Thompson and Clark spied for Government departments

There’s disturbing details in the report of the investigation into spying for Government departments by Thompson and Clark. Targets have included Christchurch earthquake victims, political parties (Greens and Mana) and activist groups including Greenpeace.

RNZ:  Thompson and Clark spied on earthquake victims, inquiry finds

Multiple government departments have breached the State Services code of conduct according to an investigation into 131 departments and their use of external security consultants.

The findings of the investigation, lead by Doug Martin and Simon Mount QC, were released today.

Security company Thompson and Clark has been barred from doing any more work for the government after the investigation by the State Services Commission found it used an unlicensed private investigator and produced electronic recordings of closed meetings without the consent or knowledge of attendees.

From 13 March 2014, Thompson and Clark, working on behalf of Southern Response, the government’s insurance agency working for claimants of the Canterbury earthquakes, attended and recorded several closed meetings of insurance claimants.

State Services Commissioner Peter Hughes has complained to the police about the recording of meetings and has lodged a formal complaint with the Private Security Personnel Licensing Authority in regard to using an unlicensed private investigator.

He has also recommended Thompson and Clark be removed from the government’s procurement panel, which the chief executive of the Ministry of Business Innovation and Employment has done.

Southern Response had also had a complaint laid to the police against it.

The investigation also looked into Thompson and Clark’s reporting to government agencies on “issue motivated groups” which treated these groups as a security threat.

Among the groups were Greenpeace, the Mana Movement and some iwi groups in Northland, the East Coast and Taranaki.

“What concerns me the most is that Thompson and Clark has treated ‘issue motivated groups’ as a security threat in its reporting to government agencies,” Mr Hughes said.

“I am very disappointed that agencies did not challenge Thompson and Clark on this. That is not consistent with how we should view democratic freedom.”

It has been said that nothing illegal was done but it was highly inappropriate and unethical.

Andrea Vance:  Public service bosses ignored warnings about Thompson & Clark for years

Physically, sexually and psychologically abused in state care, two brothers sought legal redress and damages from the Government.

Rather than take responsibility and show contrition, the Ministry of Social Development (MSD) and Crown Law hired private investigators to dig up dirt on witnesses.

This is one of the most shocking findings of an inquiry into the use of external security consultants by government agencies, like Crown Law and MSD.

The brothers – abused by a cook at a state-run school – were subjected to courtroom questioning which suggested they consented to abuse in receiving cigarettes.

They eventually lost their claim – known as the White case – against MSD on a technicality. It had dragged on for more than seven years.

MSD’s boss at the time was Peter Hughes. He is now head of the entire state service.

Hughes acknowledged this on Tuesday when he apologised, saying: “It is never acceptable for an agency to engage in surveillance or information gathering about people or groups just to manage reputational risk to an agency.”

A cavalier attitude to personal and sensitive information, and a troubling disregard for the democratic right to protest, was allowed to flourish within the public service over 15 years and successive governments.

Thompson & Clark have been painted as the villains in this scandal. They will face a police investigation over the use of an unlicensed investigator against earthquake insurance claimants and likely will lose much of their business.

But although they took advantage, Thompson & Clark aren’t responsible for public service culture and the undermining of democratic rights.

That lies with Peter Hughes. For public confidence to be fully restored, the public service must demonstrate accountability and accept culpability, starting from the top down.

So should a head or heads roll over this?

Further boom in tourism forecast, infrastructure warning

The Ministry of Business, Innovation and Employment has forecast up to a 40% increase in tourist numbers by 2024 (that’s just 6 years away). The opportunities have been welcomed by Local Government New Zealand, but they have warned that already stretched infrastructure will be put under more pressure.

Tourism Minister Kelvn Davis: Tourism growth forecast to continue

Tourism Minister Kelvin Davis has welcomed new forecasts showing international visitor spending is expected to grow 40 per cent to $14.8 billion a year by 2024.

The New Zealand Tourism Forecasts 2018-2024 were released today by the Ministry of Business, Innovation and Employment.

“New Zealand’s tourism sector is forecast to grow steadily over the next seven years, reaching 5.1 million visitors annually by 2024, up 37 per cent from 2017,” Mr Davis says.

