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REVEALED: Taxpayer dosh paid to Ministerial spouse’s firm – with no open tender

Peter Nunns and Julie-Anne GenterThe New Zealand Taxpayers’ Union can reveal that in the last year the Government has paid $356,466.61 to the consultancy firm of Peter Nunns – the partner of Associate Transport Julie Anne-Genter – without a single open tender process.

The firm in question is MRCagney – for which Mr Nunns is principal economist.

A significant proportion of the 19 engagements – namely around light rail – falls directly within the Associate Transport Minister’s own portfolio allocations.

Under the previous Government, MR Cagney was paid an average of $50,346.66 per year, compared to $356,466.61 under the current Government.

This marked increase in spending on a particular consultancy since Ms Genter became the Minister raises obvious questions. If she had a sense of accountability to taxpayers, the Minister would have recognised the name of her spouse’s firm, identified the clear conflict of interest, and demanded that at least one of the 19 tender processes were opened to other firms. From what we have been provided to date, there is no evidence of this happening.

Even if the Minister has stepped aside from the decision-making, how can we have confidence that taxpayers are getting value for money, and that the firm is the most qualified if no-one is bothering with a competitive process?

One thing is clear: Julie-Anne Genter’s Government has been very good to MRCagney. The previous Government engaged MRCagney just six times in four years, compared to the current Government’s 19 engagements inside of 12 months.

The Union obtained this information under the Official Information Act, having been tipped off to the spending by a concerned public servant. The information can be viewed below.

Op-ed: Leave the Super Fund alone

When Sir Michael Cullen’s Super Fund was established, its explicit purpose was to help ensure that superannuation would remain fiscally sustainable long into the future while the population ages.

It’s an expensive scheme. The Government has devoted $15.45 billion to the Fund since inception, approximately $8,935 per household in higher taxes or government debt.

Wisely the quid-pro-quo for taxing New Zealanders much more to fund the Super Fund was that the Fund must be operated completely independently from the political whims of Government. The Fund was justified to the public on the basis that it would make superannuation affordable for future generations: allowing political interference in investment decisions would inherently reduce the Fund’s return and undermine the central purpose of investment performance.

Independence has served the Super Fund – and taxpayers – well. Since inception, the Super Fund has delivered an average return of 10.37 percent per annum, while the fund’s benchmark portfolio has only delivered 8.88 percent per annum on average: equivalent to a $7.6 billion premium in returns. While some economists (including our own Jim Rose) have argued that the Fund’s return merely reflects the high risk investments it chooses, the point is that it is independently managed and performs well.

Except now, the Government wants to kill the Golden Goose.

Last month the Minister of Economic Development David Parker said he wants to seize on hundreds of millions of dollars of the Super Fund to establish an ‘angel investment fund’.

The purpose of an angel fund is to invest in early stage ‘start-up’ companies. ‘Angels’ evaluate these start-ups and determine the likelihood of their future success, and the size of any returns if they are successful. If the start-ups appear to be a good investment opportunity, the fund will buy a stake in the company to deliver funding required for growth.

A well-known example of this investment strategy is Facebook, which received US$500,000 of investment from now New Zealand citizen Peter Thiel in 2004.

Angel investment strategies can be extremely profitable, but they are also enormously risky. For every Facebook there are thousands of scrap-heap start ups that never become profitable. The most adept analysts in the world seek to sort the wheat from the chaff. Most can’t.  

Establishing an angel fund is incredibly risky, especially for an agency like the Super Fund investing public money. It does not have the experience or knowledge in the tech start-up world to take full advantage of any available opportunities.

If the Fund is also directed to disproportionately focus on New Zealand investments, delivering good returns will be even more difficult.

Mr Thiel told us last year that the reason he has not invested in New Zealand start ups to the extent that he had hoped is that there are no promising investment opportunities. 

More importantly: is the Government best placed to direct the Super Fund’s investments?

The Super Fund is doing a good job at finding investment opportunities and delivering reasonable returns to taxpayers. If adopting an angel investment approach made good economic sense, why does the Government need to direct them to do so? The Fund has more than enough capital to start such a fund on their steam, without Ministerial directives.

