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Battered govt staggers from credibility blows

HIDESIGHT

It’s fashionable to say the wheels are flying off the government. That’s journalists talking to themselves.

But the government has suffered two blows.

The first blow is to policy credibility. I don’t know the correct class size for New Zealand schools. But I do know that a government can’t afford to announce policy half-cocked and then reverse it because it proves unpopular.

Policy credibility counts. The Auckland mayors and councillors were all stunned back in 2009 when I told them they were sacked. The delightful deputy mayor of Waitakere Penny Hulse shot her hand up to ask what it would take to make the government change its mind.

I replied that nothing would. Cabinet had decided there would be one council for Auckland and that was it. I explained it was a waste of time complaining and better to work with the reform process rather than against it. And so they did.

It never occurred to me that the government could change its mind.

It’s clear now, though, that if enough people kick up a fuss the government will reverse decisions, including Budget ones.

The mayors of Auckland would now organise protests and gain traction. They would easily force a back down. Penny Hulse would still be deputy mayor of Waitakere and not deputy mayor of Auckland.

Government ministers can no longer deliver policy momentum and stare-down special interests.

The loss of policy credibility is a serious problem for the government.

The second problem is people. It takes extremely talented people to drive change through government. Such people don’t grow on trees and they are not sitting at home twiddling their thumbs waiting for government to call.

There are talented people who can help and are prepared to do so for the country. But they need to know the politicians are serious in their intentions and that they won’t be made political fodder.

Bang goes the serious intentions with the government’s loss of policy credibility. And bang goes any assurance of not becoming political fodder with the shocking treatment of ACC chairman John Judge.

John Judge is the former CEO of Ernst & Young and has just been appointed chairman of ANZ Bank. People like him don’t need government work. But governments need them.

The hard thing for a government is to persuade the John Judges of the world to assist to make the country a better place.

ACC was financially belly-up in 2008. The risk wasn’t just that it would go under but that it would take the government with it.

ACC’s shortfall in 2007-08 was $2.4 billion. The following year it was $4.8 billion.

ACC was down the toilet. The government was lucky to persuade John Judge to step up to the plate. Along with a new talented board he turned ACC around.

By 2010-11 ACC was back in the black with a surplus of $3.5 billion and a balance sheet on the mend.

It was an extraordinary multi-billion dollar a year turnaround. We only have an ACC now because of the hard work of John Judge and his team. No one else has stepped up to save the government billions a year.

I don’t know the ins-and-outs of the Bronwyn Pullar affair. But what I do know is that people with John Judge’s ability are rare and very hard to attract to help with government. And now we have lost him.

Here’s the questions: would he do it now? And where would ACC be if he hadn’t.

There’s been two big hits to the government. But really the big hits have been to any serious reform process and policy quality. That’s been a hit to us all.
 

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Comments and questions
51

Great article Rodney

Thank you Rusty.

John Judge's suitability is limited to the private sector, if he is responsible for what has occurred within ACC then his legacy is one of financial liability in terms of damages.
The public just need to think back to the conduct of ACC and the late
Dr Laurie Gluckman many $$$ were pd. in damages to claimants. Did Mr Hide read Judge Trapski report into ACC before making just unwise statements.
All kiwis need to decide if its time to ditch ACC in favour of the right to sue. A poll would demand the status quo.

Yes. I have read Trapski's report. But nearly 20 years ago!

The ACC annual liability was growing by billions of dollars a year when John Judge took over. He reversed it. I have no doubt it's the largest reversal ever achieved public or private in New Zealand.

The last thing government needs is another banker.
BTW... I'm still waiting for the Auckland rates to go down due to centralizing city services...

Well bankers and accountants are handy when in financial do-dos. BTW I never promised that rates would go down. My goal was always to provide a governance structure that matched the jurisdiction of the challenges Auckland confronts. We did manage to make significant savings too. $100m a year in wages alone.

$100mn is chicken feed compared to the annual budget.

True. But sadly I wasn't in charge of the total budget! I could only wish.

Yes, more people must be put out of work for the super city plan to look worthwhile.

Well the reforms have already proved their worth. But you are right in the sense that we need a much small council in terms of staff and operation if the region is to truly prosper and rates are to be held down. So we agree!

Can you prove that $100m a year in wages alone was saved - or, is this another whizz-kid ACT comment? From folk who work in the new Council, I understand that more consultants an docntractors are being brought in - but they do collect wages do they? If the new merged council has saved so much money a year, then it beggars belief that rates are rising! While you were a MP outside of Cabinet (ha!) statements you made did suggest that rates would be reduced. You have the time now, so re-read all your "press rleases".

I was never silly enough to promise what I didn't control. But the rates when I left were down often by a good mark across all former council districts compared to what the former councils were planning in the LTPs.

the $94 million saving will -- I am sure -- be found in the ATA's wrap report and the DIA's review report.

Usual claptrap trotted out by Right Wing Rodney.

