Leadership and accountability

Michael Reddell BNZ & Wheeler, NZ politics, Uncategorized

I’d been going to write just a short post on the contrast, that I’ve been trying to make sense of over the past week, between the very public calls for the head of the Director-General of the Ministry of Health, and the near complete silence around the conduct of the Governor of the Reserve Bank.   Perhaps there are just more votes in health than in the Reserve Bank?

Chai Chuah seems to lead a not entirely well functioning ministry –  in time presumably the SSC PIF report will reveal more –  but he has little or no direct control over anything beyond his own agency.  And the latest calls for his head –  or at very least for severe reprimand –  appear to relate to errors in putting together the Budget.  The mistakes were made by people down the organisation, and while chief executives have to take responsibility for everything in their agency, it doesn’t look as though the direct mistakes were made by Chuah himself.   And even the mistake affected expected flows of money between various government agencies (the various DHBs), with little or no apparent consequences for the public.   But the Minister was openly embarrassed by the mistake.  And there has been plenty of public and media comment, and even comment from politicians –  so much so that the State Services Commissioner has (rather unconvincingly) sought to suggest public service chief executives shouldn’t be openly criticised by the Opposition.

Contrast that situation with Graeme Wheeler, Governor of the Reserve Bank.  He is an extremely powerful indepedent public servant, who makes policy himself and regulates financial institutions, with relatively few checks and balances.   Upset by comments on his policies by the BNZ’s economist, he engaged in a sustained campaign to “silence” (materially alter the tone and/or content of) a leading critic.  It wasn’t a matter of a single upset phone call, but a sustained campaign over weeks (at least) involving not just the Governor, but each of his three other most senior managers, a meeting with the BNZ chief executive, and finally (that we know of) a letter to the BNZ chief executive, urging that Stephen Toplis be censored.   The Governor, recall, is a key regulator of the BNZ’s business.

And what was the response?   Pretty muted to say the very least.  Lots of people were pretty appalled by the behaviour, but hardly anyone was willing to say so openly.  As Reuters put it in a story

To write such a letter was an unusual move for the head of an independent central bank in an advanced economy, particularly one that directly regulates banks.
The fact the letter did not cause more controversy indicated the central bank’s power, analysts said.

Whether it is really the central bank’s power that was the issue I’m not sure.  For some no doubt it was (some people directly associated with banks made that point to me).   But for many others, with no current involvement in banks, it must have been something else. Perhaps it was partly because Wheeler is leaving shortly anyway?  Perhaps an ingrained willingness to turn a blind eye to egregious conduct when it involves establishment institutions?  The sort of practical indifference that, in turn, enabled the Minister of Finance to get away with abdicating his responsibilities (for the Governor and the Bank) and breezily dismissing the issue as nothing whatever to do with him.   A silence that risks leaving the impression that such conduct –  active attempts by senior public officials to silence a prominent (and annoying) critic –  is acceptable is modern New Zealand.

Then again, look at the example set by our current head of government.

I’m not party political at all.  If any readers think they can work out who I’ll vote for they are doing better than me.  But I’m probably the sort of pro-market conservative that might in times past have been most naturally comfortable supporting National.  And I’ve always had some regard for Bill English.  He was Minister of Finance when I spent some time at The Treasury and if he wasn’t willing to be very ambitious about doing stuff, at least he seemed to recognise – and care about – many of the underlying issues.    And in this very secular age, there was also something reassuring about a conservative practising Catholic as Prime Minister.   He seemed to be a person of decency and integrity, the sort of person any Cabinet would be fortunate to have.

Which is probably why what has emerged this week is so profoundly troubling.

I don’t care greatly about Todd Barclay himself.  What bothers me is Bill English, long-serving Minister of Finance, now Prime Minister, about to seek election to a full term as Prime Minister in his own right.   They are roles in which we should be looking for leadership with integrity.  What is on display this week doesn’t look remotely like that  –  not much leadership, not much integrity.

I’m sure plenty of politicians in the past have had guilty secrets – things that were either never widely known, or never able to be reported.       Had they become known, perhaps some other political reputations would have been severely damaged.    But we are dealing with this specific episode, which has become public, and this specific election.  In the process, the standards of the man who seeks to keep leading our country seem to be laid bare pretty starkly.  Not, I hope, the standards he would sign up to in the abstract, but the way that, under pressure, he actually chose to operate.