If David Parker could do a better job with the Super Fund than its current managers, he should apply for a job there, rather than externally interfere.

Funding the next Facebook or Netflix might be politically appealing for an ambitious Minister of Economic Development, but taxpayers deserve better than to have the Government gamble away their retirement savings.  

Cancel the hui, cut off the koha

The budget blowout for Kelvin Davis’ Māori-Crown Relations engagement meetings shows the danger of taxpayer-funded ‘hui’ and koha payments.
 
Calling a meeting a ‘hui’ shouldn’t be an excuse for lavish catering and bureaucratic extravagance. Besides, the fact Kelvin Davis had to hold 33 meetings to figure out what his new job involves suggests the Māori-Crown Relations portfolio probably isn’t needed in the first place.
 
Especially concerning is that a significant proportion of the blowout comes from ‘koha’ payments. The Government should never be paying anyone ‘koha’. These payments, at best, obscure real costs and skirt tax requirements. At worst, they’re taxpayer-funded bribery of special interest groups.

New report: The Bitter Truth

The Taxpayers' Union's new report The Bitter Truth: Why don't sugar taxes work?  focuses on the regressive economic effects of sugar taxes and responds to the central claim from public health lobbyists that sugar taxes will improve health outcomes. 

Whatever the good intentions the evidence shows that unfortunately sugar taxes haven’t actually worked to curb obesity where they have been tried. They fail to deliver meaningful health outcomes, but consumers still get hurt by the tax – especially low-income households who are disproportionately punished. Promoters of these taxes claim that the small health benefits are progressive, but the evidence for this is at best mixed.

There is also no evidence for the existence of a market failure that would justify intervention. Just because you might find someone else’s behaviour distasteful does not mean the market has failed. Many people simply enjoy drinking sugar-sweetened beverages and are fully aware of any health consequences.

The health lobbyists that campaign for sugar taxes have good intentions but they need to pay attention to the evidence. Good public policy requires a sound evidence-based approach and we hope this report goes some way to promote that.

Summary

  • Many sugar tax studies fail to take into account the effects of quality substitution and storability. Each of these effects markedly reduce the effectiveness of sugar taxes in achieving health outcomes. 
  • When quality substitution is taken into account, a 12-14% percent tax applied to SSBs could elicit an average weight loss of between just 200 and 300 grams per person. This is too small to provide meaningful health benefits.
  • Economic evidence unequivocally finds that sugar taxes are regressive. Backholer et al. (2016) "reinforces the regressive financial nature of an SSB tax". 

Shadbolt knocked off perch: new winner in race to buy most expensive vehicle in local government

Infographic

The Taxpayers’ Union can reveal that Horizons Regional Council Chairman Bruce Gordon cost ratepayers $97,000 with the most expensive vehicle for a local government elected representative – a swanky BMW X4.

The Union asked every council in the country for expenses associated with their vehicles. The full spreadsheet of expenses is available here.

A week ago, we identified the most expensive mayoral vehicle in the country, that of Invercargill Mayor, Tim Shadbolt. But we have now looked at vehicles for chairs of regional councils, and discovered that Horizons Regional Council Chairman Bruce Gordon manages to make Mayor Shadbolt look frugal.

Bruce Gordon is someone most people, even in Manawatu, probably haven’t heard of. It is a disgraceful sense of entitlement that he sees fit to have the most expensive vehicle of any elected local official in New Zealand.

Maybe, when the Council purchased the $97,000 BMW X4, they thought this kind of luxury was the norm. It’s not – the cost of Mr Gordon’s vehicle sticks out like a sore thumb, making other council chairs and even the most extravagant mayors look frugal.

Mr Gordon risks giving ratepayers in Manawatu-Wanganui the impression that their money is taken for private luxuries instead of essential services.

Revealed: The most extravagant mayoral vehicles

Chrysler 300CInvercargill Mayor Tim Shadbolt drives the most expensive ratepayer-funded mayoral vehicle in the country, the New Zealand Taxpayers Union can reveal. 

The New Zealand Taxpayers’ Union has asked every council in the country for expenses associated with their mayoral vehicles. The full spreadsheet of expenses is available here.

