Spinoff: How to hide a million dollars in politics

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According to the official records, David Zhang had donated $8,000 to the Labour Party by buying an overpriced piece of art at auction. So it was something of a surprise when he stood up in court and said, “I do not like the Labour Party. I’d rather burn money than give it to Labour.”

Zhang’s comments were just one darkly comic moment in the long winter of cases in which people connected to National, Labour and New Zealand First went on trial for trying to hide the sources of those parties’ funding from the public. And now that the cases have concluded (pending appeals), and some defendants been convicted, it is time to take stock of a political finance system that appears wide open to abuse, and reflect on how it might be reformed.

The first court case, which wound up in July, concerned the New Zealand First Foundation, set up as a fundraising vehicle for Winston Peters’ centrist party. It solicited large sums from wealthy New Zealanders, and took in nearly $700,000 in what were, on the face of it, donations. Most of the sums were over the $15,000 threshold at which, under the Electoral Act, the donor’s identity must be publicly disclosed. Many of the givers thought the money was going to New Zealand First, and the foundation used the cash to pay the party’s bills. These were, in substance, donations: sums the New Zealand public should have known about, so that they could see who was funding the party and be on the lookout for favours being paid in return. This is the basic premise of our transparency laws.

In this case, however, the defendants – who have name suppression – were acquitted, partly on the technicality that, in law, donations are sums given directly to a party or to people “involved in the administration of the affairs of the party”. The defendants, in the judge’s view, were administering the foundation, not the party itself. This ruling suggested that unlimited sums could be anonymously channelled to parties through related entities: a loophole so large you could drive Winston Peters’ bus right through it.

To further underline the law’s weakness, the defendants weren’t even charged under the Electoral Act, which lacks sufficiently strong penalties and, in some cases, the kind of offences that would cover such activities. Convoluted charges under the Crimes Act were filed instead. What’s more, many donors admitted to the Serious Fraud Office (SFO) that they had split their very large donations into sub-$15,000 tranches, routing those sums through the bank accounts of friends, family members and companies and trusts they controlled, in order to keep their (the true donor’s) identity secret. (As the foundation wasn’t disclosing the donations anyway, this was an unnecessary precaution.) Yet they weren’t prosecuted, for reasons that remain unclear.

In the winter’s second big political case, the judgement in which landed earlier this month, the SFO finally got a conviction.  The trial revolved around three Aucklanders: wealthy businessman Yikun Zhang and his associates, twin brothers Colin and Joe Zheng. All three were found guilty of concealing a $100,000 donation from Zhang to National by splitting it into sub-$15,000 tranches and routing them through other people’s bank accounts. Colin Zheng was also found guilty of concealing Zhang’s identity as the donor of another $100,000 to National, and Joe Zheng was convicted of lying to the Serious Fraud Office (SFO).

Why they so badly wanted to conceal Zhang’s identity was never fully explained, though the SFO did note that he had eagerly sought, and received, an official Honour (MNZM) from the National government of the time. Ironically, the disgraced former National MP Jami-Lee Ross, who had solicited donations from Zhang and whose allegations of wrongdoing sparked the whole trial, was cleared of all charges, owing to the state of his mental health at the time.

When the SFO had been following up Ross’s allegations, though, they found that Zhang had also donated to Labour. Following that trail led to charges against him and the Zheng brothers – heard in court simultaneously with the National charges – of conspiring to conceal another $35,000 donation. Zhang had paid $60,000 for five artworks that Labour had valued at $25,000, the balance counting, the SFO argued, as a donation.

The payment was again disguised, this time by the Zheng brothers falsely claiming that five members of Auckland’s Chinese community had bought one artwork each at a silent auction. One of them was the above-mentioned David Zhang, whose anti-Labour views – and insistence that he had never bought a painting in his life – underscored the SFO’s case.

For all that, the defendants were cleared of the Labour-related charges, essentially because of an SFO mistake. The agency had failed to independently value the artworks, raising the (very slim) prospect that the paintings might actually have been worth over $45,000 and therefore Zhang’s donation (the difference between his payment and the artworks’ market value) would have been less than the $15,000 that needed to be declared. Two Labour Party defendants were also cleared of charges, on the basis that, although they had clearly provided false statements about the donations, they might simply have been misled by Zhang and the Zheng brothers.

What can we conclude from these two cases? Clearly the law is inadequate. The government has said it will close the New Zealand First Foundation loophole, but it may need to go further. Penalties for breaches may need to be strengthened, and the law may need a general “anti-collusion” offence to catch donation subterfuges the law can’t specifically anticipate. 

It is clear, too, that the concealment of donors’ identities, via donation-splitting, is widespread. Stopping it altogether is difficult, but greater transparency would help. So the government may need to go beyond its current plan to lower the threshold for disclosing a donor’s identity from $15,000 to $5,000. Even at that level, a donor of $60,000 could hide their identity by splitting the sum among 12 people; at, say, $1,500, they would have to involve 40 people in the conspiracy, significantly raising the chances of being ratted out or otherwise detected.

It is also worrying that these cases were brought to light only by whistleblowers – albeit strange ones, in Ross’s case – and not by tough, systematic inspections by regulators. Such haphazard methods of discovery leave ample room for more offending to go undetected. 

And indeed the trials remind us of just how weak our regulatory agencies are. The SFO, though basically in the right, made rookie mistakes. The police appear to be generally reluctant to take donations-related cases, perhaps because those cases are so intensely politicised. Meanwhile the Electoral Commission, which should be the first agency to detect wrongdoing, has almost no ability to do so. It receives donation summaries from political parties, but cannot check whether the summaries match the party’s own internal records, nor whether those records themselves are reliable. It can compel neither documents nor witnesses.