“We expect to see numbers climb fairly rapidly over the next two years, due to favourable economic conditions and better air connectivity, but over the longer term growth will be more moderate.

Mr Davis says a healthy tourism industry is great for New Zealand, though there is work to do to ensure the sustainability of the sector.

“It is important that the Government, councils and industry work together to meet the challenges that accompany the forecast growth.”

It’s worth remembering that John Key was Minister of Tourism for much of the last decade.

Local Government New Zealand (LGNZ): Predicted tourism boom could push infrastructure to breaking point

LGNZ President Dave Cull says that a new forecast predicting an international visitor increase of 37% to 5.1 million annually by 2024 will be a great boost to regional economies across New Zealand, however infrastructure is already under pressure and much more is needed to ensure a fair funding division is achieved between tourists and local ratepayers.

“The tourism sector is predicted to grow rapidly over the next two years, but as evidenced last summer infrastructure it is extremely stretched in many regions, with provision of public toilets, car parks and basic potable and waste water infrastructure coming at a substantial cost to communities,” says Mr Cull.

“Those communities with scale can share the burden across many rate payers, but smaller ratepaying bases are picking up big bills to accommodate visitor demand and the lack of infrastructure is resulting in tension among communities.”

Mr Cull contends that the increase in international visitor spend should be harnessed to provide tourism infrastructure.

“This is about fairness. It’s not right to burden ratepayers with subsiding the entire cost of infrastructure which is used by tourists, and there needs to be a new mechanism for tourism to support itself.”

LGNZ is advocating strongly to Government on councils’ behalf that the Government introduce a Local Tourist Tax to raise the necessary funding to meet the capital and operating costs associated with tourism mix-used infrastructure future demand, thus alleviating the financial burden on local ratepayers.

Without the necessary funding tools to ensure the needs of both locals and tourists are met, New Zealand faces the prospect of over promising and under delivering in a sector that is so critical to our economic future.

“New Zealand should be known as a high-quality tourist destination with fit-for-purpose facilities to handle the expected increase in numbers and a country that welcomes and embraces their visit.”

The forecast is both promising and challenging.

Minimum wage rise versus jobs

The effect that the raising of the minimum wage might have on jobs has often been argued but never been proven. It depends on a number of factors, like how much the minimum is raised, and what the business and employment situation is like at the time.

Government officials have warned that the latest increase, due to come into effect next week (1 April), could jeopardise up to 3,000 jobs but the Minister of Workplace Relations disagrees.

NZ Herald: Minimum wage rise to $16.50 at the end of next week could cost 3000 jobs, says MBIE

Government officials say lifting the minimum wage to $16.50 an hour could see a loss of up to 3000 jobs.

Boosting the minimum wage was part of the Government’s 100-day plan and is set to take effect at the end of next week, on April 1.

In its regulatory impact statement, officials from the Ministry of Business, Innovation and Employment said an increase “may have negative employment impacts which include lower job growth and reduced work hours”.

“The estimated restraint on employment for a minimum wage of $16.50 is 3000,” the statement said.

It also noted that the effect on employment “is heavily debated in economic literature … there is no clear consensus”.

And the Minister, Iain Galloway, debates their warning.

Workplace Relations Minister Iain Lees-Galloway said workers had not had a fair share of economic growth, and the boost to the minimum wage was only one part of the Government’s strategy.

“The Government considers advice alongside a range of other factors, including prior experience increasing the minimum wage – which has always been positive.

“I note that Treasury also advised the best time to raise the minimum wage is while the labour market is strong and tightening.

“Treasury forecasts that the unemployment rate will keep falling towards 4 per cent over the next three years, and that average wages will rise on average at about 3 per cent a year over that time, due to a tight labour market.”

So Lees-Galloway seems to be dismissing the MBIE advice, and choosing to use different Treasury advice to support the increase.

This is a fairly modest increase in the minimum wage, from $15.75 to $16.50, but bigger increases are planned.

Labour and New Zealand First have agreed to increase the minimum wage to $20 an hour by April 2021.

One could guess that MBIE may have further job loss warnings if it is bumped up more.