From his comments this week it is clear that:

  • Bill English knew not just that a financial settlement had been made in the dispute that had arisen over the employment relationship between Todd Barclay and his former staffer, but that (a) part of the settlement had been funded from the National Party leaders’ fund (not a problem in itself). and (b) that the payment had been larger than usual because of the “privacy issues”
  • Bill English knew that Todd Barclay had taped some of (her end of) his employee’s phone calls (as he noted in his statement to the Police that Barclay had told him so)
  • Bill English knew there was a Police investigation into a complaint around the taping (approached by the Police, he made a statement to them),
  • Bill English knew that  –  as was public knowledge – that Todd Barclay had refused to cooperate with the Police investigation.
  • Bill English knew that when an OIA release was made on these matters, his statement to the Police (with the report of Barclay acknowledging the taping), was deliberately and consciously withheld.

If it didn’t initially occur to him, when Barclay first mentioned the matter, that taping someone else’s phone calls could be a criminal offence, the possibility must have been clear by the time he was making his statement to the Police a couple of months later.

Bill English wasn’t Prime Minister when all this was going on, but he was both Deputy Prime Minister and the former electorate MP for Clutha-Southland.  He knew all those involved in a way that, presumably, John Key didn’t.  And can anyone really doubt that, in a matter with these specifics, if Bill English had insisted to John Key on a higher standard being adopted, it would have been done?

What might a high standard of integrity have involved in this case?

I’d have thought it was as simple as this.

Once it became clear that there was a Police investigation into these matters, English (and Key) should have insisted that Barclay co-operate with the Police inquiry –  first made that insistence known privately, and then (if that failed) publicly.  There was no legal obligation on Barclay to cooperate with Police, but this is about politics and acceptable standards in public life.    Insisting on co-operation with Police isn’t an asssement of guilt, or innocence, just the sort of minimum acceptable standard we should expect in those holding high public office (in this case under the National Party banner) –  especially when you as leader or deputy know stuff (per the English statement) that, at least on the surface, looks questionable.

And if Barclay had refused?   Suspension from Caucus would presumably have been an option, followed by expulsion from Caucus if necessary.   Richard Prebble did that as leader of ACT when the Donna Awatere case arose.

English –  and Key and the National Party Board –  could also have made clear that if Barclay refused to cooperate that under no circumstances would he be a National Party candidate at the 2017 election.

And Mr English could have released his Police statement.

No doubt, well before any of this happened, Barclay would have quietly bowed to the inevitable and either resigned or cooperated with the Police investigation.    But he isn’t the issue here; the conduct of the National Party leadership (and that of Bill English in particular) is.

Might it have been uncomfortable for English and the National Party?  Quite possibly –  and over something that they had had no effective control initially.  But doing the right thing often is uncomfortable.   But it is also why we all drum into our kids that “you’d get in less trouble if you’d fronted up straight away”.    Dealt with effectively 15 months ago (a) this would largely be forgotten by now, and (b) as much of any memory would have been about the willingness of the Prime Minister and Deputy Prime Minister to act decisively to uphold standards.

Instead, none of this was done, and presumably the hope was that none of it would ever come out.  As late as Tuesday morning –  after the Newsroom story came out –  the Prime Minister was still trying to claim he didn’t know much about what had gone on.

It is pretty shameful conduct from the Prime Minister.  And pretty feeble leadership even now.  There is no sign of contrition.  There has been no apology.  Even now, Barclay is still not indicating that he will be cooperating with the Police, still not apologising.  And yet he still sits in the National caucus.    Meanwhile, media seem to find it impossible to get the President of the National Party to face the media on the issue –  even though if the Prime Minister told him otherwise he’d surely be available almost instantly.  (In fact, I heard one National Party MP on Morning Report this morning bemoaning how unfortunate it was that “internal party stuff” had become public.  It suggests they still don’t get it.  Police investigations into possible criminal conduct aren’t just “internal party stuff”. )

Where was the leadership with integrity last year?  Where is it today?

Perhaps the spin is right that the public don’t care.  Time will tell.  But I reckon we should expect, and demand, better from those who hold, or seek, high office.  In a sense, we are fortunate that so much detail emerged on this episode –  that, for example, the Police got Mr English’s text with the comment about taping.  The standards  apparent in the stuff we do see is our best predictor for how our leaders handle other difficult stuff.  On the evidence of how Bill English (and John Key) have handled this episode, from the beginning to today,  those standards look pretty deeply disquieting.

As readers will know, I have written here more than once about a tendency that has crept into this government as the years have gone, and the problems of underperformance have become more apparent, to just make stuff up.  Perhaps it is the pretence that the economy is doing wonderfully, better than most of our peers (when in fact productivity growth is non-existent, the tradables sector is in relative decline, and the unemployment rate still disconcertingly high etc), or the proposition that New Zealand came through the 2008/09 recession better than most, or the laughable (and worse) attempt to pass off extraordinarily high house prices as a “quality problem” or mark of success, it has become all too pervasive.    Frustrating as that sort of thing is, at least anyone who looks for themselves can see that it is largely made-up lines.