The consequence is that party funding often remains opaque; the public is kept in the dark. Across the two cases, something close to $1m was given to political parties from people whose identities would, absent whistle-blowers, have remained secret forever. And this winter’s cases are just two in a long line of donations scandals that have, until the National-related convictions, resulted in precisely zero successful prosecutions. One partial success does not greatly change the overall impression that the country’s electoral laws, and its system of enforcement, are both in need of serious repair.

Stuff: National's new social plan goes back to the future - but is that a bad thing?

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I was in a Victoria University auditorium on Wednesday, listening to National MP Nicola Willis outline her party’s resuscitation of “social investment”, when I turned and saw Bill English sitting a few rows back. His face wore its usual quietly confident smile, as it had when he was prime minister.

Back to the future, then: for it was precisely English’s ideas that Willis, the party’s deputy leader, was reviving. English pioneered social investment, as National uses the term: a quest to minutely evaluate ​government​ programmes so that ministers can sift what works from what doesn’t, and transfer funding from the latter to the former.

In its earliest incarnation the scheme became, unfortunately, an excuse for kicking people off benefits. Once the boffins had calculated the lifetime cost of keeping someone on the dole, forcing people off it could be celebrated as a reduction in the state’s “forward liability” – regardless of whether those people then resorted to crime, fell ill or died.

Although by 2017, when English lost power, social investment had moved on from these brutal beginnings, the left’s instinctive hostility to it was entrenched.

In government, Labour initially renamed it “investing for social wellbeing”, then dropped it altogether.

This strikes me as a partisan mistake because, for all its flaws, social investment’s core idea is sensible – progressive, even. Implicit in the quest to find out which public services work best is the belief that public services work.

Indeed, social investment is compatible with the view – which I hold – that the positive effects of many such services are vast. Just think about last century’s immense progress in people’s health and literacy, much of it thanks to services delivered by the state.

Social investment is neither so revolutionary nor, for all the partisan rhetoric, so different from the Government’s much-touted “well-being” agenda. This reflects the basic sameness of modern politics, full of numbers but short on bold actions.

Both well-being and social investment are data-driven attempts to measure how well a given programme scores on multiple domains important for people’s happiness. Well-being spreads its net wider (100-plus indicators and counting), while social investment is better at modelling costs and benefits. Well-being offers a more holistic goal, social investment a sharper idea of how to get there.

The two approaches are compatible. And if Labour hadn’t dumped English’s baby, it would have a clearer story to tell about its use of taxpayer dollars.

Instead National can easily argue – with some justification – that Labour has good vibes but spends money badly, and that the well-being agenda remains amorphous. Social investment, which sounds compassionate but promises to allocate funds wisely, strikes at that weak spot.

It has, though, potential shortcomings. How might a National government avoid them? My advice, albeit unasked for, is as follows.

First, don’t use it as an excuse to cut spending. If, as seems likely, evaluations identify vast swaths of schemes with positive impacts, National ministers would have to fund them accordingly.

Second, drop this strange idea that philanthropists could provide social-investment funding for state schemes. If private money helps determine whether or not someone receives a core social service, that’s a wildly inappropriate privilege for the wealthy. And if we want more funds for social programmes, we should simply ensure millionaires pay more tax.

Above all, don’t let data become god. Social investment could lead ministers to fund only small projects whose benefit-to-cost ratio can be clearly established. But what happens when the data are patchy, or non-existent? Sometimes you just have to do what you know is right.

And what of the more sweeping schemes whose impact defies measurement? As the data journalist Keith Ng has written, a social-investment approach might have led the US not to reform civil rights in the 1960s, because life chances for African-Americans didn’t improve until years later while racial violence worsened in the immediate aftermath. Visionary, long-term public action can transform lives and generate ripples of improved well-being that no spreadsheet could ever capture.

Likewise, targeting sounds smart, but sometimes universal schemes – with their lower administrative costs, avoidance of stigma, and lack of demeaning hoops for applicants to jump through – can work better. And National would have to listen to communities to ascertain what “works”, rather than assume government datasets hold all wisdom.

Finally, accept that politics will intervene. At Wednesday’s lecture, I asked Willis if, as a committed social investor, she could explain the benefit-to-cost ratio of her party’s policy of banning gang patches in public, something I suspect is a net negative because it further alienates an already troubled cohort.

Looking like she didn’t much appreciate the question, Willis replied: “We have no idea.”

Populism trumps data, in other words. And English might have sympathised. He, after all, talked ceaselessly about social investment, but in 2017 was forced to run on a platform that included boot camps for teen offenders – an initiative that, research had already established, simply did not work.

Stuff: Sacrificing 50,000 workers on the altar of inflation is madness

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It sounds like a Pacific island, but is actually a crime scene. Welcome to Nairu, the Non-accelerating inflation rate of unemployment, a seemingly innocuous term that symbolises all kinds of damage to well-being and to working lives.

On Wednesday, in the latest salvo of the cost-of-living war, the Reserve Bank lifted the official interest rate at which banks borrow from 3 to 3.5%. If, the theory runs, banks in turn charge customers more to borrow, companies will cut back on spending and inflation will be curbed.

Which is all very well – except that one of the ways in which companies retrench is they sack thousands of staff.

