New Zealand. It reiterates the central thesis of Transparency International – that this country is a low-corruption nation – while warning that this could change. You can see the report here: “The effectiveness of anti-corruption institutions in New Zealand in deterring, detecting and exposing corruption”
As is typical of these sorts of reports from within the Wellington beltway, it’s worthy and theoretically-grounded but doesn’t illustrate much – mainly because the author bends over backwards not to name or cite instances of corruption or scandal in New Zealand public life.
As with other similar reports into corruption and integrity deficits, there is no mention of National or Labour politicians going almost straight from the Beehive to lobbying, or the fact that four of the last five chiefs of staff for the Labour Government were lobbyists. Nor are incidents like National’s Saudi Sheep scandal discussed. There’s no mention of NZ First’s donation court case, etc. Or recent allegations about Te Pāti Māori or even National MP David MacLeod being investigated by police for failing to disclose $178,000 in donations. And wealthy individuals who have given donations, seeking influence, are not named.
The effect of this more abstract approach is to downplay the existence of the very real problems that exist and need to be highlighted. This approach also makes for a rather dull read that, unsurprisingly, gets largely ignored by the media, politicians and the public. Yet the report’s substance is important, and buried in it are some valuable recommendations that deserve a larger audience.
NZ “deserves” its reputation for “low corruption” but could lose it
The Transparency International New Zealand (TINZ) report was launched in Wellington by the global head of the anti-corruption watchdog, François Valérian, who congratulated New Zealand on having a political system with “impeccable integrity”. He said that New Zealand’s low-corruption status was “a well-deserved reputation”. He didn’t say the country’s low-corruption status was without threat, but instead urged politicians to strengthen the integrity safeguards in the system to prevent corruption from becoming a problem.
This is the basic orientation in the Wellington beltway towards the issue of transparency, corruption and integrity: to celebrate and champion the idea that New Zealand leads the world on its lack of grift, nepotism, patronage, or cronyism. After all, each year Transparency International publishes its Corruption Perception Index that places this country in one of the top-ranked places, which allows the government of the day to justify why it refuses to carry out integrity reforms that other nations have.
This approach has been a recipe for complacency. By continuously saying that “there’s nothing to see here, move on”, integrity watchdogs have done New Zealand a disservice, turning a blind eye to the need to implement reforms on things like money in politics and lobbying.
This latest TINZ report on corruption largely reiterates the idea that New Zealand has low corruption. It argues that New Zealand’s institutions are historically less corrupt than elsewhere, and that the country has a culture of good ethical behaviour.
Report recommendation: Beneficial ownership register
The TINZ report makes several recommendations for reform. It’s strongest case is for the government to introduce a beneficial ownership register that would be public. At the moment, businesspeople can easily hide and move around money between legal entities that have limited transparency – such as companies, trusts, and limited partnerships. It’s long been a concern of transparency campaigners that this allows corruption, money laundering, and tax-evasion to remain hidden, and that laws need to insist that the ultimate owners of all companies must be identified.
Unfortunately, the new coalition government has recently announced that such a register won’t be included in their upcoming legislation intended to modernise the Companies Act. The Minister of Commerce and Consumer Affairs, Andrew Bayly, submitted a paper on this to Cabinet recently saying that such a register would “add a compliance burden to companies (albeit a small one). As such, it does not fit well with the overall scheme of the package.”
This will put New Zealand further out of line with comparable countries on transparency and anti-money laundering initiatives. As a result, some have suggested that New Zealand will face future restrictions on being able to shift money out of the country – essentially New Zealand’s financial systems will be blacklisted.
Report recommendation: Single anti-corruption agency
Transparency campaigners have long argued that New Zealand’s law enforcement on corruption and integrity issues is woeful, largely because the responsibilities for monitoring, coordinating, researching and operating the laws are spread over several different agencies. Often this leads to corruption problems failing between the cracks, and some of the agencies aren’t equipped to carry out their responsibilities.