Invercargill District Council topped the chart for mayoral vehicles, having spent $72,323 on a Chrysler 300C for Mayor Tim Shadbolt in November 2015. This is despite the Council’s budget for mayoral vehicle spending being $55,000.

The reasons the Council provided for overspending were:  

- The Chrysler 300C "best suited the Mayor’s needs".
- The Chrysler 300C has "better road handling".
- The considerable mileage undertaken in the Southland region.
- Intention to retain the vehicle for a longer period than usual, until after the 2019 Local Council elections.

Invercargill ratepayers might be surprised to know their humble town has the country’s most extravagant mayoral vehicle.

The excuses for using ratepayer money on such a flash vehicle don't add up. Why does Mayor Shadbolt need to fork out $72,000 for 'better road handling'? Roads in New Zealand don't get much straighter than Invercargill’s.

Mayor Shadbolt’s previous vehicle was bought in 2012, a Chrysler 300C purchased for $58,087. This was sold in November 2015 for $20,000, meaning his previous car only had a three-year lifetime, and lost two-thirds its value.

This raises concerning questions on the expected lifetime of a mayoral vehicle. Invercargill City Council implies a car lifetime of four years is a longer period than normal, which would surprise many ratepayers.

The car is admittedly very stylish. It’s up to Invercargill ratepayers to decide whether gleaming chrome is worth the price tag.

Taxpayers’ Union launch report at Parliament with inaugural "Jonesie Waste Awards"

Jordan, Tabitha, and Porky

Today at Parliament the New Zealand Taxpayers’ Union presented the inaugural Jonesie Waste Awards, recognising the best of the worst in government waste revealed in the last 12 months.

The full details of the 2018 Jonesies are available as a report, which was launched at the awards ceremony (see below).

The Jonesies celebrate the best of the worst of government waste, greed and graft, foolishness and flagrancy, at the local and central government levels.

The sheer scale of troughing is not the only criteria for a Jonesie nomination – some smaller extravagances have earned nominations thanks to their absolute absurdity or how they encapsulate a corrosive culture of frivolous waste.

While we’ve hosted this ceremony with our tongues firmly in cheek, there is a serious point. These examples of waste make a lie of the claim that governments deserve more and more of your taxpayer money.

This is envisaged as the first event of an annual tradition. We suggest that in future, any politician or bureaucrat pondering ways to fritter away taxpayer money ought to consider whether they might end up with a Jonesie on their desk.

The awards were inspired by the Canadian ‘Teddies’, which have been hosted at the Federal Parliament in Ottawa for 19 years.

Local Government Nominees:

  • Hastings District Council spent $116,371 on catering in 2017 – more than $50,000 of which was for elected members.
  • Auckland Council spent $91,742 on a Hunua Ranges goat cull in 2016/17 that killed zero goats.
  • Christchurch City Council spent $1.25 million on a seven-metre touch screen for their new library, information that it refused to release even after intervention from the Ombudsman.
  • Auckland Council spent $260,000 on a 2.4-metrewide mirror, hung between buildings in the centre city – only to have it crack open a week after its unveiling.
  • Auckland Transport spent $4 million on a Grey Lynn cycleway, but now must spend $23-35 million fixing it, despite minimal use.

Winner: Auckland Council’s vegan-approved goat hunt.

Central Government Nominees:

  • Callaghan Innovation spent $1,141,230 on ‘entertainment’ and gifts in the four years to 2017 – including boozy dinners, drag queens, and even pedometers for staff.
  • The New Zealand Film Commission paid American producers of the children’s TV show “Power Rangers” $1.6 million to include references to New Zealand in its script, such as a plot involving a pavlova.
  • Inland Revenue paid $40,000 to The Spinoff to publish a series of articles on “Tax Heroes”, promoting the tax system and tax compliance to the point of stating “Tax is love”.
  • The Provincial Growth Fund saw Gisborne’s ‘Chardonnay Express’, a locomotive wine tour, receive a share of $60,000 given to three tourism businesses.
  • The Ministry of Social Development spent $150,000 developing a video game to teach people how to run a business.

Winner: The Film Commission’s ‘Power Rangers pavlova’.