Last month economists were candidly discussing the “need” to cull 50,000 workers. Contemplating the Reserve Bank’s options, ANZ chief economist Sharon Zollner argued: “To beat inflation, they require some people to lose their jobs. That’s a comms challenge right there.”

A comms challenge is one way to put it: unnecessary suffering might be another.

Part of the problem is symbolised by the Nairu, a concept used to identify, in the words of Australia’s Reserve Bank, “the lowest unemployment rate that can be sustained without causing wages growth and inflation to rise”.

Leaving aside the special genius it takes to frame wage growth as a bad thing, the salient point is that estimates of the Nairu are often quite high. In 2018 our Reserve Bank put it at 4.8%. If unemployment falls below that level, on this theory, inflation will accelerate away. Even commentators who’ve never heard of the Nairu are channelling a similar logic – one that leads inexorably to mass layoffs.

So much here is upside down. While high inflation is undoubtedly bad, high unemployment is far worse. Research by New Zealand economist Robert MacCulloch suggests the latter is 12 times more damaging to our self-reported well-being than the former. If, as ministers claim, we live in the age of well-being economics, surely we should be making different decisions.

There’s little evidence, moreover, that the main villain in the cost-of-living story is the spending of the 50,000 people who’ll be laid off. Much of current inflation is driven by Covid-induced supply-chain shocks and war in Ukraine, by firms facing so little competition that they find it easy to raise prices, and (at the margins) by government spending. None of that is working people’s fault.

It’s still true that too much money sloshing around lifts inflation. But think about the 50,000 workers most likely to be laid off, who will be disproportionately low-waged, young and Māori. Are they spending their spare cash on fripperies, or just trying to buy groceries, heat their houses and pay rent?

If there genuinely is excess cash, it sits in the hands of the well-off. But current policies don’t target them. In other words, low-wage workers will be thrust into poverty so that the rich can keep buying new kitchens. Hence the above reference to a crime scene, for these are economic crimes being visited upon ordinary people.

Questions should be asked of the Reserve Bank, though its options are limited by the blunt interest-rate-hike tools at its disposal. We must also dig deeper into our intellectual substructure, unearthing semi-hidden concepts like the Nairu and questioning what they represent.

The Nairu assumes, for instance, that wage rises automatically spur inflation. But if employers take the hit by accepting lower profits, rather than passing costs onto consumers, inflation needn’t soar. How, in these equations, have company profits slipped out of sight, gaining the protection of an invisibility cloak?

Nairu-based analysis also sees greater staff bargaining strength as a bad thing, because it lifts wages. A wider pool of workers is good only because competition between them keeps wages low. Again we glimpse an upside down economic universe.

In a more orderly world, decision-makers would put employment and wage growth first, then work out how everything else fits. Since New Zealand used to have full employment, we might aim for something similar again.

Accepting that 1% of the workforce constantly churns in and out of jobs, we could seek to eliminate long-term joblessness – especially if we invested far more in retraining schemes for beneficiaries, as other countries do. Paid work isn’t the be-all-and-end-all. But for those who want it, a job should be available. Isn’t that one of the core promises of social democracy?

In this scenario, of course, inflation risks would be heightened– and we’d need to manage them carefully, without harming poor households. Which tools we’d use isn’t yet clear. Forcing more competition into sectors where it is currently deficient? Higher top income tax rates? Higher but temporary GST levies on luxury products, when inflation threatens?

Whatever the answers, they have to be more sophisticated than the current set. Sacrificing 50,000 workers on the altar of inflation is madness.

Spinoff: Kris Faafoi and the revolving door

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Kris Faafoi’s got us all in a spin. A cabinet minister barely three months ago, and now the country’s newest lobbyist, he has gone through the revolving door between politics and corporate life so fast it must still be spinning. And of course one of his new roles, at lobbying and public relations firm Dialogue 22, will be… spinning.

Why does this matter? Because it highlights a key weakness in New Zealand’s integrity rules. As a cabinet minister as recently as July, Faafoi will have been privy to the most important political discussions in the land, compiling a treasure trove of information. And normally that knowledge is held confidential. Admittedly, elements of cabinet discussions leak, and the government publishes some papers after the fact. But the vast majority of the information surrounding such discussions – the arguments made for and against in cabinet, the motivations and positions of individual ministers, the political realities that determine a given decision – is kept under wraps.

In particular, confidential public information is not supposed to end up in the hands of commercial interests. With good reason, we do not simply sell information about cabinet debates to the highest bidder. That information is supposed to be used for the public good, not to advance private interests. And if private firms or individuals do get hold of it, they gain a completely inappropriate advantage over their rivals.

All these values and protections are rendered somewhat irrelevant, however, if Faafoi – or indeed anyone else – can simply step through the revolving door and, taking confidential public information with them, immediately turn it to the benefit of their clients. Dialogue 22’s website makes clear that Faafoi’s former life as a cabinet minister is a core part of its pitch. And the man himself told the Herald earlier this week that in looking to drum up business, he had been “speaking to people I’ve had relationships with in the past”. Given it’s a long time since Faafoi did anything except politics, those are presumably people he has met in his capacity as an MP and minister.

The concerns about the revolving door arise well before ministers leave politics. If, while still in post, they spy the prospect of a lucrative corporate afterlife, it is hardly inconceivable that they will start to bias their decisions towards – or at least form overly close relationships with – the firms able to deliver that career. While there is no reason to think Faafoi has behaved in this way,  it routinely happens overseas. Empire of Pain, Patrick Radden Keefe’s celebrated book on America’s opioid-pushing Sackler family, shows how they built a cosy relationship with a regulator whom they persuaded to approve their dangerous drugs – and then found said regulator a job at the family firm paying US$400,000 a year.

