Speaker by Various Artists

Auditing the Auditor-General

by "Rex"

Auditor-General Kevin Brady's report into taxpayer-funded advertising expenditure in the three months before the 2005 General Election is difficult to stomach.

The principle Brady has sought to uphold is that taxpayer money cannot lawfully be spent on electioneering; he has identified around $1.1 million of advertising spending which he believes transgressed this rule. Relying on the then-Solicitor-General's advice, he defined electioneering as anything that could be construed as encouraging someone to vote for you.

There are two primary reasons why his approach is impossible to accept.

First, political parties have not been treated according to principles of natural justice.

Labour has made much of the fact that the same pledge card now deemed unlawful was not deemed as such in the two previous elections. It has also pointed to National spending money on similar material in the 2002 election according to spending rules that have not materially changed since. The reason Labour considered its spending lawful was because such spending had taken place over many elections by many political parties and never before been questioned. Thus, Labour has categorised Brady as changing the rules in the middle of the game.

Labour's critics have pooh-poohed this defence - saying:

a) Two wrongs don't make a right. That is, just because Labour got away with something unlawful in previous elections doesn't mean it should do so again this time.

b) Ignorance of the law is no defence. Just because you thought the rules made the pledge card spending lawful doesn't make it so.

This is a superficially appealing couplet of arguments, but a misleading one. When working out whether something I wish to do is legal, I might ask myself: "Have similar actions been considered legal by relevant authorities in the past?" Indeed, if relevant authorities had treated a certain action as legal over many years, it would seem capricious if I were then prosecuted because they all turned out to be wrong. So, while blithe ignorance of the law is not a good defence, ignorance because everyone who should have known something was unlawful didn't consider it such is a pretty good one.

Clearly, the important clause in the above question is "relevant authorities". Who are the relevant authorities where parliamentary advertising rules are concerned?

a) First, everyone involved in the parliamentary advertising process: the parliamentary political parties (who wrote and followed the rules) and the Parliamentary Service (the bureaucrats that administer parliamentary spending, and the Speaker, as the Minister responsible for them). All of them (including National) had, over many election cycles, interpreted the rules to allow all advertising except that which explicitly solicited votes or party membership. All of them had interpreted "electioneering" in this narrow way, including the National Party. (It is this narrow interpretation that is very convincingly defended in the legal opinion by Chapman Tripp's Jack Hodder and Briony Davies in their excellent legal opinion for the Speaker.) This might have been a self-serving interpretation, but it was one which parties across the political spectrum followed. This explains why the Labour pledge card was not remarked upon after the 1999 and 2002 elections, and why a similar pledge pamphlet was distributed by National in 2002. None of them - not the politicians on either side of the House, nor the apolitical Parliamentary Service - had understood that the wider definition of "electioneering" now endorsed by the Auditor-General was in play.

b) Second, none of the relevant watchdogs (including the Auditor-General, the Solicitor-General, and the Chief Electoral Officer) had, after previous elections, declared such spending "electioneering" - the Auditor-General had never declared the spending unlawful; the Chief Electoral Officer had never counted such spending towards party election campaign limits; the Solicitor-General had never provided a legal opinion stating that for the purposes of parliamentary advertising spending, "electioneering" meant anything which could be construed as trying to get someone to vote for you. And while the Auditor-General did ask parties before the 2005 election to be careful in how they spent their parliamentary money, he absolutely did not foreshadow the radical widening of the definition of "electioneering" that he has now adopted.

In short, the behaviour of political parties in the 2005 election was not materially different from previous elections; rather, it was only the reaction to that behaviour by the "watchdogs" that changed. Why is this relevant? Because Labour had very good reason to believe that its spending on the pledge card was lawful. It knew that all political parties (including its opponents) had acted similarly in previous elections. And it knew that the relevant legal authorities had not declared such actions unlawful in the past.

Imagine I called the Queen ridiculous repeatedly over many years in front of my local constable, my lawyer, the mayor, the Police Commissioner, and the Solicitor-General, as well as in public (say, in a newspaper column). Now imagine that none of them said anything over that time. Now imagine that I do it again, and the next day my local constable, armed with a newly-minted legal opinion by the Solicitor-General, arrests me for treason. Would that seem fair? Of course not. Yet, something very similar has happened to Labour and the other political parties called up for big over-spends by the Auditor-General.

The second major problem with the result of yesterday's events is that the scope of the Brady report is arbitrary. Brandishing his wide definition of "electioneering", Brady has picked on only one type of Parliamentary spending (advertising) and focused on only one, specific period of time (the three months before the 2005 general election).

While this arbitrariness might be understandable given the origins of the Auditor-General's report, its consequences are deeply concerning. Brady has accepted a definition of "electioneering" as "something that is intended to persuade a voter to favour a candidate or party in an election". If this is the rightful legal definition for parliamentary spending purposes, then it ought to be applied consistently across all areas of taxpayer-funded parliamentary political party activity and across all election cycles that took place under the current funding regime (i.e. at least all the MMP Parliaments). If the Auditor-General believes strongly that an important legal principle has been breached, and unlawful action has been undertaken by political parties over many years, then surely it is incumbent upon him to identify all the unlawful expenditure so as to remedy all the harm caused?