The lack of leadership, and attempts to keep things from the public, apparent over the Barclay affair seems to me an order of magnitude more serious.   But perhaps one sort of spin eventually corrodes in other areas the standards these people would surely once have set for themselves, and allows them to lose sight of just how unacceptable the continued failure of leadership now on display really is.  Flourishing free and open democracies need better than that.

 

28 thoughts on “Leadership and accountability”

  1. Thanks, Michael, for such a well-written and insightful article.

    I agree with you, 100%.

    The question arises: Had Winston Peters been prime minister, would he have acted more decisively and done the right thing — as set out so clearly by you — straight away? I like to think he would have. Do you?

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    • To which, as with so many issues around Winston, I can only respond ‘where is the evidence, in 30 years in public life (quite a few in ministerial office) of a different approach?”

      I have no idea whether others in the same position would have handled things differently. But we really deserve people who would.

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  2. Michael, what I found troubling was that a young MP probably thought he was doing the right thing in taping the breaches of trust being undertaken by an employee. He did the right thing in reporting the issue. This has become a police issue because Bill English lodged a police report of the incident. So Bill was being the the upright and moral politician which is exactly what you would expect of a Catholic and moral politician or he was protecting himself in the event this issue ever came to public light. But the very act of lodging a police report basically puts it into the public arena and subject to the Official Informations which virtually guarantees that this issue would have come to the public attention anyway.

    Todd Barclay was basically thrown under the bus for doing the right thing which is to report suspicious breaches of trust by a employee in a position of trust.

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    • Er……as English has now acknowledged he did not “lodge a police report of the incident”. He made a statement to Police after Police approached him, having obtained English’s text referring to the taping, from other sources (presumably the recipient of the text).

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      • What happened to Employer rights? This is a workplace recording with a workplace dictaphone of a employee who was in a position of trust who was obviously caught in the very act of not acting in the interests of the employer.

        Are we now saying that all workplaces that record telephones conversations, that have video cameras in warehouses to prevent employee theft that record computer activities is now considered criminals? Ridiculous!!!

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      • If Bill English did not report the incident, then that is good. I was under the impression that he had thrown Todd Barclay under the bus. He has not. For this ugly episode to rear its head again even though the police had not pursued any further action then my suspicion of this to be raised again would fall back to the dishonest employee who was being investigated by Todd Barclay.

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    • I’m sure there is a lot more to the ructions with the DHBs, as you suggest, but what really caught my eye was the Stacey Kirk article (linked to in the post) which was exclusively focused on the latest stuff up, and calling for Chuah to have offered his resignation of this, and even if it wasn’t accepted for it to be akin to a “final warning”.

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  4. Re the Barclay affair

    Bill English knew that Todd Barclay had done wrong/broken the law, because Todd confessed to him that he had secretly taped his staff. Yet Bill let Todd pretend for over a year that no wrongdoing had occurred. Todd was going to public meetings, candidate selection events…… pretending no wrongdoing had occurred……. this in Bill’s old patch, his home country, with his old staffers….. and Bill did not tell his old constituents that yes Todd had done wrong, a simple public statement of the truth from Bill a year ago in any of those Southland meetings would have prevented this mess……

    What does that say about Bill? Will the public trust his morals? His judgement? His leadership?

    Interestly Michael when judging the morality of the Barclay affair and Bill English’s part -I too thought about how I would explain it to my son. This is what I commented in Interest.co.nz earlier this morning.

    “Bill English is our chief lawmaker and he is auditioning to continue in that role. Yet when he was in a situation involving his old job representing Southland and his old staffers, Bill chose not to uphold the law.

    Hasn’t Bill just destroyed his moral authority?

    For instance if my son comes to me and says a friend of his has confessed to wrongdoing/breaking the law and my son asks me what should he do? Do I say- well you could follow the example of our PM -Bill English, who had a similar problem with a friend.

    Bill’s example is to get someone else to make some payoffs to stop people talking, the wrongdoer then pretended that no wrongdoing occurred……. the problem with this example is eventually the truth does come out……… everyone eventually does get punish….. the wrongdoer does lose their job…… And now lots of people think the PM is a liar, who covers up wrongdoing …… so son best not follow the example of Bill English. “

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    • There is no morality issue here. This is a workplace recording by an employer suspicious that the employee was up to no good.

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      • It is wrong and illegal (punishable by up to two years imprisonment) to secretly record others -including employers recording employees -even if you think the employees are up to no good -you need to tell them they are under video/audio surveillance.