None of which is to say that lobbying itself is bad, even if the term usually has negative connotations. Everyone is entitled to (try to) contact an MP or a minister. And if people can do it themselves, they should presumably be able to pay someone to do it on their behalf. Lobbying becomes a problem only when it happens in secrecy, involves inappropriately close relationships between officials and lobbyists, creates an imbalance of power – such that some voices are heard much more than others – or, as in this case, may involve turning confidential public information to private benefit.

Fortunately, there is a straightforward policy response: the cooling-off period. In many countries, former decision-makers have to wait some time before they can lobby the public institutions that once employed them. Principles set out by leading global NGOs, including Transparency International, recommend a minimum cooling-off time of two years. In Taiwan, the period is three years, in Canada five, and in some US states six. Because politics moves rapidly, the individual’s confidential knowledge is, by the time such periods end, far less relevant, and thus less likely to be used for private benefit.

If we were to implement such a policy in New Zealand, we would have to pick an appropriate period – three years, the length of a parliamentary term, would be one option – and decide whom it covers. Ministers, obviously – but arguably MPs and senior public servants also possess enough confidential information to warrant a cooling-off period, albeit perhaps a shorter one.

Beyond that, we should also require those lobbying the government to disclose their interactions with decision-makers. The Greens’ 2012 attempt to institute such a register may have gone down in flames, but Ireland has long maintained one, suggesting it is not an especially difficult thing to get right. As ever, the tools to ensure openness and transparency in government are readily available to us; the only question is whether we have a real desire to use them.

Guardian: Hope and heartbreak for New Zealanders dreaming of a communal life

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“Welcome to the site of hope and heartbreak.”

With these words Bronwen Newton greets visitors to a quarter-acre gravel carpark between two industrial buildings in New Zealand’s capital, Wellington. Still visible are the foundations of a sheet-metal workshop that once stood there; not visible is the cohousing project that Newton and 23 other families hoped to build, but now never will.

Since 2018 Newton – a lawyer and property developer – has helped steer the Urban Habitat Collective, one of New Zealand’s latest attempts at a cohousing scheme. The story of its collapse is the story of the difficulties facing those who dream of living in a connected community outside the conventional models of the property market – often at considerable personal cost.

Cohousing is a semi-communal housing model, typically featuring a mix of private and shared spaces but retaining individual ownership of homes.

Mark Southcombe, a Wellington architect and academic, lauds it as a “self-help, bottom-up organising” of house-building that delivers stable, well-connected communities – important in a world of increasing loneliness.

“I think cohousing is wonderful,” he says, adding that in a country where property investing is a national obsession and has helped drive house prices to world-record highs, there is a need to “re-socialise” housing.

For Newton, cohousing is about ensuring people can live not just physically close, but also connected. Inspired by such sentiments, her collective’s 24 members – a mix of retirees, families with children, and others – bought a site in Wellington’s Adelaide Road in 2019 for NZ$2.25m.

Their final design featured two buildings with shared dining areas, a rooftop social space, a bike workshop, car-share parks and an expansive communal garden. “We used to say we are building ‘together-ments’, not apart-ments”, Newton adds.

For developers, though, the project sat awkwardly between the familiar profitable territory of stand-alone houses and 80-unit apartment blocks. Few were willing to take on the job, and then rising construction prices wreaked havoc. Estimated costs nearly doubled, to $23m. At this point, Newton says, the “last sliver of hope” vanished: even if their bank hadn’t pulled out of financing the construction, many owners would have struggled to get mortgages.

The scheme itself is effectively over, and at some cost: between them the families have spent millions of dollars on design and other expenses, and will likely be out of pocket. Some had sold homes or used inheritances to finance their involvement.

In light of this collapse, how does Newton feel? “It only hurts when I think about it,” she says. “I don’t regret doing it. [But] I really still regret not having a building. It’s what we set out to do, it’s what we worked for, it’s what we still want.”

‘We get to be a community’

Across town, a happier story unfolded. On Christmas Eve last year, six Wellingtonians moved into a cohousing scheme they had been planning since early 2017. One of the residents, Tania Sawicki Mead, says: “Independently lots of us had been talking about wanting to buy a house, and the impossibility of affording one.”

Moving quickly, they bought a site in November 2017 and settled on a small local building firm.

But even getting a building loan took eight months. The problem wasn’t the costs, it was that the group weren’t a conventional one-home, nuclear-family customer, nor could they be classed as commercial developers. “We were just weird – we didn’t fit into any category.”

The supposed complexity of a six-owner structure also “gave people the heebie-jeebies … They were so obsessed with the idea that we were a risk.”

Eventually, though, the project got a loan and today the row of four townhouses stands proudly amid still-fresh concrete paths, work-in-progress gardens and common room and deck.

“The ability to socialise together was really important,” Mead says. “That made it worth the time and hassle … We get to live close to people we care about and we have a space where we can hold those connections alive. We get to be a community.”

Extending the pool

These projects mirror the fortunes of New Zealand’s cohousing movement. Alongside well-established examples like Auckland’s Earthsong, recent successes include Dunedin’s Toiora High Street, which repurposes a former school site, and another Auckland project, Cohaus. But planned schemes in Cambridge and Lyttelton have folded.

Southcombe is among those working to create open-source guides and legal templates for prospective cohousing groups. Cohousing advocates have also urged the government to allocate spare public land for collective house-building, and to provide support for people navigating the many finance, tax and building-consent hurdles.

