Analysis by Dr Bryce Edwards.

New Zealand has fallen slightly in the latest Corruption Perception Index – which measures the least corrupt countries in the world. New Zealand has gone from number two in the world, to number three. The annual index is produced each year by the global anti-corruption NGO, Transparency International. The country’s score out-of-100 has also dropped, from 87 to 85 (in which, zero is considered highly corrupt and 100 is very clean).

While hardly a dramatic drop, it should still be something of a wake-up call, because if you look at the trajectory over a longer period, the 2024 drop is part of a steady downward trend, especially since 2020. See the trendline below – NZ is the dark line:

Politicians may feel vindicated by our ranking as one of the least corrupt countries, but they should not be complacent.  Anyone who follows politics in New Zealand closely will be well aware that there are all sorts of integrity deficits in our political system. These range from a laxness about ethical standards amongst Cabinet ministers, through to the willingness of politicians to get close to financial donors, and lobbyists coming in and out the revolving door of the Beehive.Business leaders are particularly sensitive to the growing potential for corruption in New Zealand, and it was the changing perceptions of this group that has led to the latest drop in New Zealand’s integrity score. The global “Executive Opinion Survey” is a component of generating the Corruption Perception Index (CPI). New Zealand business leaders have responded to the 2023 survey indicating that they have, according to Transparency International, reduced “confidence in government integrity systems” in this country.

The survey asked business leaders: “how common it was for businesses to make undocumented extra payments or bribes connected with trade, public utilities, tax payments or awarding of public contracts. It also asked how common it was for public funds to be diverted to companies, individuals or groups due to corruption.”

The graph below, with the red line representing New Zealand, shows the resulting dramatic decline in the perception by business leaders that this country has low corruption:

Arguably, such problems became much worse during the last Labour Government. But now these democratic problems – which can lead to corruption, cronyism, and a dysfunctional society – are at the office door of new prime minister Christopher Luxon. He needs to decide whether to continue as a “business as usual” leader, allowing sloppy behaviour and low ethical standards in government, or else stamp out creeping corruption and generally raise the standards in politics.

The Integrity problems of the last government

The last government was probably one of the least democratic and transparent for a long time. It had continued integrity problems, many of which contributed significantly to Labour’s demise in 2023.

It’s worth restating some of these. In just their last year in power, Labour lost three Cabinet ministers over their low standards of ethical behaviour. Michael Wood failed to resolve a conflict of interest pertaining to owning transport company shares while serving as Transport Minister, despite repeatedly assuring officials he would do so. Stuart Nash broke numerous ethical standards and had to finally go when he was found to have shared confidential Cabinet discussions with Labour financial donors. Kiri Allan was also sloppy on political donations, transgressed Cabinet rules several times, and then departed as Minister of Justice when she was arrested by the Police after a drink driving crash.

These controversial breaches were a key part of Labour’s popular decline. They made the Government look sleazy and lacking in adequate ethics. Although other issues contributed to Labour’s loss of nearly half its electoral support – such as the lack of delivery over the six years – it is clear that once the scandals involving Nash, Wood and Allan occurred, the party was electoral toast.

Other ethical lapses tarnished Labour’s reputation over its six years in power. One is particularly worth mentioning – it’s the billions of dollars that they spent on infrastructure and Covid era economy-saving efforts that have recently been criticized by the Auditor General. In a report that didn’t get enough media coverage in the lead-up to Christmas, the Auditor General published his findings into an investigation of spending since 2020, which was damning of the lack of process in the Beehive when it decided how to quickly spend $15bn on new projects.

There was a lack of records kept by ministers about how they decided on many of the projects, and a lack of concern for conflicts of interest according to the Auditor General. This means that the public still doesn’t know where a lot of the money went, nor whether it was good value for money. Massive projects were announced and launched without proper process, and often against the advice of officials.

The damning assessment suggested something was rotten in the Beehive political process. As the Auditor General John Ryan states in the report, “In a country that prides itself on the integrity of its public sector, this is something we should all be concerned about.”