And what if in the future Treasury advises that the labour market is no longer strong and tightening? Would the Government go against that advice?

They already have, last month. Stuff: Labour warned if economy turns, minimum wage plans will hit the young and unskilled

Treasury is urging the Government to ditch its plan to abolish the youth rate, warning that minimum wage pledges will hit the prospects of younger, unskilled workers if the economy cools.

Advice from Treasury officials released under the Official Information Act shows Treasury expressing concerns that a commitment to a substantial increase in the minimum could harming the prospects of the very people the rate was meant to protect.

While Treasury explicitly said it supported hiking the minimum wage by 75 cents an hour to $16.50 in April, as the economy and labour market would see little impact, officials warned the three-year plan to get the minimum wage to $20 could have a series of unintended consequences.

These ranged from hurting the local economy in already slow growth regions, the risk that once New Zealand’s minimum wage was on a par with Australia’s, fewer young, low-skilled worker would cross the Tasman for work and that higher minimum wages “has been shown” to attract young people to leave education to enter the workforce.

Lees-Galloway has been quite selective in picking advice to justify Government policy.

He was a Nurses’ Organisation organiser (aka a union official) prior to becoming an MP,

Advice to employers on Holiday Pay issues

The problems with holiday pay calculations in Government departments are getting a lot of attention and it is being said the problems could also affect many businesses.

If you are an employer or a payroll operator – don’t panic.

I think the Government has a responsibility to urgently address this and advise all employers and employees how to use the current Act correctly, or fix then Act so it can be used correctly.

If you believe you are paying holiday pay fairly my advice is to continue doing as you are until official clarification is made. So wait and see what comes out of this.

If employees work regular hours over a holiday pay year and earn regular amounts then there shouldn’t be any problem if you have complied with the Act.

The holiday pay rate is the greater of the employee’s current pay rate or their last 12 month average rate. This usually works out fine.

If employees work regular hours over a holiday pay year but earn irregular amounts like overtime for a part of the year or are paid a bonus should also be ok, although holiday pay rates can vary over the course of the year.

Holiday pay rates can vary depending on how irregular payments occur within the past 12 months and there can be some quirky results depending on the timing of holidays but this is how the Act determines it should work.

The headaches are with:

  • Employees whose work pattern changes significantly over the past twelve months, for example an employee changes from 40 hours a week to 20 hours a week. How to deal with this can take a bit of working out but can be done with the current Act.
  • Employees whose work pattern changes all the time. The Act makes it very difficult to deal with these employees because the old relatively simple 8% calculation is not supposed to be used except in fairly exception circumstances.

Employees in the continuously variable category, where ‘standard hours’ can’t be determined, should be paid at the greater their last 12 month average and their last 4 week average.

This means that if they take holidays just after being paid much more than usual over the previous 4 weeks their holiday pay rate can be abnormally high – correctly according to the Act but it can be nonsensical. Some employees avoid wild fluctuations be using different calculations.

If employees take holidays after a relatively low paid 4 weeks they should be paid at their 12 month average which should be ok.

There is another way holidays can be paid, at an agreed rate (agreed between employer and employee).

But there’s also a  bigger problem with how to calculate how much holiday to give people who work variable hours.

People who work regular hours are given four weeks (or more) annual leave. That’s straight forward.

But people who have changed their regular work pattern at some stage through the year need to be dealt with more carefully.

Again those employees working continuously variable hours and days are the biggest headache. Some employees ignore the Act and calculate a holiday pay rate based on earnings. This is probably reasonably fair but non-compliant with the law.

It gets trickier working out how to calculate what 4 weeks holiday equates to. If the employee took all their 4 weeks at the end of each year in one block it isn’t too difficult.

But if they taken a day or two every now and then it can get horrendously difficult.

If the work 4 hours some weeks and 40 hours other weeks and they want to take a few days holiday how is that calculated easily? Many employees struggle with this. If you know a simple solution that complies with the Act please pass it on.

I’ve read the Holiday Pay Act extensively and believe it is fundamentally flawed with regards employees who work irregular hours.

