John Key’s ‘blind’ trust is currently under intense scrutiny, and rightly so. The financial arrangements of politicians and political parties deserve being examined and analysed by civil society. And while the current ‘Highwater-gate’ scandal is still hard to fully comprehend (see the Standard for the best critiques, and see Tracey Watkins for the best defence of Key), it means that more and more questions are being raised about how the political establishment run both their and our financial affairs. Today, for instance, the National Business Review runs an insightful piece by Rob Hosking on conflicts of interest, using the example of the Clark Labour Government’s encouragement of a property boom, which furthered the financial interest of Labour MPs while putting housing out of reach of the less well off. [Read more below]
No Right Turn has recently brought up the question of how parliamentarians can possibly pretend that they have no financial interest (and thus, conflict) in debating the Budget and tax cuts. He says:
Bill English, on $276,700, can expect $10,000. Cabinet Ministers, on $243,700, can expect $8,600. Backbenchers, on $131,000, can expect $3,000. By any ordinary understanding, this is a direct financial interest - MPs will be voting on a matter which will result in a direct financial benefit to themselves. So, how many MPs will make a declaration under Standing Order 161 before speaking on these tax cuts? My guess is zero. MPs have had a consistent tin ear on these issues; in Parliament, "financial interest" means something different and more limited than what we plebs out in the street would understand it to mean.
Similarly, in a subsequent post, he ponders how often government ministers declare any conflict of interest before considering issues like tax cuts in their Cabinet meetings. He comments: ‘Highly paid Ministers don't regard passing laws to benefit themselves as any form of conflict. What's good for them is good for New Zealand.’ (See: A conflict of interest II).
Rob Hosking provides another excellent example – which he, rightly, thinks has more substance than the current ‘Highwater-gate’ scandal over John Key’s blind trust. Hosking shows how the last Labour Government actively help cause the property boom that did so much harm:
Labour’s time in power saw a massive property bubble the like of which New Zealand has not seen before. And it was driven largely by two things: one was the long standing ability of New Zealanders to offset their losses on property investments against their income. The other was one of the first things Labour did when it took office: it raised the top personal tax rate to 39%. This created a large incentive for people in the top bracket to shove even more of their money into property. Westpac Bank economists pointed out last week that this led to a “compression” in the property market: because most investors put money into the low-to-mid end of the market, prices in that area escalated. The gap between the top and the bottom of the property market became much narrower during Labour’s time in power. It also put houses out of reach of the less well off.
He goes on to connect this policy with the fact that so many Labour politicians had considerable investments in property:
There was a lot of handwringing in the middle of the decade about “housing affordability” – Labour set up an inquiry into it, although nothing came of it. Meanwhile, take a look at ministers’ register of pecuniary interests from that time. The number of Labour ministers with property investments around the country – from then- Prime Minister Helen Clark on down – is striking. If you want to create a scandal, one with much more substance than Mr Hodgson’s effort, here’s one: Labour’s tax policies enriched its own ministers at the expense of the people Labour pretends to represent.
There seems to be more than just a kernel of truth in this critique. After all, Helen Clark alone owned whilst be prime minister, an Auckland villa worth $720,000, a Wellington townhouse worth about $350,000, an apartment in Christchurch, property at Rodney, and was a beneficiary of two family trusts.