Some very quick thoughts on the matter of the PM's lawyer and his lobbying efforts, written on a Friday afternoon while waiting for a taxi to take me to the airport. So don't expect anything too deep and meaningful!

Revelations that the PM's personal lawyer was active in lobbying the Government not to tighten the rules on the sort of foreign trusts fingered in the "Panama Papers" present, as they say, poor political optics. Here's some quick thoughts.

First off, the mere fact that someone could so easily get in the ear of first the PM and then the relevant Minister isn't that surprising. After all, New Zealand is a pretty small place and access to our politicians is comparatively easy. To take a pretty mundane example, every year I ask Michael Woodhouse to come and talk for an hour to the Public Law class that I teach and he unfailingly makes time to do so. That's good of him, of course, but it's also indicative of how Ministers work.

That said, getting into Ministers' ears probably is especially easy if you're speaking on behalf of a $50 million a year industry [Updated: The IRD actually estimates it to be a $24 million a year industry] and are able to waive the PM's name around when doing so. Which brings me to the second point. There's something of a discrepancy between how John Key is representing his conversation with Ken Whitney and what Mr Whitney told Revenue Minister Todd McClay about it in December of 2014.

Mr Key's claim is that he said he simply didn't know anything about any looming changes and that Mr Whitney should talk to Mr McClay about it. But Mr Whitney told Mr McClay that Mr Key had said there were "no current plans for change". Which makes me wonder how relaxed John Key is with his personal lawyer apparently misrepresenting his position in an effort to convince another Government Minister to adopt a policy stance helpful to his other clients.

Leading to a third thing. According to RNZ news:

The day after Mr Whitney's email to Mr McClay, the minister's office contacted Inland Revenue to say the minister had "expressed some concern that one of the options that will be presented in the report to him before the end of the year would be a removal of the foreign trust regime".

Inland Revenue senior official Carmel Peters responded saying they would "bear this in mind in how we write the report".

This strikes me as pretty poor on the part of both the Minister's office and IRD officials. Sure, Ministers in the end get to set Government policy and make decisions about what advice to accept or reject. But this looks like the Minister was telling his officials "I don't even want to hear about why NZ might want to end this policy, irrespective of the reasons to support it". And having been told this, the officials simply accepted that the territory was verboten.

Whatever happened to a neutral public service that is tasked with providing "free and frank advice" to Ministers? Maybe Dr Chris Eichbaum has something of a point when he suggested recently that "public servants might just provide ministers with the advice they wanted to hear, rather than what they needed to hear."

[Updated: In Matt Nippert's article in today's NZ Herald, he notes that in a briefing note to Mr McClay the offshore trust industry:

explained how the sector attracted "high wealth families" as clients, who were attracted by New Zealand's political stability, incorrupt public service and, particularly, our "respect for privacy and commercial confidentiality".

Irony abounds!]

Finally, the Government's response to this whole issue seems to be to try to shrug it off as "business as usual". OK, then ... let's take that claim at face value. That means we can look at the pattern of events here and extrapolate it across the rest of the Government's decisions - this exemplifies how policy is made under John Key's National Government.

How does that make us feel?

Comments (10)

by Rich on April 29, 2016
Rich

Should that be "lawyer" given that Mr Whitney has relinquished his practising certificate?

And does not being a practising lawyer give one more leeway to engage in borderline behaviour than somebody subject to Law Society rules?

by Antoine on April 30, 2016
Antoine

To be fair, IRD did go on to recommend that consideration be given to reviewing the foreign trust rules. Carmel Peters, who you name above, co-authored the paper in which that recommendation was made.

So it seems that IRD's reaction to the communication from the Minister's office was not to shut the issue down, but merely to approach it with more caution.

I have some sympathy for the Minister's desire to avoid prematurely raising the option of 'removing the foreign trust regime', on the basis that even to air this option in public, would be detrimental to the foreign trust management industry. And indeed, it is hard to imagine that shutting the regime down entirely would be the best way to proceed.

A.

 

by Antoine on April 30, 2016
Antoine

I guess there are (at least) two different ways to approach this debate. One is optical - "this whole process looks dodgy as *(&#" - and the other is more substantive - "how should NZ best develop its foreign trust regime, having regard to being a good international citizen as well as to onshore concerns". Both are valid.

A.

by Andrew Geddis on April 30, 2016
Andrew Geddis

@Rich,

I'm not sure that Mr Whitney would have had to act any differently if he retained a practicing certificate - all he did was represent the interests of his clients. The fact he may (and only may) have over-egged a bit his claim about the PM's views when trying to advance those interests isn't something a practicing lawyer would be hung for by his peers. But  John Key might have cause to reflect on it.

@Antoine,

Accepted - but still, having a Minister tell officials "I don't want to hear anything from you about the merits of a particular policy option" is somewhat troubling. It's also worth noting, in terms of how to judge what happened here, that the IRD's recommendation to start working on a review of whether to amend the foreign trust regime (in order to ensure we are being a good international citizen and in light of offshore concerns) got rejected. At least in hindsight, given what has happened since, that looks to be a poor decision.

by Antoine on April 30, 2016
Antoine

> but still, having a Minister tell officials "I don't want to hear anything from you about the merits of a particular policy option" is somewhat troubling

Hmm. See where you're coming from. Having said that, if he considers a particular option to be entirely unpalatable, then I don't think it's too unreasonable to pour a bit of cold water on it at an early stage. Saves wasted effort.

But don't you agree that your 'the officials simply accepted that the territory was verboten' was a bit strong? In fact, they (including the particular official named in your post) did pursue the matter (one step) further.

> the IRD's recommendation to start working on a review ... got rejected. At least in hindsight, given what has happened since, that looks to be a poor decision.

Sure, agree with that.

A.

by Nick Gibbs on May 01, 2016
Nick Gibbs

" OK, then ... let's take that claim at face value. That means we can look at the pattern of events here and extrapolate it across the rest of the Government's decisions - this exemplifies how policy is made under John Key's National Government.

How does that make us feel?"

Mostly it makes me wonder what it'd be like to be a policy wonk trying to give advice to a Greens Govt on climate change. Might be a health and safety issue if you came up with the wrong suggestions.

 

by Andrew Geddis on May 01, 2016
Andrew Geddis

@Antoine,

OK ... I retract, apologise and replace with "indicated that any future policy advice would be written with an eye to meet the policy preferences of the Minister's office".

 

@Nick,

And ... is that a good thing?

by Nick Gibbs on May 01, 2016
Nick Gibbs

Not at all. I concur with your post that ministers should be given the best advice not simply expedient advice. I'm simply imagining that giving such advice on highly charges issues must be an interesting challenge at times. 

by Antoine on May 01, 2016
Antoine

We live in times when the PM and senior Ministers maintain pretty tight control over the public service. I'm not sure if there used to be times when this was not the case, or how we could get back there.

by Rich on May 04, 2016
Rich

Well, well

Would witnessing a document when not in the same country as the signatory be the type of thing that would get a registered lawyer into professional difficulties? And be a reason to change ones nominal profession from "lawyer" to "consultant"...

And does it reflect well on a Mr Key that he retains such a "lawyer"? 

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