The current Act makes it very difficult for many employees to comply with the Act and pay their employees for their holidays fairly.

It is the Government’s responsibility to provide practical advice on how to deal with this, and if it can’t be done properly with the current law then the Holiday Pay act should be changed.

Holidays Act 2003: http://legislation.govt.nz/act/public/2003/0129/latest/DLM236387.html

The Holiday Pay Ass

There’s been more said today about payroll problems at MBIE and the police but the fact is the Holiday Pay law has been an ass since 2004.

Stuff reports State payroll blunder may be widespread, hitting private workers too.

A payroll blunder that left thousands of state sector workers underpaid may be widespread, meaning many in the public sector and in private businesses may have been short-changed.

The problem came to light after police and more recently staff at the Ministry of Business, Innovation and Employment (MBIE) were underpaid because of an error calculating their holiday pay and shift entitlements.

But Finance Minister Bill English on Tuesday signalled that the problems go back to the Holidays Act in 2004 and “there may be a widespread issue in the public sector as well as the private sector”.

I think it’s been well known there have been issues with the legislation that make it very difficult in some scenarios to follow the law.

Prior to 2004 , when paying part time employees with variable work patterns a common way of dealing paying holidays was giving them their 3 weeks (it changed to 4 weeks later) and paying them 6% of what they had earned over the year (liable gross).

The 2004 Holidays Act clamped right down on paying ‘casuals’ (Pay As You Go employees) like that. The new Act meant you could only use the 6% calculation in very limited circumstances (on call non-rostered work). There are many part time workers who were excluded.

In 2010 the Government reviewed the problems with the Act but put any resolution in the too hard basket and left things as they were – so employees struggled on the best they could with an ass of a law.

I know of large private employers who work around the law (don’t follow it) because it’s just too difficult following the letter of the law.

I’m sure many payroll operators won’t be aware of what the law requires them to try and do.

I think most employers strive to pay Holiday Pay fairly, but find their own way of doing it.

I don’t think the problem is widespread in that most employees will be have paid reasonably fairly, but complying with the Act has been a widespread problem for over a decade.

 

 

Refurbishment debacle

The Ministry of health has been accused of “serious financial mismanagement” which at least looks like a mess in relation to the refurbishment of their head office.

Stuff reports:

A multimillion-dollar miscalculation on the $24 million refit of the Health Ministry’s head office in 2014 has bought a strong rebuke from Treasury, accusing the ministry of “serious financial mismanagement”.

Health Minister Jonathan Coleman also confirmed it led to a major shakeup in the the ministry’s finance department.

Independent auditors were called in to investigate how the ministry “miscalculated” the levels of its cash reserves, and came up short of funds for the refit.

Director-General of Health Chai Chuah said the ministry’s corporate finance team made a mistake in its forecasts, TVNZ reported.

It said the Treasury was very concerned about the funding miscalculation, citing papers describing it as “serious financial mismanagement”.

In a letter to Chuah, Treasury chief executive Gabriel Makhlouf said the “the new bid for funding brings into question the governance and financial management practices of the ministry”.

This is seriously embarrassing for a Government that promotes itself as a sound financial manager.

And there’s another potential embarrassment as well:

Meanwhile, the Ministry of Business, Innovation and Employment is facing a major problem in its payroll system that may affect up to 3000 employees.

MBIE Minister Steven Joyce said the issue involved how holiday entitlements and shift pay were calculated. It could potentially involve millions of dollars but ministry chief executive David Smol had told him it would involve only small amounts in individual cases, though Joyce could not put a dollar figure on those.

The system was installed more than 10 years ago at the Department of Labour but was used for the merged super-ministry MBIE.

Holiday entitlements and pay calculations are core functions of a payroll system.

How this could have taken ten years to be identified is hard to comprehend. With a big payroll in particular it is normal that some employees would query pay calculations. So why wasn’t a problem found in the first year or two?

Holiday entitlements are complex and can be very difficult to manage and are farcical under some situations, perhaps the Government could address that at the same time they sort out the MBIE payroll.

 

Building industry investigation

TV3’s 3d have done an investigation into price rorting in the building industry. We certainly seem to have higher building costs than Australia, and this is on top of our land costs and cost of burearacracy.

