Allegations Hotchin is behind Feeley smear campaign 'a bit bizarre' - English

Deputy Prime Minister Bill English told TV1’s Q+A programme that the allegations against Judith Collins are serious and that’s why an inquiry is needed.

Asked about allegations Mark Hotchin was behind a smear campaign against (then) SFO boss Adam Feeley in 2011, Mr English said, "Well look all that seems a bit bizarre I have to say, and if that is linked through the email to any kind of ministerial conduct as is implied, that’s a serious issue, but we've yet to see whether an email written by the blogger is correct or not, and an inquiry will deal with that."

He said investors should have confidence in the Serious Fraud Office and Financial Markets Authority:

“Well look you're talking about some campaign through the media by people who seem to have a capacity to believe they can have a lot of influence. If there's law breaking there someone will have to investigate it, but in terms of the looking ahead with the Financial Markets Authority and the SFO, we have every confidence in them, the market has high confidence in them, in fact probably more than they’ve had for a long time, because they’ve all been reframed and re-regulated.”

Labour’s Finance spokesperson David Parker said Labour wants a Commission of Inquiry into the allegations:

“We believe there should be a full commission of inquiry chaired by a High Court Judge, so that you’ve got judicial independence.  They need wide ranging powers, and they need to see how far this goes through government.  It now appears that the Hager book was the tip of the iceberg, not everything.”

“This is absolutely unprecedented in New Zealand.  The Minister of Justice asserted to be undermining one of the arms of justice.  This is very serious.  The Prime Minister's office having been involved in earlier abuses of the Official Information Act.  The Prime Minister misrepresenting advice from the Cabinet Office, that he said cleared Judith Collins when she was tied up in that Oravida business where she had a plain conflict of interest in China.  This goes to the heart of government.  I'm sure this never happened when Bill English was in charge.  This is about ethics not rules.”

Watch the interview here

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RAW DATA: Q+A transcript: Interview with Bill English and David Parker

CORIN We are here of course to debate finance and the economy, but we need to deal with these allegations and the story that has broken over the last 24 hours and I'm going come to Bill English first.  Good morning to both of you, but Bill English how concerned are you by what you are now seeing in these emails?

BILL ENGLISH – National's Finance Spokesperson: Well the implications of the emails would be serious if they're borne out.  That’s why the Prime Minister has initiated an inquiry into them.

CORIN What about the allegation this morning that Mark Hotchin was behind this smear campaign?

BILL Well look all that seems a bit bizarre I have to say, and if that is linked through the email to any kind of ministerial conduct as is implied, that’s a serious issue, but we've yet to see whether an email written by the blogger is correct or not, and an inquiry will deal with that.

CORIN That’s right, we don’t know if these are in fact real emails, all that sort of thing, but on the face of it and what we've seen from the Sunday Star Times this morning, putting the ministerial issue aside, what does this do for New Zealand investor confidence that the SFO and the Financial Markets Authority are being attacked and undermined?

BILL Oh look I think confidence in New Zealand's financial markets is good and growing and that’s because it's all been re-regulated.  This is very much a relic of the past, the finance company failures and all the pressures that went with that, it looks awful and that’s why it has to be dealt with.

CORIN But at the moment the inquiry's simply looking at Judith Collins and this issue of that specific email that was released yesterday, which I would note no one seems to have refuted that email, and there is a Mark – a name you know Mark – which presumably must be Mark Hotchin or certainly the link is there.  I mean there is some serious evidence that has at least emerged which would warrant what, a much wider inquiry surely.

BILL Well look as the Prime Minister indicated yesterday, his first responsibility is around the role of ministers.  If there's any other issues that are to do with law enforcement then the appropriate agencies will look into it.

CORIN Do you think that these agencies, the SFO and the Financial Markets Authority have been got to in any way?  Have they been compromised in any way?

BILL Oh look whatever the campaign might had set out to achieve we have a high level of confidence in the Serious Fraud Office and the Financial Markets Authority and I think what's just as important is the market and the investors now have a high level of confidence in those organisations.

CORIN How can they have that confidence given what's just happened?

BILL Well look you're talking about some campaign through the media by people who seem to have a capacity to believe they can have a lot of influence. If there's law breaking there someone will have to investigate it, but in terms of the looking ahead with the Financial Markets Authority and the SFO, we have every confidence in them, the market has high confidence in them, in fact probably more than they’ve had for a long time, because they’ve all been reframed and re-regulated.

CORIN You mention a small group here.  Do you believe that this small group around Cameron Slater, that the names that have all come up over the last days are just that.  That they are small faction, or is it wider than that? 

