The cockroach of the globe, New Zealand. Photo: Getty Images
The cockroach of the globe, New Zealand. Photo: Getty Images

PoliticsMarch 6, 2020

Reputation vs reality: how vulnerable is New Zealand to systemic corruption?

The cockroach of the globe, New Zealand. Photo: Getty Images
The cockroach of the globe, New Zealand. Photo: Getty Images

I have reason to believe that New Zealand’s reputation for being corruption-free and its sense of well-being don’t fully align with reality, writes Timothy K Kuhner.

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Alongside Scandinavian countries, New Zealand is consistently cited as one of the least corrupt nations in the world. In Transparency International’s 2019 Corruption Perceptions Index, for example, we are tied with Finland for first place. This sterling reputation increases our ability to exercise a leadership role in regional and international bodies, and to attract foreign investment. I’m also convinced that it provides a sense of political wellbeing. I refer to a certain confidence within the public that this small democracy in a distant corner of the South Pacific has at least as much integrity as any other.

But I have reason to believe that this reputation and sense of wellbeing don’t fully align with reality. Nothing better to call our attention to this than the Serious Fraud Office’s ongoing prosecution of large donors to the National Party and its ongoing investigation of the fundraising practices of the New Zealand First Foundation. The spotlight may soon reveal a few bad apples, but before that specific focus takes over the news cycle, I suggest we focus on the rotten barrel. These cases are merely symptomatic of New Zealand’s extreme vulnerability to the undue influence of concentrated wealth over political parties, laws, and policies.

TI’s 2019 report, published this past January, provides a glimpse of what I’m talking about. Despite coming in first in the ranking, New Zealand largely fails to comply with the report’s urgent recommendations for political integrity. TI’s Chairperson, Delia Ferreira Rubio, states that “governments must urgently address the corrupting role of big money in political party financing and the undue influence it exerts on our political systems.” (See the TI CPI 2019 website here.) Homing in on the “need for greater political integrity,” TI’s Executive Summary reminds the nations of the world that “Public policies and resources should not be determined by economic power or political influence.” To this effect, the report recommends controlling political financing, managing conflicts of interest, and regulating lobbying activities.

Currently, New Zealand imposes no limit on individual or corporate donations to political campaigns or political parties. Even corporations with government contracts are free to donate. Moreover, disclosure rules are weak. Party secretaries are only required to disclose the details of domestic donations over $15,000 (although thankfully this rule applies to multiple small donations from the same source). Thanks to that high bar, the great majority of funds donated to National and Labour in any given year aren’t disclosed to the public (83% of the money donated to National hasn’t been disclosed – $8.7m over six years; and 80% of that donated to Labour hasn’t been disclosed –  $2.8m). Even worse is NZ First, which allows the greatest percentage of its donations to remain secret.

Parliament wisely adopted the Electoral Amendment Act 2019, imposing a new $50 limit on foreign donations, but Golriz Ghahraman’s Electoral (Strengthening Democracy) Amendment Bill hasn’t been taken up. That bill would limit donations (and aggregate donations) to $35,000 and lower the threshold for disclosure. Globally speaking, these provisions are permissive and intended, clearly enough, as a compromise measure to satisfy the major parties’ business models.

In terms of conflicts of interest, MPs must make an annual return on pecuniary and other personal interests pursuant to the Standing Orders of the House of Representatives. While this brings a degree of transparency, conflicts of interest are generally considered an internal matter for party discipline. While a few cases have tackled these issues over the years (such as Field v R and Wilkinson v Osborne), the Standing Orders Committee has issued this worrisome summary:

“Members who have a financial interest in business before the House are not thereby disqualified from participating in a debate on the matter, serving on a committee inquiring into it, or voting on it. It is for members to judge whether they should participate in any of these ways when they possess a financial interest in the outcome of parliamentary proceedings.”

Finally, attention should turn to Holly Walker’s Lobbying Disclosure Bill, which was shot down by the Government Administration Select Committee and the attorney general. The grounds for those rejections could be dealt with through relatively painless revisions, bringing New Zealand in line with sensible lobbying regulations on the books in Canada. But for now, lobbyists face no code of conduct, are not required to register with the government, and their meetings with MPs face no public scrutiny. But they and their clients may donate unlimited sums to political parties and campaigns. And the revolving door between parliament and the private sector remains wide-open with no cool down period.

While the SFO may soon shed light on violations of this already permissive regime of political finance, I’m concerned more with its lawful systemic effects. Take for example, the rising economic inequality reported by Oxfam New Zealand:

  • The wealthiest 20% of households in New Zealand hold 70% of the wealth
  • The top 10% hold 50% of the wealth
  • Two New Zealanders are worth the same as the poorest 30% of the adult Kiwi population
  • The bottom 40% of households account for just 3% of total wealth
  • In fact, the bottom 90% of the population own less than half of the total of New Zealand’s wealth
  • Our wealth concentration is worse than Australia and worse than the OECD average
  • Executive director of Oxfam NZ Rachael Le Mesurier notes what a shock is was to discover such inequity. “The gap between the extremely wealthy and the rest of us is greater than we thought, both in New Zealand and around the world. It is trapping huge numbers of people in poverty and fracturing our societies, as seen in New Zealand in the changing profile of home ownership … New Zealanders love fairness, not inequality.”

But when it comes to combatting the undue influence of concentrated wealth over law and policy, New Zealand’s electoral and parliamentary framework doesn’t reflect a love of fairness. It reflects, rather, a love of inequality. And the laws and policies produced within this framework are likely to prioritise the private interest over the public good.

I fear that good governance, citizen confidence, and political integrity won’t survive for long in this rotten barrel.

Keep going!