Such moves, Mead says, would help “extend the pool” of groups able to carry out cohousing projects, among them hapū (indigenous families) seeking to build papakainga developments – a traditional multi-generational shared housing model.

For her part, Newton wants to see “fundamental issues” in the construction industry resolved, including its boom and bust cycles and the unbalanced risk-sharing that sees clients pay more if costs escalate but developers pocket the proceeds of any savings. State agencies, too, could be waiving development contributions for cohousing projects and providing other supports. Anything, she says, to recognise the fact that cohousing collectives are people “trying to do something different, at great personal cost and risk”.

Stuff: The curse of cosyism in public life is hurting us all

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Cosyism: a new word for one of the most chronic problems in New Zealand public life. We are largely spared, thankfully, the envelopes-stuffed-with-cash corruption that infects other countries. But we’re suffused with overly close relationships: nepotism, jobs for the boys, all that jazz.

Some call it cronyism, but that doesn’t quite fit here: “cronies” sound too much like Mafia hitmen. “Cosyism” better describes those insidious processes by which public positions, jobs and contracts sometimes go not to the best-qualified applicants but to the friends, contacts and family members of people in power. It’s an apt term for a famously small society in which cousins and mates are always – cosily – rubbing up against each other in public life.

Cosyism isn’t solely an injustice to the well-qualified but poorly connected people who lose out; it can cost us all, since the winners – the well-connected but poorly qualified – often do bad work, expensively.

A cosy society also tolerates the most colossal conflicts of interest: situations where power-holders’ decisions could be biased by a personal incentive, be it to protect a business connection or aid a relative. Even just a public perception of bias can be harmful, corroding trust and promoting political disengagement.

Here’s a cosy example: the head of the Film Commission, David Strong, was earlier this year revealed to have a show in development with Great Southern – a production company that bids for funds administered by the commission. Strong declared this conflict upfront but, given his obvious interest in the firm’s success, how could junior commission staff feel comfortable saying no to it? Under intense pressure, Strong eventually quit, but this conflict shouldn’t have been tolerated for a moment.

Another example: last year, the Reserve Bank thought it was a bright idea to hire as a contractor, and then appoint to its board, Roger Findlay, the chairman of NZ Post, which then owned Kiwibank – one of the institutions the Reserve Bank is supposed to regulate. Findlay’s term at NZ Post has since expired – but again, how could this conflict ever have been allowed?

In politics, cosyism has a long and undistinguished history. In 2013, Paula Bennett appointed a new families commissioner, Belinda Milnes – the sister of Bennett’s Cabinet colleague Amy Adams.

Last term, NZ First MP Shane Jones was a walking conflict of interest, once even contacting the New Zealand Transport Agency about a case it was taking against a relative. More recently, according to reports, National MP Mark Mitchell found his sister a job in his electorate office.

The latest conflict-of-interest accusations concern minister Nanaia Mahuta and the nearly $200,000 in contracts awarded to her husband and his family by ministries where she had at least associate responsibility. These contracts are now – at her instigation – being examined by the Public Service Commission.

Mahuta seems to have done what’s currently required, declaring the conflicts of interest and taking no part in the contract decisions. But two agencies, Kāinga Ora and the Ministry for the Environment, have already acknowledged major mistakes – including the failure to even realise there were conflicts of interest when hiring the associate minister’s husband.

No doubt the agencies will improve their protocols, at least to meet current standards. But given what they allow, are those standards fit for purpose? Could any public servant, in any department, deal confidently with a contractor – including, if necessary, rejecting substandard work – if they knew the latter were the minister’s relative?

What, too, about the advantageous information a minister could convey to their contractor relative? There may be no reason to doubt the integrity of current ministers, but that’s not the point. We must design systems for the most corrupt actors, not the least.

Some people respond to such problems with a shrug: in a small society, they say, these conflicts are inevitable. But that’s back-to-front: we have to be tougher on these problems precisely because we’re a small society, and they will crop up so often.

The current default is to “manage” a conflict of interest by leaving the room, sometimes literally, when a particular issue is discussed – as if this removes every opportunity to influence the decision. That default needs to change.

By and large, we shouldn’t manage conflicts of interest, we should avoid them. If you want to run a government agency, for instance, you just have to ditch your contract with the firm the agency regulates. Or they hire someone else.

Remember there are four million adults in this country, albeit many are held back by poverty and discrimination. By fighting those forces, we could create a talent pipeline that feeds a wider pool of applicants, and lets recruiters cast their nets further.

A cosyism crackdown would, of course, be hard on some people. Too bad. That’s the price we pay for probity, and for public faith in our institutions.

Stuff: Two decades of donations scandals – so where are the convictions?

Co-written with Lisa Marriott. Read the original article on Stuff

It looks awfully like one law for the rich and one for the poor. At one end of the justice system, people can be fined or jailed for relatively minor crimes such as the driving offence of “wheel-spinning”, where no injury is caused. But there seem to be few legal consequences for breaking the laws around donations to political parties, something which typically involves the rich and powerful.

Because political donations can lead to influence and favours, big donors – those giving over $15,000 – are required to disclose their names. But New Zealand faces a growing number of scandals in which donors and parties seemingly go to great lengths to keep those names hidden.

People connected to both Labour and National, including the disgraced former MP Jami-Lee Ross, are currently on trial in the High Court at Auckland, facing donations-related charges. The New Zealand First Foundation was in the same court a few weeks ago for similar reasons.