BILL I don’t know any more than anyone else whatever the media are coming up with, I'm sure if there's others involved they’ll find it.

CORIN David Parker, let's come to you on that.   Do you believe a wider inquiry is needed to this, given the issues around things like investor confidence?

DAVID PARKER – Labour's Finance Spokesperson: Absolutely.  We believe there should be a full commission of inquiry chaired by a High Court Judge, so that you’ve got judicial independence.  They need wide ranging powers, and they need to see how far this goes through government.  It now appears that the Hager book was the tip of the iceberg, not everything.

CORIN Bill English, is the National Party's campaign now completely derailed?

BILL No it isn't because the public have a genuine interest in their economic future, the future, the future for their families and communities.

CORIN But you're not able to talk about any of that?

BILL Well we are.

DAVID Well neither are we.

BILL We are and we have been.

DAVID You haven't asked me more than one question so far Corin, and we're halfway through the interview.

CORIN We've got do this, we've got 20 minutes David Parker.

DAVID This should be sheeted home to the National Party.

CORIN Well that’s exactly what I'm doing.

DAVID They can't invert this and say that this is just politics as normal.  This is absolutely unprecedented in New Zealand.  The Minister of Justice asserted to be undermining one of the arms of justice.  This is very serious.  The Prime Minister's office having been involved in earlier abuses of the Official Information Act.  The Prime Minister misrepresenting advice from the Cabinet Office, that he said cleared Judith Collins when she was tied up in that Oravida business where she had a plain conflict of interest in China.  This goes to the heart of government.  I'm sure this never happened when Bill English was in charge.  This is about ethics not rules.

CORIN Okay okay, fair enough.  Bill English how does this make you feel about your government when you hear those sorts of comments?

BILL Well I disagree with most of those comments.

CORIN Most of them?  Which bits don’t you disagree with?

BILL Oh that this is a serious issue.

DAVID Would this have happened under you?

BILL That the implication happened under the current minister that’s a serious issue, it's got to be sorted out one way or the other, but we've run a very open transparent government, we've taken the public along, we've set a direction for the economy.  Families communities and businesses can see a way ahead, and in the end that’s what this election campaign's about.

CORIN You have been the one that has been the strongest on this book and on this issue.  You said you didn’t condone it at the Finance Leaders Debate.  What now, I mean are you isolated on this?  Is there some sort of division in National?  What's going on?

BILL No there's isn't.  The Prime Minister, as he said yesterday made judgements on the facts that are before him.  He's got a new set of facts today.

CORIN Should he have acted earlier?

BILL No, I think he's made the right decisions and now there's going to be an inquiry into what is a serious allegation.

CORIN David Parker, should the Prime Minister have stepped in earlier?

DAVID Well I think that Judith Collins has brought the Ministry of Justice into disrepute.  The question that people are asking is if you can't trust the Minister of Justice can you trust the Justice system.  This have been apparent since Oravida when the Minister of Justice, Judith Collins, had a plain pecuniary financial conflict of interest between her family's financial interests and what she was doing as a Minister in China.  I want to see the alleged Cabinet Office advice which the Prime Minister at the time represented cleared her of wrong doing.  I don’t believe that that was the case.  I think it's time that we had those sorts of disclosures before the election, because this inquiry although it should look into those things won’t report back until after the election.

CORIN Bill English is this in fact to become bigger than the campaign this issue, that we've never seen anything like this before that’s being alleged.

BILL No it hasn’t become bigger than the campaign, because in the end the campaign's about the voters right?  This is an argument about a blogger, maybe a Minister and a bunch of other people who generally aren't in the public eye.  It's about families and communities are about their opportunities, what governments are going to do to support them to take those opportunities.

CORIN David Parker leadership starts at the top doesn’t it?  Is that you're argument?

DAVID It's exactly my point.  This is a style of government that is unprecedented in New Zealand.  We wouldn’t know about it were it not for the Hager book.

BILL It's not a style of government at all.  The style of this government as exemplified by John Key.  John Key has been the most open transparent best communicator as a Prime Minister we've had and he's led this country with confidence through a tough time, and now we've got good prospects ahead of us and that kind of confident credible leadership is what's needed.

CORIN But you must be concerned that there are links between these bloggers and the Prime Minister's Office, through Jason Ede?  

BILL Well there’s certainly been concern about the activities of the group.

CORIN What do you think about that?

BILL Well I'm happy that the serious issues are being dealt with and the allegations that were unproven have slid away, and the serious issue here has been the implication – again generated by the blogger -  about a Minister in the government and it's going to be investigated.

CORIN Alright gentlemen I might leave it there.  We will come back with a full section on the economy.