The reason he couldn't possible do this is that it would entail an investigation without precedent. He would need to investigate:

a) the expenditure of parliamentary political parties in at least the last three election cycles.

b) all parliamentary political party expenditure, not simply that relating to advertising.

Indeed, if Labour's pledge card expenditure in 2005 was unlawful, then so was its pledge card expenditure in 1999 and 2002, and so was much activity undertaken by National in previous election cycles (including the English pledge pamphlet in 2002). Why should only this most recent advertising expenditure be paid back, but not that from previous elections? Why should Labour be landed with the bill for the 05 pledge card, and National not be landed with the bill for its 02 pledge pamphlet? How is that fair and consistent?

While National and the media have beaten on the "taxpayers shouldn't fund electioneering" drum repeatedly over the past few months, they haven't done so with any consistency. To see what I mean, take a look at the 2005/6 Budget for Vote: Parliamentary Service. It's worth around $120 million. Breaking this down a bit:

a) $17 million for 'provision of secretariat support and travel services' to MPs.

b) $14 million for 'Party and Member Support' - this money is used to support parties' parliamentary operations, including the salaries of parties' press secretaries, researchers, and political strategists, as well as the advertising the Auditor-General examined.

c) $3.5 million for 'Members' Communications' - such things as MPs' cellphones, business cards and office stationery.

d) $9.9 million for air and land travel for MPs, their families, former MPs and other dignitaries.

That's close to $50 million of taxpayer funding in each of the past few election years. If we're to take the Brady report seriously, the vast majority of this would have been used for 'electioneering' as the Auditor-General has defined it, is thus unlawful spending, and thus should be paid back.

Here's the rub: If the Auditor-General is serious about ensuring that taxpayer money appropriated for parliamentary purposes has not been used for electioneering (in his broad definition), then he should be seeking to root out all unlawful expenditure and demanding repayment. He could start by demanding the repayment of all MPs' travel and celllphone bills during the election campaign. When Dr Brash flew to his campaign launch, or his tax policy announcement, taxpayers paid for it. When Dr Brash made cellphone calls during the election campaign to discuss his Brethren gaffe with advisors, taxpayers paid for it. If we're to take his report seriously, Brady has to believe all of this was unlawful.

Perhaps he could also start asking for the diaries and work programmes of the people who worked for our parliamentary party leaders in the three months before the general election. Was Dr Brash's chief of staff, Richard Long, involved in any electioneering in the 2005 election campaign when we were paying him to undertake taxpayer-funded parliamentary business? Were taxpayers paying him to take part in National election campaign committee discussions? What about Peter Keenan, Dr Brash's speechwriter? Were taxpayers paying for him to write Dr Brash's election campaign speeches? Or the National Party parliamentary research unit? Was it formulating National's election policy? Or its media team? Were they speaking to members of the Press Gallery about the election campaign?

Of course they were, and that is unremarkable because all other political parties did the same thing. They all have taxpayer-funded researchers, spin doctors, political strategies, and speechwriters, whose job during the election year is almost exclusively about electioneering. And that's my point: if you accept Brady's ruling, then almost all parliamentary expenditure undertaken by political parties during at least the past few election years was unlawful. If you accept his reasoning, unlawful taxpayer-funded political party electioneering is much more widespread than a million dollars worth of advertising. We're talking about possibly more than a hundred of million dollars over several election cycles. That strongly suggests that everyone involved in the system, including National, have rejected Brady's wide definition of electioneering, in favour of Chapman Tripp's narrow one.

The reason to pick on National in my above examples is that it has undertaken a cynical, hypocritical campaign to pretend that it is purer than pure and Labour is blacker than black when it comes to using taxpayer funding for electioneering purposes. This is palpably untrue. Both have acted in the same way in this regard for many, many years, because all political parties had the same understanding of appropriate use of taxpayer funding for parliamentary purposes.

Which leads us to the nub of National's credibility problem. If it genuinely accepts the Auditor-General's definition of "electioneering", then it has to accept that it has unlawfully spent millions (if not tens of millions) of taxpayer money over many election cycles. It should now proceed to pay the money back. If it genuinely believes the rules were clear, and that they were to be interpreted as the Auditor-General has interpreted them, then it needs to be signing an awfully large cheque to taxpayers. Of course, National will never do this, nor will the media demand that it pay this money back. But that doesn't make its position any less craven or any less hypocritical.

This leads us to one of two conclusions. In effectively deeming tens of millions of dollars of expenditure over many years unlawful, the Auditor-General has either:

a) Erred, by adopting an extreme definition of "electioneering" for Parliamentary spending purposes which bears no relation to actual practice or the understanding of the rules by all those who wrote them and administered them over many years.

b) Ruled correctly, but then applied his ruling in an arbitrary, capricious manner.