Are we paying too much to build our homes?

A 3D investigation has uncovered a whole range of practices in the building industry keeping New Zealand prices high, from perk trips for builders to exclusive stocking deals at hardware chains.

Kiwis are paying so much for building materials – the building blocks like timber, concrete and plaster – contributing to ballooning costs.

Tony Sewall, head of Ngai Tahu Property, the biggest developer in the South Island, has sent teams around the world to investigate building material prices.

“We’d be paying around 30 percent more than in Australia, probably 60 percent more than the United States,” he says. “And the United States’ product is better.”

The latest Quotable Value statistics tell us $280,000 to $312,000 will build you a medium home in New Zealand. In Australia it’s much cheaper – an equivalent house will set you back $260,000 to $280,000.

That’s just the house building costs.

“We need to open up the New Zealand market to the international one,” says Mr Sewall. “If there’s a product that’s being used on a building here, the builder should have choice from all around the world. That will keep the competitive tension up and keep the pricing at the right level.”

Bunnings New Zealand blames transport costs and our small population, but there’s a myriad of things industry insiders say are pushing up prices.

There are exclusive deals between some suppliers and big hardware chains to stock only one brand of product, so there’s no choice for the consumer. And then there are also kickbacks and rebates – rewards designed to keep builders loyal to a particular type of product.

So claims there are anti-competitive practices in the industry. A specific example was given:

When it came time for the Government to decide who would supply plasterboard to the Christchurch rebuild, the contract went to Gib and a major German firm, Knauf. The Government said it would help improve competition.

But within a year, the German company ran into problems. There were resignations and the company announced it was reviewing its New Zealand operations. The world’s second biggest supplier of plasterboard simply couldn’t gain traction in a market dominated by Fletcher Building.

In fact, Fletcher’s share of the New Zealand plasterboard market is 94 percent. After several complaints, including from Knauf, the Commerce Commission investigated.

It found evidence of aggressive market behaviour, but no illegal, anti-competitive practice.

But official MBIE briefing notes for the Commerce Minister from February this year, well after the Commerce Commission’s decision, warn the building sector could be susceptible to cartel-like behaviour and that aggressive market tactics do “curtail competition in the supply of alternative wallboard”.

It went on to say the “comparatively high cost of wallboard in New Zealand is having an impact on the cost of construction”.

Big business monopolies and duopolies can be bad for competitive pricing.

The journalist who investigated for that report, Michael Morah, has also posted an opinion piece. Opinion: Govt action needed on building industry. He concludes:

Considering these issues have the potential to affect thousands of ordinary Kiwis, you’d think it was something one of our politicians or policymakers would front up to talk about.

To be fair, the Government did appear to take action last year in an effort to improve competition. What it did was cut tariffs or taxes on some imported products, the idea being that we’d get a lot more international products into the market for less and it would push prices down.

Unfortunately, however, this move hasn’t had much of an impact and the Government knows it. In fact, it was told the perceived benefits didn’t stack up.

Official Cabinet papers 3D has obtained reveal the behind-the-scenes decision-making process when the cut on tariffs was about to be introduced. The documents show the Ministry of Foreign Affairs (MFAT) advised Housing Minister Nick Smith that any competition gains from a tariff suspension would be “limited”, and that in any event, the impact of these taxes on the price of residential construction was “marginal”. Despite this, the Government went ahead with the rule change.

On the rebate and loyalty issue, the Government effectively decided it was all too hard and left it alone. But in my view there must be greater transparency and accountability.

Consumers rely on builders, architects and draftsmen to make calls about what materials they use. The problem with this, as we discovered in our 3D Investigates story, is that there’s often a cash deal or a perk helping shape opinions and key decisions – this as MBIE officials pointed out in briefing notes on the issue can be used “to reinforce market power”. It appears this is exactly what’s happening currently across a range of products.

Whether the Government will do anything further to promote greater innovation and competition in the industry remains to be seen. MBIE to its credit does sound genuinely interested in improving the status quo.

