Thursday, July 29, 2010

"Higher standards"

During the 2008 election campaign, John Key ran on a platform of bringing higher standards of government. And yet today we have another Minister who appears to have used a trust structure to disguise substantial shareholdings - and a whopping potential conflict of interest - from the electorate.

Tim Groser owns 40,000 shares of New Zealand Farming Systems, currently valued at $22,000. He's registered as their owner, but for the purposes of his pecuniary interest declaration, they are "owned" by his superannuation fund, so we don't get to know about them:

"The distinction here is, in a legal sense, I don't own shares. A trust, of which I am the beneficiary, owns the shares and it's standard practice for all trusts not to note the nature of the investments," Groser said.
Meanwhile, in his role as Trade Minister, he actively promotes this company, and tries to negotiate deals to its advantage. Ordinary people would call that a conflict of interest - something both Cabinet and Parliamentary disclosure rules are supposed to avoid. But John Key says he's "100% comfortable" with it, as usual (but he guess he has to be, given that he's pulling the same scam himself).

As a member of the public and a voter, I am not comfortable, either with a Minister promoting and negotiating on behalf of a company he has a direct financial interest in, or with the secrecy. Once again, legal structures are being used to thwart oversight. But with conflicts of interest, the perception is as important as the reality - something that the Cabinet Manual recognises:

Ministers are responsible for ensuring that no conflict exists or appears to exist between their personal interests and their public duty. Ministers must conduct themselves at all times in the knowledge that their role is a public one; appearances and propriety can be as important as an actual conflict of interest.
Tim Groser has failed to meet that standard. His shareholding creates a perception of a conflict of interest, and his attempts to keep it secret make it look like he has something to hide. Its time for him to choose: he can either dabble in dairy investments, or represent New Zealand on the international stage - but not both. Either he sells his shareholding, or he resigns. It is that simple.

Meanwhile, the core problem here - the ability of MPs and Ministers to hide conflicts of interest by using a trust - needs to be addressed. The current rules do not provide the level of scrutiny and oversight the public expects. And they do not provide the level of protection from corruption we expect either. This is not an area where we can trust politicians - that is basically just asking for it. Instead, we must make them prove every day they are not corrupt. And that requires full disclosure. Not half-disclosure, not semi-disclosure with everything significant hidden by trusts and corporate fronts, but full disclosure. Parliament and Cabinet must amend their rules to bust the trusts and require full disclosure of all assets screened in this fashion. Otherwise, the public are fully entitled to judge every MP with any trust structure as prima facie corrupt.