2018 Lifetime Achievement Award Winner:

  • Hon Shane Jones, Minister for Regional Economic Development, Infrastructure, and Forestry, receives this award in recognition of the scale of pork-barrelling achieved via his $3 billion Provincial Growth Fund – of which so far only 10 per cent has been allocated.

Benefit Sanctions: Help-but-hassle welfare reduces child poverty

A new report from the New Zealand Taxpayers’ Union shows the success of benefit sanctions, explains why efforts to make life on a benefit easier simply encourage a culture of welfare dependency and fraud, and exposes that more than one third of unemployment and single parent beneficiaries admit to failing on their obligation to seek employment.

Report cover

The release of the report, Benefit Sanctions, coincides with a Green Party campaign to remove sanctions for beneficiaries who don’t comply with associated obligations. The report also works as a submission to the Government’s working group tasked with providing recommendations to overhaul the welfare system.

Beneficiary advocates have good intentions, but their prescriptions – removing requirements to seek work and removing sanctions – are a social and moral failure. The Green Party’s policy to make life on a benefit will simply encourage a culture of welfare dependency and fraud.

Rates of welfare fraud are many times higher than most New Zealanders would expect or find acceptable under the current system. The report canvasses the evidence that easing up on sanctions and obligations for beneficiaries would dramatically increase fraud and dependency. That means driving up the cost of the welfare system for taxpayers and leaving less room in the Budget for other forms of social spending.

If the Government wants to reduce child poverty, it should encourage the unemployed and single parents back into work and off welfare.

Our report advocates a help-but-hassle approach that nudges beneficiaries back into work, leaving more to spare for those in genuine need.

If the Government took this approach, it could afford to be more generous, within existing budgets. The difference is that the money would be more targeted to those who most need it.

Benefit Sanctions is available at www.taxpayers.org.nz/benefit_sanctions and was written by Taxpayers’ Union research fellow Jim Rose.

Benefit Sanctions: Key Findings

  • The Green Party wants to remove sanctions on beneficiaries despite extensive evidence from data matching by MBIE of benefit fraud under the current system.
    • More than one third of unemployment and single parent beneficiaries admit to failing on their obligation to seek employment;
    • ten percent of single parent beneficiaries acknowledge living as man and wife; and
    • ten percent of unemployment beneficiaries work full-time.
  • Ministers, the Welfare Expert Advisory Group, and even the Ministry of Social Development are unaware of the extent of this fraud because MBIE failed to publish the 2012 report containing this data. The report was begrudgingly released three years later under the Official Information Act after an appeal to the Ombudsman.

  • The Government’s plan to remove sanctions for refusing to name the father will encourage many more single mothers on the benefit to not identify the father and make under-the-table arrangements.
    • Nearly 20 percent of single parent beneficiaries currently refuse to name the father and face sanctions.
    • About $186 million is currently deducted from benefits because the father is named and successfully chased for support.

  • Benefits conditional on seeking work are highly effective in moving parents into jobs that bring their children out of poverty with the support of Working for Families. A credible sanction for not looking for work increases job finding rates by 25 percent or more.

  • For the sake of taxpayers, any reforms must guard against abuse – especially in an ageing society where already-stretched budgets will only get tighter over time. No social safety net can successfully increase benefits and loosen eligibility if it fails to run a tight ship against abuse.

  • Marriage booms in Sweden, Canada and the US after sole parent benefit and widows pension reforms suggest a major fiscal risk from adopting Green Party-style relationship definition, which requires marriage, or two years living together.

  • The Greens’ fiscally-neutral costing of their policy is untenable: if the overseas experience is any guide, the number of sole parent beneficiaries will likely double under the Greens’ proposals, costing $1.1 billion.

Statement on Taxpayers' Union official information requests

Below is the statement we provided to the NZ Herald in the lead up to publication of this article.

The Taxpayers’ Union is a heavy user of the Official Information Act, comparable to media organisations such as the New Zealand Herald.

The vast majority of public sector organisations respond to Taxpayers’ Union information requests quickly and transparently. However on occasion government bodies stonewall us – treating information requests from our staff and volunteers differently than requests from other organisations, or members of the public.

