Jenée Tibshraeny can forgive a genuine, if rather extraordinary, mistake, but the government’s lack of transparency around decision-making creates confusion at a time when we need confidence, she writes in a piece originally published on interest.co.nz.
The creator of Veep, The Death of Stalin and In the Loop, Armando Iannucci, could’ve filmed a political satire at parliament last week.
We had the extraordinary situation on Thursday, where the government gave itself the power to issue billions of dollars of loans to small businesses, without realising it. An administrative error, involving someone clicking on the incorrect confusingly named file, saw the wrong bill tabled and then passed within hours.
The version MPs thought they were passing was one that enacted all the tax changes the government had already announced to ease the pain of the Covid-19 crisis. The version that actually passed was one that additionally included clauses giving the Inland Revenue Department (IRD) the authority to issue small businesses loans on behalf of the Crown.
The crazy thing is, MPs didn’t know what they had just rubber-stamped until I reported it on Thursday afternoon. I got lucky and saw the creation of the small business cashflow loan scheme in the bill, made a few quick calls to confirm I was reading it correctly, and hurriedly broke the news – without at that stage knowing the wrong version had been put in the system.
As I have since found out, the debacle caused cabinet to meet on Thursday night to approve details around how the scheme would operate – the bill simply gives the IRD the power to issue loans, but doesn’t detail loan values, eligibility, interest rates etc.
I understand the matter was due to be brought before cabinet today, ahead of legislation being passed under urgency later this week.
I’ve been told work on the scheme had been done by Thursday night. So even though things were rushed and horrifically messy, the outcome is ultimately the same.
Officially announcing the small business cashflow loan scheme at the 1pm press conference on Friday, finance minister Grant Robertson acknowledged the botch-up and said: “This is something we always intended to do, the legislation simply created the enabling framework for that.”
Show us the due diligence
The opposition is rightly upset. National’s finance spokesperson Paul Goldsmith said: “New Zealanders expect their government to have gone past the panic stage of the crisis and to be capable of carefully thinking through detailed policy that will target assistance to those most in need.”
Act leader David Seymour said: “The error raises questions about the government’s competence. Given the speed at which this legislation was drafted, the government should also explain what due diligence was done by treasury and IRD officials on the small business loan idea.”
I believe both Robertson and the public sector that has served successive governments are competent. However, the opposition makes a crucial point – the government needs to give us the hard facts and proactively release the advice behind its decision-making soon after decisions are made.
Robertson couldn’t, in the press conference, provide satisfactory answers on how much he expected taxpayers were putting on the line for these loans. Nor could he say how the IRD would assess credit risk – other than to say the IRD is well-placed to do the job, as it already has a lot of financial information about businesses.
Journalists were left deciphering what the scheme meant in practice from a PRed press release, with no supporting documentation
Issues with the business finance guarantee scheme too
But here’s the kicker – a line was slipped into the bottom of the release, saying the government is no longer requiring banks to take security when issuing taxpayer-backed loans under the existing business finance guarantee scheme (which is distinct from the new scheme).
So it will be at banks’ discretion whether they take security for the $6.25 billion of loans they’re expected to give businesses, which taxpayers are 80% on the line for. No big deal!
Robertson’s response to my question around taxpayer exposure once again didn’t fill me with confidence.
Then later in the press conference he mentioned agricultural businesses will also be able to apply for bank loans under the scheme. They previously couldn’t. Sorry what? Another huge change mentioned nonchalantly.
I thereafter asked both Robertson’s office and treasury to urgently provide me with an updated eligibility criteria for the business finance guarantee scheme. No response until 5pm.
But wait, there’s more. The treasury response unveiled further changes to the scheme to make it accessible to more businesses. Among these, very small businesses can now apply and businesses don’t need to have exhausted other options with their banks before being eligible. Wow.
Banks didn’t know the changes were coming pretty much until we did.
Rewind to April 1, when Robertson announced the eligibility criteria of the initial iteration of the scheme, and detail was once again lacking. Treasury couldn’t give me a copy of the eligibility criteria until very late that night and banks weren’t in fact ready to start receiving loan applications straight away.
Confusion when we need confidence
The consequence – people are left confused and then upset the support offered to them isn’t what they thought it was. The information media provides is incomplete in the first instance and banks’ phone lines get jammed as they’re swamped with enquiries.
On April 1 I refrained from publicly venting my frustration. I accepted that in an initial response to a crisis, imperfect action is better than inaction. I saw how hard the government and its officials were working, making life/death decisions based on imperfect information, and wanted to give them a break. They did a good job.
Now the government needs to take that extra day if it needs to to get its ducks in a row, so its announcements provide the certainty and confidence businesses need to tackle tough decisions.
The public is putting an immense amount of trust in the government as it circumvents the usual checks and balances to get us through this crisis. But trust is earned. It’s also key to maintaining social cohesion.
Oddly, I can dismiss Thursday’s passing of the wrong legislation as an extraordinary genuine mistake. But the lack of transparency around decision-making and incoherent way of announcing a billion-dollar policy change are inexcusable.
The Spinoff Daily gets you all the days' best reading in one handy package, fresh to your inbox Monday-Friday at 5pm.