Fiduciary, not an often used or recognised word.
So, what is a Fiduciary?
Among the most common forms of fiduciaries are financial advisors, bankers, money managers, and insurance agents. A fiduciary must always have the best interest of their clients foremost.
The most common fiduciary duties are relationships involving legal or financial professionals who agree to act on behalf of their clients. A lawyer and a client are in a fiduciary relationship, as are a trustee and a beneficiary, a corporate board and its shareholders, and an agent acting for a principal.
A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal.
A breach of fiduciary duty occurs when a principal fails to act responsibly in the best interests of a client.
The consequences of a breach of fiduciary duty are multiple. They can range from reputation damage to loss of a license and monetary penalties.
That leads me to pose the question; Is political power a fiduciary duty?
My research found there is a significant body of literature dedicated to the idea that politicians are in a fiduciary relationship with the public. The voting public that gave them a political mandate to act on their behalf. The writings suggest the relationship between politicians and the voting public establishes the grounds on which the voting public build their legitimate expectations that both members of the legislative authorities and government ministers will act in the best public interest, at all times, in order to fulfil their fiduciary duty.
Both members of parliaments and ministers in government are expected to promote the interests of their constituents in parliament. They should comply with the principles of ‘Public Duty’ and ‘Duty as a Representative.’
I also found in my research opinions that said “….while politicians and government ministers will act in the best public interest, at all times….” “….they must also serve the political interests of their parties when joining the government.”
Fertile ground for conflicts of interest there!
So, if the government of the day or more succinctly, the finance minister, has a fiduciary duty to us, the tax payer, can a case be made that the minister is not/has not acted in the best interests of the client?
Is the tax revenue being managed or spent judiciously?
Let’s look at some of the assertions for that argument.
There seems to have been a belief by the government that, behind the cloak of fear that Covid has or they have created around Covid, that they can and have thrown money around like confetti.
The Government continues to boast about their massive Covid Response and Recovery Fund (CRRF). Figures produced recently showed that $57b had been "committed" from this fund to combat Covid-19.
Of course, government support was fundamental and crucial to ensure our economy did not collapse during the pandemic.
Firstly, let’s talk about this Covid Response and Recovery Fund that Robertson is so proud of.
To the majority of us a “fund” is made up by money put aside on a regular basis: noun - A fund is a pool of money set aside for a specific purpose.
I think we can all relate to that; Holiday fund, university fund or retirement fund.
But Robertson's Covid Response and Recovery Fund is most definitely not money put aside for a specific purpose.
This is simply borrowed money. And a hell of a lot of it! Then titled the Covid Response and Recovery Fund.
Is that prudent financial management?
So, when Robertson talks about the Covid Response and Recovery Fund, Mr and Mrs Joe Average would automatically think “ fund….ok…. a pool of money set aside… we are cool with that.”
The world champions of OBFUSCATION strike again.
Remember when, back in September of 2021 Robertson was proudly boasting “the government has greater fiscal headroom available due to lower deficits and lower debt than forecast, as well as positive GDP growth.”
So, what did Robertson do? “Ministers have decided to use the greater fiscal headroom to top up the COVID-19 Response and Recovery Fund by an extra $7 billion. There’s the semantics coming into play around the FUND again!
For “greater fiscal headroom” Robertson reads, “greater ability to borrow!” Sound financial management?
Since March 2020, the Reserve Bank had been printing tens of billions of dollars and pumping it into the economy using something called LSAP (Large-Scale Asset Purchases).
So, it now looks like future generations will have a $55 billion debt to deal with. A massive “handbrake” to increasing future growth, wealth and prosperity. We currently have Government debt, approaching close to 70 per cent of New Zealand's annual tax take!
What is questionable, but never seems to be questioned, is who decides which section of society qualifies for access to the CRRF and most crucially, what checks and balances are in place to scrutinise the veracity of the utilisation of the funding. Was/is there reasonable financial scrutiny and accounting around the way, what is tax payers’ money (or debt), CRRF monies are expended?
Given my pessimistic views on this government’s financial management, I would not expect a high level of scrutiny. Remember big companies and law/accounting firms being able to claim millions in wage subsidies during the 2019 lockdown despite making large profits?
Simply relying on recipients’ honesty is not prudent financial management!
How can that be seen as anything other than what it is; Poor financial management.
