Tuesday, April 5, 2022

Bryce Edwards: Questions of corruption & integrity surround the Govt’s tourism “slush fund”

Was political corruption involved in the dishing out of millions of dollars by government ministers to tourism businesses? We can’t know, because the Government didn’t keep sufficient records or have proper processes for the handouts. That’s the obvious question arising from a scathing report released by the Auditor General on Thursday, which has received far too little attention.

The Auditor General’s report investigates a scheme set up by the Government early in the Covid crisis (May 2020), called the Strategic Tourism Assets Protection Programme. The report is one of many that have criticised government procedures during Covid for their lack of integrity.

The multi-million-dollar scheme was set up to give money to local tourism businesses, with the aim of keeping them operating despite the lockdowns and the severe reduction in tourism. But every element of the scheme’s design seems to have been poor. While it’s unclear if any untoward handouts were actually made, this is precisely the point – procedures were set up in a way that makes it almost impossible to know.

In the end, 127 tourism businesses were given grants and loans worth at least $166 million. Dozens of businesses were turned down, and many more didn’t apply due to confusion over eligibility because the criteria for funding was so unclear.

Some of the biggest beneficiaries were large tourism operators that were owned by highly profitable companies – such as AJ Hackett Bungy, which was allocated $10m to help them through the pandemic.

Poor processes

According to the Auditor General, Ministers never developed clear criteria for how to dole out the money, and no proper records were kept on their decision-making process for who to give money to. Conventional funding processes were seemingly cast aside. And on investigation, the Auditor General’s office couldn’t get adequate explanations from the ministers as to why they gave millions to certain businesses.

Although it’s the prerogative of ministers to decide how they spend public money, the Auditor General points out in the report that such expenditure still comes with an obligation to ensure decision-making is transparent and consistent, and in this case it wasn’t.

The advice of officials also seems to have been sidelined. Government departments such as Treasury were often kept out of the policy processes. And when the Ministry of Business Innovation and Employment advised the Government to call a halt to the programme, Ministers overruled this.

One of the problems with the scheme was the lack of criteria for eligibility. Although the scheme’s rules stated that businesses first needed to have “exhausted all other avenues of support” before being eligible, this criteria was neither clear to businesses, nor checked on by the Government when doling out the money – as no information was sought from applicants about their financial position.

In the end, about a quarter of businesses were actually given more money than they requested.

Favouritism from politicians?

The report refers to numerous examples of funding under this scheme that appear questionable. One example is the $1.5m given to Whale Watch Kaikōura. The money was doled out on the same day that Ministers made their decisions about funding criteria, and before that criteria had ever been advertised or the application process officially opened.

Apparently, this particular application was in the form of a letter that didn’t include any financial information about the business and its needs. The Auditor General’s office commented on this case that “We have not seen any evidence to identify what criteria the Tourism Recovery Ministers used when making this decision” and “We also did not see any advice from Ministry officials.”

The wider tourism sector reacted to this and other funding decisions with anger. Other operators that were rejected for funding, or led to believe they weren’t eligible, have complained that they’ve had to compete against other businesses that have government funding as well as being owned by large, profitable parent companies.

Some in the sector have called for their financially healthy competitors to pay the money back. So far, none have. Others have called for the Government to revise the scheme to be more transparent and with clearer criteria.

Some businesses clearly believe that the Government gave funding to their favourites. For example, the owner of Heritage Expedition, Aaron Russ, was reported as saying “I think 100 percent the government sat back and picked favourites and chose who they wanted to see at the finish line.”

Similarly, the owner of Cromwell’s Heliview Flights, Yolanda Foale, has complained: “Us as a small business is having to compete against big business that has been favoured by government, and… on top of the Covid problems, it’s made life double difficult by having to compete against businesses that have been given a hand out”.

Some have also raised questions about why Māori-owned tourism businesses were required to meet a lower threshold for funding. According to the report, Government ministers developed a basic criteria in which each business was rated out of a possible 30 points for eligibility, and those businesses that received more than 15 points were funded. Māori tourism businesses were exempt from needing to meet this threshold.

Government response

The Government has been rather dismissive of the Auditor General’s report, downplaying the questions it raises. In fact, the Minister of Tourism at the time of the scheme’s creation, Kelvin Davis, won’t even comment on the report, instead leaving it to the new minister, Stuart Nash.

Nash has emphasised that, in the Government’s defence, they were prioritising speed and the need to save jobs during a pandemic: “Ministers were operating under great urgency at a time of massive uncertainty… and they had to make decisions quickly”. He is somewhat dismissive of the report, arguing that “We’re always wise in hindsight”.

Likewise, Finance Minister Grant Robertson says he stands by the general approach, and also argues it was an unprecedented situation that required corners to be cut, but he admits “We will always look at those decisions again and, in hindsight, we may make slightly different decisions.”

Yesterday’s Otago Daily Times editorial on the subject doesn’t buy it. They are highly critical of the Government’s response: “It is not good enough for Tourism Minister Stuart Nash to airily dismiss the issues identified by referring to the time pressure the Government was under in early 2020 and saying that with the beauty of hindsight there will always be lessons to learn.” They suggest that using Covid as an excuse shouldn’t wash, and correct procedures are vital for good government.

The newspaper concludes: “The Labour Party’s trumpeting of transparency must be backed up by its behaviour. The sort of sloppy, poorly documented process highlighted in Mr Ryan’s report smacks of arrogance, pandemic or no pandemic.”

Similarly, veteran political journalist Richard Harman emphasises the significance of this report: “This is a most damning report of how the Ardern Government has interacted with (or really ignored) officials since it came into office in 2017. The question must now be whether this is now administered what amounted to a tourism slush fund, were there other areas of Government activity where it has been exhibiting the same behaviour.”

Harman draws attention to the fact that there have been a number of other reports from the Auditor General’s office that have pinged the Government for poor processes in regard to government departments dealing with private vested interests during Covid – especially the Ministry of Health and the Ministry of Social Development.

Of course, one of the most problematic has been the multi-billion-dollar Wage Subsidy Scheme, which was seen to be poorly designed and administered.

There’s a theme building up from these reports – that of crony corporate welfare getting out of hand in recent years. This is one of the blind spots in New Zealand politics and society. Recent governments are prone to giving generous subsidies to business interests, often without any great systems of integrity or best practice. And unfortunately, the public never seems to mind much when it becomes apparent.

It could well be that New Zealand is just too eager to believe the annual Transparency International Corruption Perception Index results that show this country to be the least corrupt nation on earth. In ignoring reports such as this latest from the Auditor General, we seem determined to block out any evidence to the contrary.

Dr Bryce Edwards is a politics lecturer at Victoria University and director of Critical Politics, a project focused on researching New Zealand politics and society.


Terry Morrissey said...

Questions of corruption and integrity surround the government as a whole.The notion that this country is the least corrupt nation on earth certainly does not stand up to scrutiny when the government's performance in honesty, transparency and truth are reviewed.
They would also be the most incompetent, undemocratic, separatist, totalitarian, arrogant, narcissistic government ever. Their Marxist communist ideology is becoming more and more obvious.

Max Ritchie said...

This is a scandal which should be pursued by Parliament and relevant authorities. Including the rest of the media. That may well include the police, from the look of this.

Bill T said...

Max the media are part of the corruption.
It will not be part of any investigation as will impact their pay.

Mudbayripper said...

In a another time and place a government such as the one currently occupying the seat of power here in New Zealand would be brought before the courts and charged with sedition and treason.