3 mins to read

Our constitution and crony capitalism

Stephen Franks
Sat, 15 Jun 2013

Kathryn Ryan on Nine to Noon followed up the constitutional issues raised by my firm's recent opinion work for the Green Party.

I thought her questions nailed the issues.  Whether the Sky City deal is good or bad is not material, and I did not opine on that. Nor does the opinion suggest that there has been any dishonesty by anyone.

As a lawyer and as a citizen I believe in the advantages of an 'organic' constitution. But it makes the slippery slope steeper. If the government seems oblivious to stacking up bad precedents constitutionally  that could build support for unfortunate constitutional tinkering after Prof Burrow's review group reports.

Our constitution relies on conventions and respect for written and unwritten rules that constitute behavioural bottom lines. High quality Ministers in the Lange government built good fences against crony capitalism – developing a strong sense of shared understanding of what is, and is not, done around here. It became easy to distinguish New Zealand from countries as similar as Australia, because of the lack of return for businesses seeking political favours. Corruption became practically unthinkable.

Now it is not clear where the bottom lines are the next deal could go further. The next SkyCity type counter party would be a mug if it does not push or test officials and the government to see how far they might go in giving private concessions no-one can really value.  What was unthinkable has become worth testing.

Even if it is the best deal for the purpose of getting the convention centre built, corrosion of those protective expectations is collateral damage.

Unfortunately the Warner Bros Hobbit deal contributes to that concern. To a constitutional lawyer that would not have been at all reprehensible, except for confining the benefit of the law changes to the industry and party they did the deal with. The circumstances should have persuaded them there was a problem with the law. Competent adults should not be able to renege on independent contractor arrangements for which they are paid, by claiming to have an employee's protection from not having the contract continue. So the law change should have been of general application.

Once there is a perception that our law or political favour is for sale, there is plenty of scope for it to operate.

In the  opinion I touched on the lack of protection in our constitution against corrupt use of powers to confer privileges (and to punish financially) without Parliamentary (or court) oversight. We have good procedural protections against casual misuse of powers to tax, and to spend tax money on favourites. But there is next to no protection, for example, against vast wealth transfers by way of regulatory privilege or detriment.  That happens under the RMA, I think mostly without corruption, but  it is mainly because of habits of honesty, not structural protection if our public morality erodes.

I raised this generic risk in Parliament when the ETS regime was under debate. A corrupt Minister could make or break friends or enemies whose competitive position depended on emission credits. The first scheme gave great discretionary patronage powers to those deciding  who would get the credits supposed to protect and reward for exceptional circumstances. Even as legislated there are still few safeguards.

Former ACT MP turned National Party candidate Stephen Franks is principal of commercial and public law firm Franks and Ogilvie. He blogs at

Stephen Franks
Sat, 15 Jun 2013
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
Our constitution and crony capitalism