Thank you. I must get full marks for consistency.

Interesting inside view about John Judge. I did not know that about him, excellent article.

Hi Damien, That's very high praise indeed given your columns and, at the risk of starting a mutual fan club, may I say I am enjoying your articles enormously.

Bromance - only in NBR Comments

We likes yours too Chris!

Rodny what planet are you on? Did you get dropped on your head too, whilst dancing?? Judge is a political acolyte - he did nothing useful useful for NZ or ACC - merely pushed a 'say no to claims' policy - which if you think hard enough any fool can do! The issue is that ACC is a social contract with taxpayers/legitimate residents of this country that in the event of an accident (how ever caused, and however irresponsible the act), the care and rehabilitation will be taken care of. This does not happen now; and only those who are articulate and have advocates/friends can get the nod. ACC has now become a largely dishonest service (?) with private insurance men working within the organisation with one aim - to stop payments as far as possible. Sadly, a few medical practitioners have also prostituted themselves. Mr Judge presided over the biggest "transfer of clients from ACC to Welfore - hardly something to be proud of and hardly sustainable for NZ. Greedy people only remain greedy and focused on getting in the trough! As you may well know, Rodney!!

Earth. No. I am afraid we disagree. There is also a large rehabilitation role to ACC. Would ACC have survived without John Judge? No. How could a government continue with multibillion dollar a year losses in one entity? How does a social contract work when a country is sent broke/

Is ACC perfect? No. I would totally privatise the operation and open it up to competition. That would improve the performance of the system immeasurably.

As I said, any fool can 'slash' a budget. ACC's core role has been compromised by the cuurent regime. While you may "disagree", please read the legislation and the enabling statements, then make an informed judgement. And, Yes, ACC could have survived becau eits so called 'loss or liability' was a ' paper accounting' device and did not affect its current operating position. Again, this is not being a journalist for NBR, but the annual report/statements bear this out.

No. Any fool can blow a budget. We saw that with the previous regime. Controlling and cutting costs is tough.

I'm disappointed that ACC remains a monopoly. I'm guessing that this monopoly, and the ethos that monopolies develop, has be detrimental for NZ and is a primary cause of all the Pullar/Boag/Judge angst.
Sadly, a goodly number of voters believe in State control as they think that State owned ACC, power companies et al will be a soft touch for them.
What they don't seem to realise is, when you screw, or are subsidised by an SOE you are screwing/subsidising yourself. Now, apart from being darned silly, that is not a good look.

Sure. Privatise it.

Hi Rodney,
Given that "privatising it" is just too politically unpalatable, would splitting it into the DHB's have any merit? At the moment we have a monopoly, (and I hate monopolies with every fibre of my being, they are truly evil) with lay people tracking and measuring sick people. If it was split into DHB's we would have some sort of performance measure, with medical personal "tracking and measuring" the patients.("clients":)
Just a thought! Any merit? in your opinion.

I think there has been too much justified criticism of ACC actions to describe Judge as successful. Also his press conference on the Pullar issue was just disastrously misinformed.

Obviously he has financial and leadership skills, but equally obviously they were not balanced sufficiently to take ACC's customer base with him.

I disagree. There are too many who play the pr game. It was refreshing to have someone blunt and to the point

Its more of a culture issue. Key decided to cut costs ruthlessly to reduce public expenditure. Fair enough. However that created a culture at ACC where every claimant is treated like a potential crook trying to rip off the government. And some are. But many aren't, as we've learnt with the Bronwyn Pullar case.

John Judge may well have had the requisite skills to ensure the government saved money. But clearly he lacked the empathy needed to run a organisation like ACC. We need to remember the purpose for which an organisation like ACC was set up. And, if the end goal of a policy is to ruthlessly cut costs, we need to ask ourselves: Will the organisation be able to fulfil that purpose?

We have no idea about the Pullar case or its merits.

govt ship is sinking, and fast

"govt ship is sinking, and fast"
I do hope you are wrong, because I believe this Government has showed fiscal leadership that no other has before in my memory.
You could argue that the intelligent fiscal conduct that they have been pursuing has been forced on them by global circumstances and I would not argue. But I would say, "hopefully this way ahead that this Gov. is demonstrating will rub off on future Governments".

Sinking fast? Nah!

While I agree the Puller affair was a PR disaster for Judge and mis handled by him, I absolutely congratulate him on what he achieved at ACC. All these wolly woofters that complain about the aggressive stance taken by ACC need to consider that Judge's approach was long overdue.

Someone needed to take a serious look at these long term lay abouts and get them back into paid employment. Pitty Bennett could put him in charge of the 10,000's on sickness benefits as well.

People in NZ need to harden up and realise that we the taxpayers simply can not afford to continue paying for the 1000's that chose not to work because our system and the people who work in it make it so easy for them to make this choice.

We do need to harden up.