Callaghan Innovation is one of the worst.  We had an insider approach us who disclosed that information requests from the Taxpayers’ Union were being deliberately sidelined as our previous investigations had led to embarrassing media coverage for the agency wasting public money.

Therefore, on rare occasions, our research staff have been forced to use personal email accounts, or have even encouraged our people to use pseudonyms, to ensure the public can have full and prompt access to information. This is one way to make it harder for officials and politicians to discriminate or play silly games with official information. The fact anyone would find it necessary to do this should disgrace these public entities.

The fact the media covered the information our requests revealed from Callaghan Innovation speaks for itself in terms of the public interest.

So, while we are not currently using the method, we do not rule it out, and if it takes this to get at the truth, we would expect the same from a good journalist.

Finally, we note that it appears many of the information requests made using the NZ Herald-sponsored website ‘fyi.org.nz’ appear to use pseudonyms – indeed, the anonymity of the system appears to be one of its key selling points.

Canterbury catering costs revealed: Christchurch City Council spends $51,000 on milk

Christchurch City Council spent $350,208 on entertainment, gifts, and catering in 2017 – including $51,572 on milk, reveals the New Zealand Taxpayers’ Union.

This makes Christchurch City the council with the highest level of ‘indulgence spending’ in New Zealand (aside from Auckland Council, who say they are unable to provide equivalent figures).

The bulk of these expenses ($336,130) came from catering, with the largest source of such expenses being the Antarctic Office, which spent $54,348, followed by the all-of-council spend on milk, at $51,572, followed by catering for citizenship ceremonies, at $36,840.

Fifty grand spent on milk alone is an astounding figure, that reflects just how bloated Christchurch’s army of council bureaucrats has become. Either that, or the Mayor is taking milk baths.

Catering expenses are largely non-essential, and should be near first in line for budget cuts when ratepayers are getting squeezed. The fact that the Antarctic Office, totally tangential to core council business, managed to spend $54,000 on wining and dining should warrant an audit from councillors.

Canterbury ratepayers are also under the pump from the Regional Council, which spend $287,087 on entertainment, gifts, and catering, including $155,253 at one catering business, Pulp Kitchen Catering.

Ecan’s indulgence spending was higher than any other regional council in the country. For comparison, Wellington Regional Council’s total equivalent spend was $37,450.

Below are spending figures for all Canterbury territories, ranked from highest total to lowest.

Christchurch City Council
Entertainment: Included with gifts and catering
Gifts: $14,078.42
Catering: $336,130.00
Total: $350,208.42

Canterbury Regional Council (Ecan)
Entertainment: Included with gifts and catering
Gifts: $8,125.70
Catering: $278,962.19
Total: $287,087.89

Ashburton District Council
Entertainment: $20,370.67
Gifts: $4,036.88
Catering: $81,330.76
Total: $105,738.31 

Waimakariri District Council
Entertainment: Included with gifts and catering
Gifts: $7,989.23
Catering: $69,915.91
Total: $77,905.14

Timaru District Council
Entertainment: $1,065.93
Gifts: $2,936.65
Catering: $40,967.73
Total: $44,970.31

Waitaki District Council
Entertainment: $0.00
Gifts: $0.00
Catering: $25,958.41
Total: $25,958.41

Hurunui District Council
Entertainment: $0.00
Gifts: $3,664.62
Catering: $9,232.64
Total: $12,897.26

Mackenzie District Council
Entertainment: $0.00
Gifts: $779.46
Catering: $8,528.32
Total: $9,307.78

Selwyn District Council
Entertainment: $0.00
Gifts: $0.00
Catering: $9,060.00
Total: $9,060.00

Kaikoura District Council
Entertainment: $5,596.87
Gifts: $1,063.50
Catering: $1,795.02
Total: $8,455.39 

Waimate District Council
Entertainment: Included with gifts and catering
Gifts: $3,615.00
Catering: $3,729.13
Total: $7,344.13

All figures were obtained under the Local Government Official Information and Meetings Act.

Breakdowns for Christchurch City Council and Ecan are available here:

Christchurch City Council catering (including milk)
Christchurch City Council gifts
Ecan catering
Ecan gifts


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