        It is wrong to lie to give the impression you haven’t committed an illegal act when you have -especially when the lie is beneficial to the liar -such as to gain well paying secure employment -like being the MP of Clutha/Southland.

        It is wrong to allow others to lie to give the impression they haven’t committed an illegal act when you know they have.

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      • Then there’s a lot of crime being committed in the workplace which is a silly law then.

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      • Common sense will indicate there was no crime. The perpetrator of the crime, the dishonest employee becomes the victim. How nutcase is that? This is exactly the problem with NZ. Too politically correct, too many checks and balances that nothing gets done. We have become a risk adverse society.

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  6. Bill English’s behaviour in this matter appears to be quite out of character. Is the PMs public persona different from the real man? Or more worrying, why was he trying to protect Barclay – whose been a liability from day 1 – does Barclay have something over the PM? A taped conversation perhaps?

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  7. Why on earth would anyone assume Bill English had any honesty and integrity? So-called religious morality didn’t stop him from dipping his paws in the till at the first opportunity in that accommodation allowances fiddle.

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      • I can understand that. He’s previously come across as less ethically challenged than some of them. But that assumption that because somebody professes a religion that they’re moral and trustworthy is an incredibly dangerous one to make. That’s why affiliation group cons are so successful. Claiming to hold a belief is cheap and easy, and any [one] can do it. Actions count for more.

        MHR comment: I have edited out and replaced one word, which seems unnecessarily inflammatory in this context.

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      • I’m not sure I share your view. Trust arises more naturally within affiliation groups, and while there are risks, it is one of the only real bases for enduring trust.

        On the specifics (a) I have absolutely no reason to doubt the genuineness of Bill English’s faith and practice, and (b) my point wasn’t about trust because someone “professes a religion”, but a degree of personal regard for him because he happens to share, and practice, the same Christian religion I attempt to practice. Of course, a keystone of Christianity is that all of us are sinners, to the end of our life, redeemed only by grace.

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  8. If what Wheeler did with Toplis had happened in Britain and not New Zealand the same level of interference would surely have been a major scandal. The shrug of ‘nothing to see here’ from the government really surprises me. There’s a real trust issue for me here and I’ve been a National voter from way back.

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    • I do not think so. The regulator should be tough when there is a clear attempt to influence and direct the RBNZ to collude in the cartel banks record profit making activities. I was concerned for some time that the RBNZ was far too compliant with market commentators who are paid by our cartel banks to influence the regulators independence. The 40% LVR is a big boost for our cartel banks as it creates a monopoly of a large existing client base that have borrowed on 20% LVR who are now subject to increasing interest rates with no flexibility to change banks. HSBC is offering 4.09% for 18 months fixed but our cartel banks have been raising interest rates to 4.8% for 2 years fixed knowing full well they have manoeuvred the RBNZ into such a policy that is quite counter competition. David Hirsh of the ANZ was making public noises of 60% equity LVR prior to the RBNZ moving suddenly towards the 40% equity LVR rules.

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      • Really don’t agree with you here. Those economists don’t drive RBNZ policy. I’m not saying the banks don’t heavily influence them but it’s not the economists who have anything to do with that. A central bank governor should never do what Wheeler did. It makes him look petty and anti-democratic. Imagine if Mark Carney had been found out doing that. Answer: wouldn’t happen as he would have had better discretion. And if it has been found out now, how likely is it that it has happened in the past too? Are there more OIAs in the works?

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      • Clearly in this case Stephen Toplis had a very directive agenda. This is a highly paid BNZ bank head economist. I have no doubts he was desperate to get the RBNZ onto a positive interest rate track as our Aussie banks do not make record margins from flat interest rate tracks. They need those interest rates up higher to justify their recent cartel behaviour in moving interest rates upwards even when the competition was offering much lower interest rates. They make their record profits from lag times from a large lethargic or captive installed customer base. My ex used to work for BNZ in the mortgage division. They had impossible sales targets and a very aggressive management style. She was never happy working even though she was very well paid with a company car and everyday was pressure pressure pressure.

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  9. Couldn’t be further from the truth. He gets his jollies from being right. He hasn’t always been right. But, he does have an engaging style that Wheeler would like to see go away because it embarrasses him. The reason that mortgage rates are high relative to the OCR likes fair and square on the Aussie regulator who is forcing the NZ subs to repatriate capital to the mother country.

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  10. But here, the Reserve Bank of New Zealand has no involvement in competition policy – and generally has sought to stay very clear of it – and arguments about bank margins, valid or not, certainly don’t create an legitimacy for how Wheeler has treated a bank critic he finds uncomfortable/annoying.
    The Australian Reserve Bank cash rate is at record low of 1.5 per cent while the big four have variable home-loan rates at higher than 5 per cent.

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