This all occurred despite claims that the Labour Government would be the most transparent in history. Good intentions are clearly not enough. The problem is that each subsequent government in livable memory has been worse than the one before them. And yet each new government seems to get into office after campaigning from Opposition about the lack of transparency and integrity of incumbents. Certainly, in 2023 National, Act and NZ First leveraged Labour’s integrity shortcomings to help them win office.

Luxon should declare war on corruption, cronyism and low standards

If past patterns are any guide, then the new administration might be expected to rest on its laurels, be overly complacent, and eventually turn out to be worse than even the Labour was in terms of integrity issues. Creeping corruption and declining transparency can be expected to carry on.

It doesn’t have to be this way. Prime Minister Luxon could instead declare a war on corruption, cronyism, and low standards. And he could genuinely start dealing to lobbyists and vested interests, and spurn any advances from the financial donors that helped the three conservative parties get into power.

This month, the leader of the British Labour Party, Keir Starmer, has declared something similar – a promised “crackdown on cronyism” when he gets into government, which is likely to be this year when a general election is held. Labour is 18 points ahead of the Conservatives in the polls.

Starmer gave an agenda-setting speech for the year that highlighted the need to clean up politics, including on his own side: “I say to all my fellow politicians – Labour and Tory – to change Britain, we must change ourselves. We need to clean up politics. No more VIP fast lanes. No more kickbacks for colleagues. No more revolving doors between government and the companies they regulate. I will restore standards in public life with a total crackdown on cronyism. I’ve put expense cheat politicians in jail before and I didn’t care if they were Labour or Tory. And I grew up working class, so spare me the self-serving excuses, they just won’t wash. This ends now. Nobody will be above the law in a Britain I lead.”

Now that Luxon embarks on leading his new government, could he make a similar speech, tailored for the New Zealand Parliament?

More than just speeches, New Zealand politics also needs to be cleaned up with real changes to rules and laws. Starmer’s Labour Party is proposing some tough laws on lobbying, with the Guardian reporting that they want to shut the “revolving door” for top politicians by banning “ministers from taking lobbying, advisory or portfolio-related jobs for at least five years after they leave government.” And there will be consequences rather than just a telling-off: “Former government ministers will be fined or have their pensions docked if they breach tough new rules on lobbying”.

As well as fines for rule breakers from the political class, British Labour says it will set up a new integrity and ethics commission to monitor “ministers moving to the private sector, to judge if their new posts involved any potential conflict of interest”.

Luxon could also look to Australia where the new Labor Government is reforming public-sector whistle-blower protections and has recently established the National Anti-Corruption Commission in response to an increase in politician and public service scandals.

Standards of Beehive behaviour

The last government had more than its fair share of integrity scandals. And all too often the Prime Minister – Jacinda Ardern, and then Chris Hipkins – appeared weak in dealing with errant ministers, often allowing them second and third chances, which they usually then abused. Luxon shouldn’t make the same mistake – he should be clear from the outset that when ministers violate the rules and standards they’ll be out. And then he needs to enforce these high standards.

Signs are encouraging because Luxon chose not to give a ministerial role to MP Barbara Kuriger. In October 2022 the National MP was implicated in a conflict of interest scandal. While serving as the party’s Agriculture spokesperson, Kuriger pursued complaints against Ministry for Primary Industries staff who had brought animal mistreatment charges against her husband and son. Much of the correspondence came from her Parliamentary email address or used National Party letterhead. Kuriger was stripped of her Agriculture portfolio by Luxon.

Despite the demotion, Luxon has allowed Kuriger to continue in the National caucus. As PM he is going to have to be much tougher than that. More integrity scandals will inevitably afflict ministers as well as backbench MPs in his administration. He will be judged harshly, and his government tarnished if he’s too soft on such violations.

And if National is anything like Labour, we will see government department contracts being given to the families of Cabinet ministers. So, Luxon would be advised to warn his ministers not to get tangled in such family contracts that could look like nepotism or cronyism.