CORIN Welcome back to this Finance Leaders debate with David Parker and Bill English.  Right let's get on to the economy.  The cost of living Bill English, the dividend from the rock star economy, two and a half percent wage growth.  Is that as good as it's going to get?

BILL If we have consistent wage growth of that sort over the next four years, the average wage will rise from $55,000 to $62,500, and this is what's important for this economy.  We've got through a difficult period, we're on track.  If we stay on that track with consistent growth, it won’t be spectacular, it won’t be winning lotto but it will deliver some of the more significant increases in incomes in the developed world.

CORIN Okay David Parker, is that good, I mean what's wrong with that?

DAVID Well the pre-election fiscal update shows that growth has already peaked it’s on its way down now, halves to 2%, rather than strong wage growth that shows that over the next three years average wage growth is less than 1% real per annum, and exports are going down.

CORIN Okay I take your point, it's a debate here about the figures that you use on wages etc, but the trend is New Zealand is looking like it's going to have 2% growth for the next three or four five years, some sustained growth.  So what I'm saying is what is wrong with that?

DAVID The trend is that the government came to power promising that exports would increase to 40% of the economy, they started at 33% they’ve gone down to 29% and now they're going back to 26%.  You know we're not going to get wealthy as a country when we continue to not earn enough from our exports to pay for our interest and our imports.  And on the current track it's getting worse, it's not going to get better, and we need to change some of the settings, so that we don’t pretend that we're going to make money just by selling houses to each other or our farms to overseas.

CORIN And what are those settings changes you're talking about?  Capital gains tax are you?

DAVID That’s right we've got to push against speculation into productive investment.  We've got to push through capital gains tax getting the investment signal right, so that people invest on the basis of profitability.  That is the most important thing to move capital into the productive sector.

CORIN Bill English, has he got a point?  We're not getting enough money from the property sector going into businesses, into driving that export growth.  What would you do?

BILL Well if you're out in businesses that is exactly what's happening and confidence is building.  And I'll tell you what the risk is.  The risk is here that if you bring in a capital gains tax and a big carbon tax, if you raise income tax, if you go on a spend up, if the government takes over the electricity and energy markets, that will stall the economy, because no one will know what the rules are.   The Greens and Labour will have to work out…..we’ll have politicians setting interest rates…..and that will undermine confidence, and the people out there who are waiting for a pay rise, who want to get a better job, will have to sit round and wait while a mixed Opposition sorts out what it's going to do.

CORIN David Parker, you don’t agree with that?

DAVID No I don’t.  Look our prescription makes sense.  More money saved of our own capital through universal KiwiSaver growing over time.  That’s why the Australians own their banks plus ours, they save better.  Push that investment capital into the productive parts of the economy rather than into speculation.  House prices have gone up $200,000 now, average $700,000 in Auckland.

CORIN But can you assume that businesses aren't going to be affected by those taxes that Bill English raised there, will that affect their confidence and will they want to invest?

DAVID Yes it will, it will actually improve their confidence.  The IMF the OECD, the Treasury, the Reserve Bank, all these other governments they say you need to get investment flows chasing profit not tax advantage, and that’s what a capital gains tax does.  Then you need to push from volume to value by encouraging the economy towards a more sophisticated mix of exports, and you do that through more research and development expenditure that’s stimulated through R&D tax credits and accelerated depreciation.  Now when we introduced our forestry package, our industry policy, we had a Rotorua sawmill saying they would invest another 100 million dollars so that we export fewer raw logs and more finished product.  That’s the sort of thing that lifts productivity and wages.

CORIN Why aren't exports increasing under your government?

DAVID Oh cos they’ve had strong head winds, look these guys are knocking our exporters just like they think most New Zealanders have got it wrong in the last five years.  Well they're wrong, New Zealanders are right.  In the case of exporters they’ve done in fact a fantastic job.  They’ve had a high dollar, they’ve had their export markets, the US, UK, Europe, massive recession, and still they’ve done well.  

CORIN Where are the high value jobs going to come from if we don’t grow our exports? 

BILL Well they're happening now, I mean the technology sector is taking off in a way that hasn’t been the case ever actually.  There's a wide range of manufacturers who despite that pressure, are now succeeding, and the last thing they want is the whole shebang tipped upside down by politicians setting interest rates, higher income tax, capital gains tax, carbon tax, and the government taking over the energy and the housing markets.

DAVID I was at Hamilton Jet on Friday.  Now they want our policies, they want this direction of capital, they want our changes to monetary policy that will attempt to get our exchange rate at more realistic levels.  They want higher pools of our own capital, they don’t want to be paying higher interest rates than the rest of the world are.  They see that we need to push money from speculation to productivity, they don’t think it's right that 70% of the jobs created in New Zealand in the last few years have been in Auckland Christchurch, only 10% in the provinces.