Alan and others, I read what Judge said in the press conference re Pullar not as mishandled, in the sense that I think what he said was probably correct, even although he did not exactly answer a question about why he said he hadn't read a transcript or viewed a certain video that he was proven to have read and/or watched . Why not mishandled? Because the interviewer had asked for a response by a construction that was sliding around with the truth, of the type 'when will you stop denying you are beating your grandmother'. I believe he was distinguishing between having heard and/or seen both selected excerpts of a tape or video and transcripts of those (but perhaps only briefly), and having been given a WHOLE unadulterated transcript to study as he wished.

It is well known that some people adjust and concoct and construe and rework harmless material together in a way that makes it seem something else. I think that is what may have been done *by those who provided some transcript).. I could be wrong.

I don't think the right questions have been asked to know the answers.

Totally agree.

Judge's problem was confirming confidence in the accusation of blackmail despite his Ceo having heard the whole recording which showed the only linkage originated from his own staff.

II see, Alan, but I personally think there was something verging on implicit blackmail if Pullar and Boag brought both subjects to the meeting, or arranged to make sure both were on the table. Looking at it like this, their readiness to affirm the verbalisation of Judge's offsider as to whether what they were meaning was that if ACC reviewed Pullar's file they would be agreeing to return the list of names - was like a kind of confirmation that they had already thought of this outcome as a possible result of their strategy.
Still, that doesn't meanI think ACC does not need fixing - it does.
I don't know if ACC still uses only a doctor's initial diagnosis after an incident (in this case after a fall, a wrist injury diagnosed at first as a sprain), and not the result found in a specialist service, an hour or two later, by an X-ray (in this case a broken radius). It was as if ACC's form was not flexible enough to deal with two progressive unbiased pieces of input over one diagnosis.

I don't believe that, Nancy. I believe that the ACC staffers clearly envisaged writing a legal constraint on Pullar to "return" (actually destroy) the privacy violating data they had sent her and prevent her disclosing the breach publicly. Pullar and Boag simply noted that proposed condition.

There was zero evidence of any blackmail threat from anyone except the ACC which was effectively telling Pullar she wouldn't get any further support unless she signed up to their conditions on the privacy breach. Nothing else has any credibility - as the police as an objective independent party obviously determined.

To confirm exactly that was ACC's clear intent, it has just been offering money to those whose privacy was violated on the condition they keep quiet about it.

wow John Judge, he doesn't need to the work, he's only doing it for his country, everybody on their knees to the great ACC sage... what a load of BS, there's so much he said she said who really knows the real state of ACC?

Well, we know the state of the books before and after John Judge!!

To quote"ACC was financially belly-up in 2008. The risk wasn’t just that it would go under but that it would take the government with it. ACC’s shortfall in 2007-08 was $2.4 billion. The following year it was $4.8 billion.
Garbage. It was 2 billion per annum cash flow positive during this period. Operating precisely as it was implemented - viz not on a fully funded basis.

Well you can choose to ignore the balance sheet if you like and just focus on cash flow but that surely gives you a false picture of ACC's financial position.

Surely the issue is not one about Judge but one about our relationship with ACC. Were it operating in a competitive environment you would have to believe it would have folded by now or have been taken over by a competitor. Were it not for the fact that I must contract with ACC, I would have no interest in it as an organization and little interest in it's Chairman. Other than to note that I should never deal with such a disheveled organization.

Your point is right about Government throwing good men under the bus. But shouldn't we be focusing on having less entities associated with the government?

Totally agree. The government shouldn't be in the business at a;;. The govt could easily keep the framework and policy model but open the business entirely to competition and the private sector to everyone's benefit.

Labour must take resposibilty for all ACC's woes. It should have remained privatised. In fact Labour is resposible for most of the ills this country has.

Two interesting questions at column's end Rodney - can I add a third 'Just how bad does ANZ feel now after bringing this liability to it's brand on board'. Egg-on-face big time!

"that ACC is a social contract with taxpayers/legitimate residents of this country" is part of the new dependancy culture that has pervaded NZ.

Add in the DPB and 'lazy kiwi work ethic" and you can see the stupidity of ever thinking that NZ could catch up to "Advance Australia Fair" .

I work in the insurance and finance industry and have done so for years.

Privatizing ACC is a bad idea. Many vulnerable claimants would be bought out because they might think $100,000 up front, say, is better than $30,000 p.a. for life. And even if they got the right settlement, chances are they (or the relatives) would squander it.

There will be long-term beneficiaries. What if AMI, say, had been offering ACC-type cover?

The cost of ACC cannot be ignored. If costs are not controlled then other government spending (health, pension, schools, infrastructure) will suffer. Hard decisions need to be made. People DO game the system and that is getting worse, not better, thanks to increased emphasis on rights over responsibilities. That requires tough management.

I have also known John Judge for many years. Excellent operator and a huge loss for what was really no more than a storm in a teacup.

Think the state is inefficient? Try filing an insurance claim.

And privatising ACC will just take us back to the litigation-ridden pre-1974 days.