While it is unusual to have two high-profile cases at the same time, New Zealand’s history presents no shortage of such incidents, as the (non-exhaustive) list below demonstrates.

• 1996: An ACT donor attempts to split a six-figure sum into small amounts to avoid disclosure.

• 2005: Labour ministers lobby for, and approve, citizenship for party donor Bill Liu, against the advice of officials. The process for approving Liu’s citizenship was later criticised by the auditor-general.

• 2007: National uses the Waitematā Trust to channel millions of dollars of donations to the party anonymously; Labour responds by using law firms to achieve similar purposes, albeit with lesser sums.

• 2009: NZ First’s Winston Peters is censured by Parliament’s privileges committee for failing to declare a $100,000 donation from businessman Owen Glenn.

• 2010: ACT leader John Banks files a false electoral return, with donations shown as anonymous when they were made by Kim Dotcom. Banks’ conviction was overturned on appeal.

• 2014: National minister Maurice Williamson loses his portfolios after intervening in a police investigation into party donor Donghua Liu​.

• 2016: A complaint is made about Auckland mayor Phil Goff’s 2016 election expenses and a $366,000​ auction, which included a book sold for $150,000​. The Serious Fraud Office (SFO) later investigates the use of auctions in Goff’s election campaigns. The investigation closed with no charges laid.

• Late 2010s: Controversy surrounds the Labour Party practice of getting donors to bid large sums for artworks but registering the donation in the name of the artist, thus apparently obscuring the donor’s identity.

• 2019: Chinese citizen Lin Lang avoids curbs on donations from non-residents by (legally) routing a $150,000 donation to National through a New Zealand-based firm, the Inner Mongolia Rider Horse Industry (now in receivership).

• 2021: Conflict of interest questions are raised when Labour Party MP Stuart Nash receives nearly $25,000 in donations for the 2020 election from forestry and timber companies, shortly before being made minister of forestry. The funds are not repaid.

• 2022: The SFO prosecutes the New Zealand First Foundation for failing to declare donations. The defendants were found not guilty. The Government is now urgently closing the “loophole” discovered in the case.

• 2022: People associated with both Labour and National are on trial for allegedly concealing donations, through sham art auctions and donation splitting.

From this grim catalogue we can draw several conclusions. First, the pace of such incidents seems to be accelerating. This may be because dwindling memberships leave parties increasingly reliant on large donors and increasingly willing to bend or break the rules.

Second, we generally have the media or whistleblowers to thank for bringing these cases into the public domain, not our regulatory agencies. Presumably, countless more scandals are going undiscovered for lack of a whistleblower.

Third, despite no shortage of evidence of wrongdoing, there has yet to be a successful prosecution for political donation transgressions. On occasion, a minister loses a portfolio, but other serious sanctions are absent.

What does this mean? Either the law is insufficient, or our public agencies are incapable of enforcing it.

The current regulatory framework is probably not fit for purpose. The agency tasked with ensuring compliance with the Electoral Act, the Electoral Commission, has insufficient powers. It does not have a prosecutorial role; instead, it can only refer breaches to the police for investigation, if it believes an offence has been committed. It does not even have the power to compel parties to provide documents or answer questions.

Meanwhile, the penalties in the act are often relatively minor, at least from the point of view of wealthy individuals. Admittedly, a party secretary convicted of any corrupt practice faces a prison term of up to two years, or a fine of up to $100,000.

But wilfully misleading the Electoral Commission attracts a maximum fine of just $2000 – and many other offences similarly have maximum fines of $1000 to $2000. This is roughly the same maximum penalty that applies for tagging a tree.

And although it is hard to prove this claim, it is widely believed in politics that the commission, and indeed other bodies, such as the police and the SFO, are reluctant to pursue donations-related cases because of their highly sensitive political nature.

An independent panel is currently reviewing New Zealand’s electoral law, and has been tasked with building public trust and confidence in the system. We hope one of its recommendations is that the Electoral Commission needs greater powers, and that the penalties for breaking electoral law should be made stronger.

What can be done about the legal system’s general tendency to punish the powerless more than the powerful, however, is not clear.

Stuff: An heiress's birthday and a support worker's meagre lot

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For most people, a 30th birthday party might be a celebration at a community hall, or at best a long weekend away with friends. But not if you’re a Rich List heiress.

According to recent media reports, Aucklander Ali Andrews, whose family built the $500 million Bay Audiology fortune, marked her anniversary by renting a €100,000-a-week villa in the French resort town of St Tropez.

She and her friends, many of them also the children of multimillionaires, availed themselves of the villa’s helipad and outdoor cinema, and danced the evening away “amid thousands of rose petals and a string band”.

It’s a far cry from the lives of women like Tamara Baddeley, a Napier community support worker whose job it is to visit the elderly and the vulnerable in their homes and get them through the day with dignity.

From lifting clients out of bed and helping them to shower, through to fitting catheters and colostomy bags, the work requires an extraordinary combination of mental, physical and emotional ability.

Yet she earns just $26.50 an hour. This leaves her feeling “taken for granted, underappreciated, overworked and underpaid”, she told me earlier this week.

Strange to say, Baddeley is not living it up on the French Riviera. Indeed, her only foreign trip in the last two decades, aside from an Australian holiday, was a European visit for which she saved for eight years.

Such contrasts underline the immense unfairness of modern New Zealand life.

