Scoop Election 08: edited by Gordon Campbell

On a solution for the Ministerial spending scandal, and for child poverty

June 11th, 2010

The litmus test in the Ministerial expenses scandal is what would happen to an ordinary employee who repeatedly misused the company or departmental credit card in the fashion exposed in the last couple of days. Repaying the money would not be enough – dismissal would usually follow, especially if there was repeated abuse of the privilege. Incidentally, do the repayments that have been made include an interest charge – to cover the real cost of the loss, and the opportunity cost to the public of not having this public money at their disposal in the years concerned? I would be willing to bet that it doesn’t, looking at Chris Carter’s tally of what he thinks are his obligations.

Point being, despite having preached for decades about how the country needs to accept the bracing disciplines of the private sector, there is still plainly a bipartisan expectation among a few senior MPs in both Labour and National ranks that they can flout the rules, or plead ignorance of them, again and again – without any real consequences, beyond briefly having to adopt a posture of penitence when the news gets out.

Just as plainly, this system cannot continue. Besides the initial theft of public money, it costs further taxpayer money to monitor and detect these transgressions and to go through the rigmarole of reimbursement. How can the rules be changed? Obviously a zero tolerance policy needs to be promoted by party leaders, and directed (especially) at the serial offenders in their ranks. If Ministers infringe the rules on spending, they should face the salutary prospect of suspension, or firing. Perhaps a Three Strikes (And You’re Out) policy could be instituted when it comes to the Ministerial card. Rodney Hide should be keen enough to support that notion.

There is an additional safeguard. To prevent misuse of company cards in the private sector, US firms routinely use a service that Visa and some other card holders have offered for years – namely, Merchant Category Codes (or MCC).

These codes entail a four digit number that automatically refuses to accept certain categories of spending, or spending in certain locations.

The first step in preventing unauthorized purchases means checking with your credit card issuer to find out which protections can be built into the credit card network. These Merchant Category Codes, also known as MCC codes, can prevent corporate credit cards from being used for gaming, at certain nightclubs or with other specific types of merchants…..

Business owners can also work with credit card issuers to determine spending limits by user, per transaction or per day. Larger expenditures must be approved on a case-by-case basis by a supervisor or the business owner, thereby avoiding any nasty sticker shock come statement time.

Consider a corporate credit card that includes free employee credit cards with spending limits the business owner controls, monthly employee spending reports and Employee Misuse Insurance Protection. Some cards offer reporting tools that provide spending summaries according to merchant, cardholder, and a variety of dates, allowing you to receive alerts of “unusual spending,” and catch discrepancies or unusual spending patterns.

It would be interesting to know which of these ‘early warning’ systems – if any – Ministerial Services now have in place to detect wrongful spending, when it happens. What is also needed is a category of merchants and/or an agreed list of items that can be pro-actively barred from purchase on a Ministerial card. If grey areas or contexts emerge when such items are on rare occasions deemed to be justified, the initial payment can still be made on the Minister’s own personal card, and reimbursement sought from Ministerial Services, on the presentation of receipts. Ministers are hardly likely to be caught short – they are, after all, on salaries and perks packages that are worth at least four times (or more) the average wage.

Someone such as Russel Norman or Pita Sharples should be offering to convene a meeting of party leaders with the Speaker with a view to devising a system of MCC codes – covering items and locations – that should be barred from purchase on the Ministerial card. The beauty of the MCC system is that a party leader could then personalize the four digit code (after consultation with the erring Minister) to counter the peccadilloes of particular Ministers. So, no more alcohol purchases on the Ministerial card for Tim Groser, and no more blue movies for Shane Jones, or anyone else.

Footnote : the big ticket item in TV3’s recent expose of $10 million spending by the Ministry of Foreign Affairs and Trade turns out to have been the $459,000 on “ chillers” at our Embassy in Saudi Arabia. Chillers are of course, air conditioners. I have no way of knowing whether $459,000 is an excessive amount for the purchase and installation of air conditioners in an embassy of the size we occupy in Riyadh – there are eight staff listed on the MFAT website – but surely, having some level of air conditioning in one of the hottest places on earth does count as essential spending. On the other hand, while it is hot in Tonga, the $78,000 for the swimming pool refurbishment for MFAT staff should have been foregone, in the spirit of public service belt tightening.

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Confronting child poverty

From the outset, the government’s actions on welfare reform have looked more like an indoctrination process than a genuine, open minded consultation. All the more reason to applaud the recent comments made to the Welfare Working Group (WPG) by Dr Monika Queisser. Unlike the right wing fruit loops who have been urged on the WPG by Social Development Minister Paula Bennett – I’m talking about the likes of Dr Peter Saunders – Queisser is a genuine heavyweight. She is the current head of social policy for the Organisation for Economic Cooperation and Development (OECD).

Queisser pointed out the striking generational difference in how New Zealand tackles the issues of poverty – the old are relatively well protected here, but children are not. As a remedy, she advocated a universal child allowance.

She said New Zealand could be proud of having one of the OECD’s lowest poverty rates for the elderly, with only 2 per cent of over-65s living on less than half the median after-tax income here compared with an OECD average of almost 14 per cent.

But 15 per cent of Kiwi children lived in families with less than half the median income, compared with an OECD average of 12 per cent. “The gap between material deprivation of children and older people is biggest in New Zealand out of 27 countries,” she said. She said the Labour Government’s Working for Families package had stemmed the rise in child poverty but “has not reduced the high child poverty rate”.

“More needs to be done on that front,” she said “An integrated approach to reviewing the tax/benefit system is important. The countries in the OECD that have achieved low child poverty (the Nordic countries and France) often have universal child benefits, and that might be also an avenue that New Zealand might want to explore in more detail.”

It would be nice to think that the WPG, will take Queisser seriously. That’s unlikely. Bennett made her mind up long ago to tighten access to welfare support, not to extend the safety net. On her watch, child poverty will continue to be treated as an individual failing, and not as a responsibility of the state.

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