Neither conclusion bestows much honour on the Auditor-General. That the Herald is already declaring him a candidate for New Zealander of the Year illustrates how ill-informed its editorial writers are on this issue, and how reflexively anti-Labour they have become.

I'd like to conclude with a brief commentary on the political fallout of the heated political debate that arose during the period between sections of the Auditor-General's draft report being leaked to the media and yesterday's release of the final report.

First, the Auditor-General acted unprofessionally. While his report says that it was 'unhelpful' that some of his provisional findings were leaked to the media, he allowed himself to be dragged into the public debate. Why did he and his office provide copious comment to journalists, on and off the record, during the conduct of his inquiry? How was that conducive to the conduct of a fair, consultative inquiry? Why not just stay mum throughout?

Second, the National Party has acted with breathtaking hypocrisy. It knew that like all political parties, it had, over many years, abided by a narrow interpretation of "electioneering" when determining whether using taxpayer funds was lawful. It knew that Labour had acted in precisely the same way in 2005 as National had acted in previous elections.

Breaking rank now for short-term political gain was bad enough. But it is nothing short of deplorable that National turned such a hypocritical campaign into suggestions that:

a) Labour stole the election.

b) Helen Clark led the most corrupt government in New Zealand history.

These accusations betrayed not only a lack of any meaningful historical perspective, but also a complete amnesia with respect to similar actions National had undertaken in previous election cycles.

Third, it is deeply regrettable that some sections of the media aided and abetted National's campaign to destroy Labour, and by extension the country's confidence in our democratic processes. The worst offender was the New Zealand Herald which placed all its coverage of the Auditor-General's report over many weeks under the headers "Pay It Back" or "Paying It Back". This was a newspaper using a National Party slogan to brand its coverage of a highly controversial political issue. It'd have been like the Herald placing its election coverage during the election campaign under the header "Forward. Together." More generally, there was very little attempt on the part of the media to explain:

a) National's hypocrisy on the issue, given its past and current practice.

b) That the Auditor-General's definition of electioneering (based on the Solicitor-General's advice) was completely at odds with the understanding and practice of all political parties over many years.

c) That the wide-reaching implications of the Auditor-General's decision are that tens (if not hundreds) of millions of dollars of taxpayer money has been unlawfully spent over several election cycles, and that National has a multi-million dollar liability of its own.

In short, the media got seduced by two alluring storylines - politicians are irredeemably corrupt; and this third-term government is on its way out - without stopping to think how the issue should be responsibly framed. Had the above three points been made crystal-clear, then rather than being about a Labour rort of the taxpayers, the story would have been more generally about the rules around parliamentary spending needing clarification because of disagreements between various state authorities on what those rules meant. A less sexy story, to be sure, but a much more accurate one. On the contrary, the general literacy of those commentating on these issues in the media (the Herald editorial writers, for example, don't even appear to know the difference between the budget of the Department of Prime Minister and Cabinet and the budget of the Parliamentary Labour Party) has been woeful.

Of course, there's no denying that Labour handled the pledge card issue in a ham-fisted, almost suicidal way. It shouldn't have attacked the Auditor-General. It shouldn't have fought a war in the media, seemingly coming up with a new excuse every day as to why the spending was legitimate. It shouldn't have dismissed the issue as of concern only to those living in the Beltway. All this did was:

a) provide further fuel to the fire that National and the media were trying to stoke;

b) reinforce latent perceptions of Labour as feeling itself above the law.

Rather, it should have retained a dignified silence, noting that it was in discussions with the Auditor-General about his provisional findings, and that it would make a decision as to its response once he released his final report. It should have added that:

a) Out of respect for the Auditor-General's statutory position, it would be willing to pay back money he found in his final report to have been unlawfully spent;

b) It had at all times acted in good faith and in accordance with its understanding of the rules;

c) National's behaviour in previous election campaigns suggested it had a similar understanding of the rules to Labour.

d) It would be useful for the media to analyse the practice over the past several election cycles of all parliamentary political parties with regards their taxpayer funding, and especially how the term 'electioneering' was defined and interpreted by all those involved in the system.

And once these four simple statements were made, it should have shut up. Whenever asked about the Auditor-General's report, the Prime Minister should have patiently responded: "We have made our views known. We invite the media to investigate the issues we raised. We are now waiting for the Auditor General's report before commenting further." This would have taken the heat out of the debate and avoided the many blows Labour has landed on itself in the past six weeks.

All of that said, Labour's actual, much more vociferous, response was understandable. It has been treated very shoddily - by National, by the Auditor-General, and especially by the news media. Its eventual capitulation to the demand to pay the money back was the only politically sensible option open to it; this political calculation, however, doesn't make the Auditor-General's findings any less arbitrary or capricious, the actions of National any less hypocritical, or the news media's coverage of the issue any less deplorable.

NB: "Rex" has past experience in the New Zealand political system and some insight into process. He is not associated with any political party.