Expect more focus on MP and ministerial financial interests

All around the world, there is now greater scrutiny of politicians and any personal linkages they have with vested interests that might colour the decision-making process. The most significant trend is to look closely at what politicians own – especially any commercial companies.

Luxon would be wise to run a very tight ship in this regard. Too often in New Zealand, Cabinet Office protocols and the Registrar of Pecuniary Interests are seen as just a bureaucratic box-ticking exercise without any real enforcement or scrutiny. That’s all changed now – and conflicts of interest, sloppiness, and irregularities will be much more closely scrutinised by media and political opponents than ever before.

The Minister of Commerce and Consumer Affairs, Andrew Bayly, will be dealing with the potential regulation of some major companies and sectors. Bayly himself will need to be squeaky clean in terms of any conflicts of interest. He successfully pursued former Labour minister Michael Wood over his Auckland Airport shares, but then late last year Bayly was found to have failed to declare a conflict of his own to Parliament: he owned about $92,000 in shares of a company that contracts to government agencies. Bayly claimed because the shares were in his family trust, disclosure wasn’t required. But the rules don’t back him up about this, and Registrar of Pecuniary Interests, Sir Maarten Wevers, indicated that such ownership should indeed be declared.

Subsequently, the now-Commerce Minister has expressed unhappiness about the idea of disclosure for ministers. He told Newsroom last year that his preferred way of dealing with conflicts of interest over companies he owns would be to simply disclose this in Cabinet meetings.

There are plenty of other new ministers who have owned companies that might produce conflicts of interest if not handled properly – for example, Health Minister Shane Reti has his own medical consulting company, the Minister of Māori Development Tama Potaka has been a director in various Māori investment and farming businesses, the Minister for Courts and Associate Minister of Justice (Firearms), Nicole McKee has been involved in consultancy Firearms Safety Specialists NZ Ltd, and senior ministers Winston Peters and Shane Jones are owners and directors of business consultancy firms. These and all other ministers will need to ensure divestment or other appropriate resolution of potential conflicts of interest in their portfolios have been addressed.

Lobbying – a test case for Luxon

There are many areas of reform that the new government could progress to prove that they are on the side of increased integrity. Fixing the Official Information Act would be a good start, but it seems unlikely that any government will ever do this. For example, the last government continually made promises to improve the OIA but never got close to delivering. Furthermore, the politicisation and operating ethics of the public service desperately need to be addressed, but we are only likely to see spending cuts.

Instead, it’s the issue of corporate lobbying that democrats might have some hope for progress on. This issue has exploded onto the political agenda both globally and locally. Hence even though the last government was conflicted by links to lobbyists, last year the then prime minister Chris Hipkins instructed the Ministry of Justice to start a project reforming the sector. This was the best thing that the Labour Government did in terms of integrity issues.

Commendably, National also got on board this reform process – with Nicola Willis being reported last year as promising her government “would impose a 12-month stand down period for former ministers and introduce a compulsory register of lobbyists, rather than a voluntary code of conduct.” She also promised to introduce “a transparent, publicly accountable register of who’s doing the lobbying and who they’re lobbying for”.

However, Max Rashbrooke reports this week that the Health Coalition Aotearoa, which he is working for, received a letter from Justice Minister Paul Goldsmith saying that officials were now only working on a “voluntary” code of conduct for lobbyists. In terms of the Ministry of Justice’s project on lobbying reform, Goldsmith stated it was just “one of many priorities the Government must consider, and specifically in the Justice portfolio where it has a heavy work programme”. Rashbrooke warns: “Such language often presages abandonment”.

The conservative parties in government have made much of the fact that the country is broken and needs to be put back on track, and surely, they’re right. But in fixing the huge problems in New Zealand, you also need to fix the integrity problems in the political system, which are often the very source of these other problems occurring. Much of what goes wrong in this country begins in the Beehive, and if Luxon isn’t willing to raise the standards there, then there can’t be much hope of improvement elsewhere. The question the Prime Minister needs to answer is: “If we don’t fix the politics in the country, how are we going to fix the country?”