As the daughter of Rich Listers, Andrews will have had countless unearned advantages; and if she is well paid, it won’t, in my opinion, be because her work – doing PR for luxury resorts and botox practitioners – has any great social value. (Indeed I dare say the world would cope just fine without it.) Andrews will be well paid because she caters to the desires of the rich.

Baddeley, by contrast, does some of the most important work imaginable, for some of our most vulnerable citizens, in some extremely complex and demanding situations. (People who think it’s easy work should give it a go, and see if they last even a day.) Yet she earns little more than the minimum wage.

Baddeley belongs to a class of workers, spanning community support, rest-home care, and mental health and disability assistance, whose complaints were supposedly settled after the celebrated Kristine Bartlett case.

In 2012, Bartlett, backed by her union, launched a court action alleging that rest home care and the like was grossly underpaid because it was seen as women’s work.

She won, forcing the National government to agree a $2b settlement that began in 2017 and expired the June just gone. Lifting rates by up to $7 an hour for more than 55,000 workers, the settlement was a triumph of fairness, and other pay-equity deals soon followed. The problem is everything after.

Many of the sector’s employers – the usual mix of private contractors and NGOs – undid the settlement’s impact by cutting hours or forcing staff to take on more tasks. (Such difficulties in controlling private providers are, incidentally, another argument for Health New Zealand to bring the services back in-house.)

For all the talk of pay equity, carers’ wages have never caught up with those of equivalently skilled but male-dominated jobs: prison officers, for instance, earn closer to $35 an hour. Baddeley’s compensation for time spent travelling between clients’ homes is painfully inadequate.

And although Labour deserves credit for making pay-equity settlements easier, and signing billions of dollars’ worth of further deals, its response this year to the community support workers’ plight was a 70c-an-hour pay offer – a 3% increase when inflation is at 7.3%.

“I felt insulted,” Baddeley says. “If I didn’t care about the clients, I’d consider leaving. But we have lost so many carers already, to burnout and other things.”

Her union, E tū, has since joined others in lodging a new claim, aiming to create a genuine pay-equity successor to the Bartlett deal.

But until pay rates for care workers are somehow formally linked to those of their male equivalents, the unions will always be in catch-up mode, climbing a mountain that grows ever-higher under their feet.

This pay discrimination is a national disgrace.

People like Baddeley – whose work answers our shared desire to ensure the old and vulnerable can live well – are serving the public good, and the public should ensure they are properly paid.

Labour’s big problem is finding the money to lift their wages, when New Zealand’s tax take is around $20b-$30b less than a comparable European country would raise.

Many of those countries, of course, levy taxes on the very largest estates, arguing that those lucky enough to inherit vast sums should compensate those less fortunate.

Maybe we should do the same here. I, for one, would rather live in a world where Ali Andrews contributes more, and Tamara Baddeley is better paid.

Stuff: Goodbye Marx, hello doughnuts - a new image for a better world

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Writing from prison in 1930, Italian philosopher Antonio Gramsci defined his era as an interregnum – literally, a period between rulers – and argued: “The old is dying and the new cannot be born.”

Intellectually, we could say the same of our age. The market-driven, hyper-individualist certainties of the last four decades are crumbling. The political project of leaving individual consumers to “buy” public services, and getting government “out of the way”, has not, in the developed world, delivered greater stability, lower inequality or even enhanced economic growth.

Its legacy has instead been an ever-growing number of financial crises, culminating in the GFC; wider disparities between rich and poor; weaker economic growth than in the postwar period; and of course the wholesale degradation of the planet, most obvious in the creeping devastation of climate change.

By widening economic disparities, and thus leaving many poorer communities stranded, hyper-individualism has also contributed to the vicious, reactionary populism convulsing the globe. Even if it can boast some wins, like cheaper consumer goods and wider market choices, the above failings still constitute a hefty charge sheet.

Yet while this intellectual edifice has crumbled, nothing concrete has risen in its place. Why so? Partly because there is no one predominant figure to lay the foundations. In the past, social democrats could rely on John Maynard Keynes, libertarians on Friedrich von Hayek and Milton Friedman, and Marxists on, well, Marx.

Today’s absence of an intellectual prophet is no bad thing: such figures invite over-simplification, and represent a single point of failure. But without them, the future can be harder to discern, leaving us to patch together a new paradigm from a disparate band of thinkers.

Among this multiplicity, it often feels like the best new thinking is based, explicitly or not, on the image of the circle. British thinker Kate Raworth, for instance, uses the metaphor of a doughnut to symbolise the end goal of economics. The hole in the middle represents a failure to develop sufficiently, leaving basic human needs unmet; outside the doughnut is ecological overshoot, harming the planet; in between, the body of the doughnut itself is the safe space, a point of balance where human needs are met but the planet is preserved.

Another concept rapidly gaining ground is the circular economy – the subject of a major report earlier this week – which aims to ensure products are reused (passed around between users in a circle, as it were) rather than thrown away.

Why does the circular image hold such power? For one thing, it symbolises the connectedness implicit in the very functioning of nature: think of the classic cycle of water running off mountains into the sea, evaporating upwards, condensing into clouds, and precipitating back down onto the mountains. Circular metaphors ground us in regenerative, restorative thinking.

They also emphasise equality: at King Arthur’s mythical round table, everyone was equally placed, because the table could have no “head”. Circles are balanced, stable, harmonious. And in this harried world – its jobs ever-more precarious, its climate ever-more fragile – who couldn’t use a bit more harmony, stability and balance?

Circularity can have negative connotations: think circular arguments, or people going around in circles. But one can easily draw, rising up from a circle, a spiral, one that lifts towards ever-greater opportunity and more flourishing lives.