CORIN They may well do, but they're worried that you're going to have a government with the Greens in it and that there's going to be a whole bunch of policies which they don’t like.

DAVID Well you know there's a considerable overlap between ours and the Greens' policy.  We both think we should have a capital gains tax……

BILL Worryingly so.

DAVID We both want to have increases in research and development expenditure.  We both think the price on carbon should be real.  We think there should be a different mechanism used.  Look you know we produced an alternative budget.  It shows that all our promises are paid for, plus we're in surplus.

CORIN But the Greens didn’t trust it, they want to have an audit of it, they said that.

DAVID Oh there's a bit of politics, that’s been out there for a couple of months.  No one's blown a hole in our budget.

CORIN No no no, the point is they said in their press conference that they want that independently audited.

DAVID Look, that was a throw away comment by Russell Norman, I wouldn’t read too much into it.  The truth is we have had an alternative budget that’s been out for months.  No one has picked a hole in it.  We most clearly – actually our budget surplus is bigger than yours.

BILL That’s because you raise a whole of lot of extra tax that we don’t need.

DAVID Well that’s actually because over time the capital gains tax doesn’t just push the economy in the right direction, it's also fair…

CORIN I just want to come back to this point quickly before I go back to Bill English for a response.  The issue is though the Greens have got 10 billion dollars' worth of promises and you're got your 15 over the next five years.  You’ve got to squeeze it all together somehow don’t you?

DAVID Look these big numbers that are bandied about, the government's own budget has one and a half billion dollars extra, cumulatively in each budget.  That’s one and a half billion year 1, three in year 2, four and a half in year 3….

CORIN But they don’t have another big party that might want to have the economic develop role, and wants a whole bunch of spending promises. You’ve got to figure it out.

DAVID The Greens have also made it clear that they want to run budget surplus.  We have said that we expect as the dominant party to be in charge of those settings effectively.  We have promised that we will run budget surpluses and we ran nine times in a row last time.

CORIN Quick question.  Will you rule out, the Greens want to go to 40 cents in the dollar in the top tax rate, you’ve got what 36, would you rule out going to 40 if you need to?

DAVID Yeah well you’ve heard me on other communications channels saying we're not going to negotiate these things in advance.  But we do say that the history of MMP has been that the dominant party sets these major settings.

CORIN Alright Bill English what would you say to that, you don’t obviously believe that they’ve got those numbers right.

BILL Look you can argue about the numbers and they're this simple. Over the next three years we would spend about 10 or 12 billion extra, they're going to spend 18 at least, and then plus the Greens another 10 billion.  Labour and Greens will raise – put on new tax, capital gains, carbon tax, and put up income tax to pay for a lot more wasteful spending.  Our focus is on building confidence because a new job and a higher pay come from businesses who are investing, and the good news is they're really starting to get some momentum.  The last thing we want is to stall that momentum.

CORIN The issue is here Mr English, you haven't actually put out your fiscal numbers.  We don’t know how much you are going to spend on health and education.  You haven't even told us, and we're three weeks away from polling date.

BILL Well we put out numbers in the budget.

CORIN But those numbers go backwards, we're talking about the next four years.

BILL We have a pre-election update, and tomorrow Corin you'll be able to see more detail in the numbers, and what it will show on the spending is a very simple point.  First we spend a lot less and we don’t raise new taxes, secondly the quality of our spending is much better specified because we spend for results.

CORIN So hang on, are you saying there's going to be less spending on health and education?

BILL Less than the opposition parties, we'll spend 10 or 12 billion over the next three years, they will spend at least 18 billion and probably more.  Corin we'll be focused on getting results, kids learning, more elective surgery, ….they are just throwing money at the problems.

CORIN David Parker are you throwing money at it?

DAVID The capital gains tax actually doesn’t raise much revenue for a start, it builds over time.  We actually got a lot of money to spend, and we're not spending a lot of money.  The money that we are spending goes predominantly into economic development initiatives like getting everyone into universal KiwiSaver which costs the government quite a bit of money, and research and development tax credits re-established.  Yes we do spend some money on the poorest children, and so we should in New Zealand, because we've got rising rates of child poverty, especially at the bottom end.

BILL No no they're falling actually.

DAVID No no that’s not true.

BILL They are.

DAVID That’s not true, we've got declining rates of home ownership, we've got increasing rates of ….at the bottom end especially child poverty is getting worse and your kids' package that you announced at the last budget shamefully excludes the kids in the poorest families, ours doesn’t.