In other countries this problem has been dealt with by the creation of a single lead agency, such as an Integrity Commission or Anti-Corruption Agency. The TINZ report also suggests that one of the existing agencies could take on these rules, and that a clear anti-corruption strategy needs to be adopted.
Report recommendation: Stronger regulation of money in politics and lobbying
Perhaps the weakness part of the TINZ report is where it deals with money in politics and lobbying. On these issues, the report is rather muted, almost playing down the current problems.
Nonetheless, the report’s recommendations on lobbying would be a step forward. It suggests that an online register be established for lobbyists [and] a stand-down period being instituted for politicians and senior officials before they are allowed to work as lobbyists.
The report also recommends a “code of conduct” for lobbyists – although the recent experience of these is that such codes become hollow cloaks that only provide cover for lobbyists to continue their unregulated business as usual.
The need for real research on corruption in New Zealand
In contrast to the rather dull and cautious approach of the New Zealand chapter of Transparency International, its British counterparts released a landmark report on Monday that strongly condemned an egregious misuse of public funds during Covid in that country – see: “Behind the masks: Corruption red flags in Covid-19 public procurement”
In this, Transparency International UK delved into the Conservative Government’s Covid-era contracts with private companies and discovered that a massive proportion of these fell well short of expected standards of procurement integrity – i.e. they looked corrupt, and the corruption watchdog pointed out which contracts merited proper investigation by authorities.
Here’s some of what the UK report found:
- Government Covid contracts worth more than £15bn (or nearly one in every three pounds spent on the pandemic) had been “red flagged” for corruption
- Contracts worth £4.1bn (or nearly one in every ten pounds spent on the pandemic) had been awarded to companies and individuals with known political connections to the Conservative party
- Contracts worth more than £30.7bn in total (almost two-thirds of Covid contract spending) were awarded without competition
- The Department of Health had to write off £14.9bn in public money during Covid
The new British Labour Government has now promised to appoint a “Covid corruption commissioner” to examine fraud in this area, and to try to “to get back the money that is owed to the British people.”
In contrast, here in New Zealand, Transparency International has been relatively silent on Covid-era fraud. And the various Covid inquiries launched by the last Labour Government and then the new National-led administration, appear to be doing their best to keep away from any such issues.
This is despite the $20bn Wage Subsidy Scheme being one of the most controversial and expensive Covid-era responses, which research has shown to have been used by profitable companies during the pandemic that didn’t need the payments. By some estimates, as much as $10bn was pocketed as “corporate welfare”.
Finally, the Australian Government established a National Anti-Corruption Commission just over a year ago, and on Wednesday it reported on its annual progress. The Commissioner says they’ve been particularly busy – receiving 3,189 referrals of suspected corruption in its first year of operation. And so far, it has launched 29 full investigations into corruption.
The Commission confirmed that as part of those investigations, “it was looking into allegations of corrupt conduct against the six current or former parliamentarians, along with a number of other senior officials.”
These investigations in Britain and Australia provide an idea of what New Zealand needs if it wants to take research into corruption seriously. While an academic report into the theories and abstract views on corruption have their place – but will largely be ignored – this country desperately needs some actual investigation into the more rotten parts of New Zealand public life.
Key Sources
Sarah Basford Canales (The Guardian): Federal corruption watchdog looking into allegations against at least six parliamentarians
Daniel Boffey (The Guardian): Tory Covid contracts worth £15bn had corruption ‘red flags’, study finds
Brent Edwards (NBR): Why New Zealand should worry about corruption (paywalled)
Jem Traylen (BusinessDesk): New Zealand’s ‘clean’ reputation makes it an attractive target for corruption, global expert warns (paywalled)
Transparency International New Zealand: “The effectiveness of anti-corruption institutions in New Zealand in deterring, detecting and exposing corruption”
https://www.transparency.org.nz/blog/how-well-do-we-counter-corruption
Transparency International UK: “Behind the masks: Corruption red flags in Covid-19 public procurement”
This article was originally published on the author’s Substack.