The world needs, for instance, to create a positive, self-reinforcing spiral between greater economic equality and enhanced democratic participation. If more people feel included in their society, they are more likely to vote, which in turn orients politics towards enhancing equality, and so the spiral rises. (Too many countries, currently, are on a self-reinforcing downward spiral of widening disparity and declining political engagement.)

Upward spirals encourage us to think about exchanges – whether in markets, communities or public services – that are mutually enhancing, exchanges in which the participants uplift each other’s dignity and personal development, in a positively escalating reciprocity.

Combined, the circle and the spiral provide both stability and dynamism, security and growth. It’s an optimistic image for a century that, for all its turmoil, holds extraordinary potential. The developed world learned last century how enhanced material prosperity, and widespread access to public health and welfare, can transform human well-being; now we just need to deliver those goods without simultaneously trashing the planet.

We can already see, in this century, the potential for increased education and technological creativity to further transform our lives; now we just need to ensure those forces benefit everyone, and not only the top 1%. Equality, harmony, balance.

All this is abstract, of course, and hard to translate into the everyday. Any prime minister suddenly spouting the language of spiral politics would be swiftly derided. But still these are images that can underpin a new paradigm, helping us make better sense of this century, and this world.

Stuff: Terrible landlords aren’t ‘bad apples’ - they’re endemic

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Among my generation, it’s a grim joke that an outstandingly good landlord is one who fulfils their basic legal responsibilities. That’s how low the bar is. Rental housing is routinely so awful in this country that mere compliance with the law elicits superlatives.

A flat that Stuff profiled last year in Hanson St, Wellington, is typical of our rental stock: not just damp and mouldy, but degraded by holes in the walls, malfunctioning lights, draughty windows and earthquake damage.

Property investors would have you believe the landlords of such places are a few bad apples. But every reputable survey reveals a garbage dump of ghastly flats.

A few years back, building researchers BRANZ uncovered damp in one-third of rentals and mould in half of them. An Otago University trial found one in two would fail a basic warrant of fitness.

More recently, a 2020 stocktake by Stats NZ showed one in three rentals had large gaps around windows and doors, more than one-third were always or often cold, and nearly half were mouldy. One in two required moderate or major repairs. Similarly, a Habitat for Humanity survey this year found many rentals needing repairs either internally (38%) or externally (42%).

In short, somewhere between 30% and 50% of our 600,000 rentals – that’s 200,000 to 300,000 dwellings – are in terrible condition.

The Government’s grand plan to deal with this social catastrophe centres on the Healthy Homes Standards, which – in theory at least – require landlords to insulate their properties, install​ a fixed heater (ideally a heat pump), fit fans in kitchens and bathrooms, fix holes in walls, and ensure water isn’t pouring in. These are not overly taxing demands.

A law that is not enforced, however, is no law at all. And in the past, rental rules, like too many New Zealand regulations, have relied largely on the affected individuals complaining.

This policy – again, like too many others – has been a disaster. Even though they are now theoretically protected against no-fault evictions, few New Zealand renters want to complain about their landlord, who can make their lives hell in many different ways.

But, in a potentially seismic shift, the Government has given itself the power to not just respond to tenants’ complaints but to proactively identify and target the worst landlords. That’s the good news.

The bad news is that, to investigate 200,000-300,000 terrible rentals, the Ministry of Business, Innovation and Employment (MBIE) has employed a frontline inspectorate numbering ... 37. Each inspector will have to check somewhere between 5000 and 8000 rentals.

This reminds one of the fanciful calculations showing Santa Claus would have to be a high-speed blur if he really visited each of the world’s 2 billion children on Christmas Eve. Less humorously, it recalls the sole inspector employed to check mine safety around the time of the Pike River disaster, which killed 29 men.

The comparison is apt: health experts estimate that damp, mouldy, unsafe houses – many of them rentals – cause 230 deaths each year, and put thousands more in hospital. They are one major reason why diseases eliminated in most developed countries, such as rheumatic fever, continue to haunt our children.

Just 37 inspectors could still make a difference, with the right attitude. And in the year since the Healthy Homes Standards came into force, MBIE has – it tells me – “proactively” engaged with 300 landlords. But just 43 have been issued with improvement notices, and none has been successfully prosecuted in the Tenancy Tribunal, though cases are under way.

In the ministry’s defence, it has faced Covid, and various set-up challenges. Rentals, moreover, have to meet the standards only when their tenancies are renewed, meaning tens of thousands will not yet be covered. But tens of thousands will be.

One big problem is that, like most New Zealand regulators, the ministry insists on starting gently. Initially it just informs landlords of their obligations, before “encouraging” them to comply, and only after that starts thinking about enforcement.

Even when enforcement is chosen, it happens on a slowly ascending scale, from warnings through to “enforceable undertakings”, improvement notices, infringement notices and, finally, the Tenancy Tribunal.

Though this may sometimes be the right approach, it creates unendurable delays for the tenants of slumlords. It is also inefficient. While one landlord slowly complies, the others look on, unthreatened and unlikely ever to face one of the celebrated 37 inspectors.

In France, they used to say of the English that from time to time they like to shoot one of their admirals, pour encourager les autres: to encourage the others. Without going so far as actual shootings, the ministry should bring some big, high-profile cases against slumlords, and levy enough fines to put them out of business.

The others will rapidly be frightened into full compliance. Only that way can renters expect the scourge of substandard homes to be tackled in their lifetime.