Another serious problem that is looming large on the horizon is inflation. Just as Robertson is revelling in the reckless ability to print and squander money, he seems to be totally oblivious to the downside effect that is inflation.
The Quantity of Money Theory (QTMT) being that as the quantity of money in circulation increases, so do the prices of goods. Inflation becomes widespread. With the extra money in consumers’ pockets and humans being humans, this will increase our desire to spend and buy, leading to rising demand that probably outpaces supply. We are now heading into the dangerous waters of higher interest rates and inflation.
Imagine the carnage in the housing market if we were to see, as some have predicted, interest rates in the region of 10%!
Further compounding the perils rising inflation rates will deliver is the escalating amount of government spending. The Half Year Economic and Fiscal Update in 2017, government spending was $75 billion. That equated to 28% of GDP. Robertson budgets this spending to be $128 billion in 2022. That is an amazing 70% increase!
Other than wrapping this spending in the cloak of fear that is Covid, how can that increase be called prudent financial management, let alone be justified.
I was particularly disturbed to read in the NZ Herald of 4th December 2021 an article titled “Consulting bill soars for government’s major health system overhaul.”
This article only served to confirm my view that this government and in particular the minister of finance, are completely ignoring their fiduciary duty to the voting public and utterly deficient in their responsibility to prudently manage the finances of the country.
I think we all know about how health services are going to be restructured to create a separate Maori Health Authority and District Health Boards dissolved.
But that is an argument for another day.
What did interest me was the costings or budget for this new unit.
The article outlined how the special government unit established to undertake this overhaul of our current health system has a budget of $25.96 million dollars for the 2021 year.
The article further stated that this special unit’s director, Stephen McKernan, has estimated the unit will spend 69% of its budget, that is $18million, on consultants and contractors.
That is a staggering amount on consultancy. 69%, $18 million!
When I read further in the article I found, what to me, are the really concerning questions around these consultancy/contractors’ payments or fees.
It is not just the amount being spent on consultancy fees but who are actually the beneficiaries of this government largess!
The largest beneficiary of this consultancy spending is one of New Zealand’s major accounting firms, Ernst Young. EY is one of the largest professional services networks in the world. It is considered one of the Big Four accounting firms.
Up to the end of August 2021, Ernst Young had billed this special government unit $5,700,000! So, their annual billing total will be significantly greater by now.
The article went on to list other consultants used and their fees but listed one, Finora Management Ltd as a significant consultant billing $323,700 in fees.
Now here is where I believe the article gets very disturbing: Stephen McKernan, this special unit’s director, is also a PARTNER in Ernst Young!!!
But wait there’s more: Finora Management Ltd ($323,700 in fees) is owned by Chad Paraone and Chad…. wait for it….was recently appointed as Acting Chief Executive of the Interim Maori Health Authority!
Say What! How does that work? These people are partners or owners of consultancy firms and they are employing their own companies to provide services???
This just does not sound appropriate to me. Where is the Auditor General in this? He should be all over this!
At best that could be called “Feather Bedding” or at worst it is the unscrupulous use of a person’s authority for personal gain.
I have made the assertion in this article that the government are in breach of their fiduciary duty to their client, us, the New Zealand voting public/tax payer.
I have no legal or accounting experience so would welcome comments on my assertion of financial mismanagement.
That claim may be an avenue to explore in an effort to either, bring to heel or rid ourselves of this inept, authoritarian government.
I understand that a newly formed water-users group is the latest to challenge the Government’s Three Waters Proposal. This has been instigated by a public and commercial law firm, Franks Ogilvie.
It seems legal avenues may be the only process left to control this government. The court of public opinion appears to hold no fears for them.
John Porter is deeply concerned about the loss of democracy and the insidious promotion of separatism by our current government.
you can add to that the governments plans to spend $82,000,000,000 (Yes - that is 82 BILLION DOLLARS) per year in the future to stop New Zealand's CO2 emission, which are currently about 1/600 of total global emissions.
This is quite simply economic suicide.
Again this comes back to being unable to stop politicians ruining our economy and the citizens are are unable to do anything about it except vote them out next time around, by then the damage has been done and as usual the taxpayers get poorer.
Venezuela comes to mind - asset rich, citizens poor.
Funny how the "opposition" is deathly silent.
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