But in the meantime, if you’re getting some work done on your house, considering building your own home, or purchasing some materials at your favorite DIY store, don’t forget to ask some questions. And if you’re not satisfied, go online and Google some alternative brands or products. You might find you’ll make some significant savings.

Ministry of Bloody Insulting Extravagance

David Clark clashed with Steven Joyce clashed in Parliament over hair straighteners.

That’s David Clark:

DavidClark17Jun15

And Steven Joyce:

StevenJoyce17Jun15

Hon STEVEN JOYCE : I would suggest to the member that in his case and mine, hair straighteners are no use paid for by anybody, frankly.

He’s right about that, it’s not something either of them would have much experience with.

But Clark was right to point out the extravagance of MBIE spending taxpayer money on:

  • Installation of hair straighteners for staff use
  • $140,747.66 on a public information screen
  • $74,000 on a reception desk
  • $260,000 spent renovating a rooftop sundeck
  • $1,696 spending on a ministerial plaque  – plaques are commonly installed on buildings – but for new buildings. A plaque for a refurbishment seems to be a bit ridiculous.

This is on top of a $40,000 sign. MBIE is an extravagant embarrassment for Joyce.

MBIE – Ministry of Bloody Insulting Extravagance
(a poor example for Ministry of Business, Innovation and Employment)

[Sitting date: 17 June 2015. Volume:706;Page:9. Text is subject to correction.]

4. Dr DAVID CLARK (Labour—Dunedin North) to the Minister for Economic Development : Does the Ministry of Business, Innovation and Employment’s expenditure of $140,747.66 on a public information screen show it is achieving one of its principal goals of realising efficiency gains over time?

Hon STEVEN JOYCE (Minister for Economic Development): I am disappointed with both the cost of the public information screen and the outside sign, and, as I have said publicly, I have spoken to the chief executive of the Ministry of Business, Innovation and Employment and made clear my disappointment. He has accepted that those two items in their relocation should have cost less, and in future large building projects will have additional oversight. It is important that these two items are seen in the context of savings of $40 million over 20 years by being located in a single head office that come from a 31 percent reduction in office space. It is also important to note that the overall cost of that development came in at $2 million under budget.

Dr David Clark : Does spending $74,000 on a reception desk show good judgment?

Hon STEVEN JOYCE : The member could run through a number of things that he and I could both have an opinion on, but, actually, overall the project has saved very significant sums of money for taxpayers—$40 million over 20 years—and it also came in under budget.

Dr David Clark : I raise a point of order, Mr Speaker. That was a very direct and straightforward question, and it was not answered or addressed.

Mr SPEAKER : In my opinion, in listening carefully to the answer, from what I could hear it was addressed. It would help if the member could ask his own colleagues to be a little quieter, and then he might well have heard the answer more clearly as well. Does the member have a further supplementary question?

Dr David Clark : I did hear the answer, Mr Speaker.

Mr SPEAKER : Then he will agree that it was addressed.

Dr David Clark : Can he confirm that his name appears on the ministerial plaque described in the release documents as requiring an additional $1,696 spending variation in the contract; if so, is he the Minister responsible to this House for the expenditure referred to in my questions today?

Hon STEVEN JOYCE : It could be helpful to the member to point out that he is failing to make the distinction between policy-related issues, which it is right and proper that the Minister gets involved in, and operational issues, which are the responsibility of the chief executive. We have seen examples in this House of members failing to observe the differences that are appropriate in what could be known as the “Trevor Mallard – Erin Leigh effect”. If Ministers start trying to run the departments for the chief executives, that generally does not work out well.

Dr David Clark : It will be an epitaph, not a plaque. Does spending taxpayer money on the installation of hair straighteners show good judgment—

Hon Steven Joyce : Well, not for you.

Dr David Clark : —well, not for you or me—if so, is the forward rental contract flexible enough to allow the Government installation of hair curlers as and when Wellington’s fashions change?

Mr SPEAKER : In so far as there is ministerial responsibility in this particular case.

Hon STEVEN JOYCE : I would suggest to the member that in his case and mine, hair straighteners are no use paid for by anybody, frankly.

Labour press release: Labour attacks cost of MBIE’s “flashy foyer” in new Stout Street offices