CORIN So why, if we take the assumption that we've got a child poverty problem, whether it's falling or not, you're gonna disagree with that.  Why are you looking at taxcuts.  Shouldn’t that money be used to target it at the most needy?

BILL Well we want to reward people for hard work and getting ahead and that includes the 1600 people a week who are getting off welfare.  When they get into a job we want to be sure that that job is worth them having, rather than staying on a benefit, and that’s why 1600 people a week are moving off welfare and into work.  We're also focusing the government agencies much more closely on the core of persistent deprivation.  We have serious long term welfare dependency and recidivism and drug and alcohol and violence problems.  Too often in the past governments skated over that.  We're working with the whole social sector to bore in on those things, because what we've found out is commonsense.  What works for the community works for the government's books, when kids are educated, when prisoners are rehabilitated, and you protect an abused child, it saves you money.  That’s why we can spend less.

CORIN Let's got to David Parker on this.  You do have more a focus on universality, your baby bonus policy goes right up to ….

DAVID In the first year, years two and three are highly targeted.

CORIN But the point is why are you giving $60 to someone on $140,000 when that money like the argument around tax cuts could be better directed at those at the very bottom.

DAVID In truth the reason we're doing that is so that we can get it to the poorest people.  We actually tried at the last election to do it only for the poorest people and there was an electoral backlash.  So in respect of this we've gone close to universal for the first year and then in respective years two and three it is highly targeted to those families most in need.

CORIN So there was an electoral backlash, what does that mean?

DAVID The electorate didn’t like the idea that we were giving money only to those children who were in the poorest of families.

CORIN So you believe that it should be targeted at those poorest families but you weren't politically able or prepared to do that?

DAVID Well we think there are also benefits from universality, but clearly our package is highly targeted years two and three go only to the low and middle income families.

CORIN Alright I want to hear some vision type statements from both of you.  You first Bill English.  How is New Zealand going to get a high wage, high growth economy in the future, what is your plan to make the step change that the likes of Rod Drury talk about that we need to make?

BILL Well we're on that path now.  New Zealanders have become very resilient, they’ve come out of this difficult time and looking ahead they’ve got the confidence now with stable leadership and credible government to make the investment that’s required.  We're starting to see that, we're starting to see that investment in the tech companies, the manufacturing companies, half a billion dollars from Fonterra the other day in further processing.  We can back that up with the infrastructure investment, that’s well underway but there's so much more to do and most specifically and importantly, continuing to lift the skill levels, cos too many New Zealanders can't take the high skill job if they don’t have the skills, and the government system of investment has improved a lot, but there's plenty more we can do to get the skills right.

CORIN David Parker, give us in layman's terms your vision for how you will get that step change.

DAVID Well I want the more prosperous economy.  To be more prosperous it has to be more productive.  To be more productive we've got to have more pools of our own capital through more savings.  We've got to get that capital applied to productive ventures rather than speculation, and we've got to push from volume to value through encouraging innovation and a more sophisticated product mix that we sell to the rest of the world and we do that through research and development tax credits, accelerated depreciation and cleverer government procurement as well.  All of that leads to higher wages.

CORIN Alright a few quick questions, let's start with China, are we too reliant on China as a country, Mr English?

BILL I don’t think we're too reliant, but I think it is important that we continue to diversify our markets and that’s the point of Free Trade Agreements across the Asia Pacific.  It's the point of building relationships with you know India, Vietnam, Indonesia, and the TPP because all these markets are going to have similar characteristics to China.  But it's good that our exporters have been able to take advantage of the massive opportunities of the Chinese market.

CORIN David Parker.

DAVID Certainly agree that trade with China's hugely important, we signed the Free Trade Agreement with them and it's been a good thing, but what's happened in recent months where our reliance on log exports and dairy powder has been exposed through those massive drops in prices, shows that we need to diversity our export mix, and that’s both in terms of the mix of what we sell and the markets to whom we sell them.

CORIN Why do we live in a country where we have to subsidise and intervene in our housing market, Bill English you first.

BILL Oh because of the rules around supply and that’s why we spent three years with the decision makers who are Councils who have made rules that for instance in Auckland prevented the city growing and therefore pushed prices up because the supply of land was limited.  Similar Tauranga,  Queenstown, Wellington, and certainly Christchurch, and we're setting out to change it.  Now that’s quite a long job.  The Auckland Unitary Plan is 7000 pages.  No one understands it….

CORIN So how long will it take before you think houses are affordable in New Zealand?

BILL Well we made a lot of progress last two or three years and we've zoned more long.

CORIN How long?

BILL How long?  I think another two or three years of quite hard work.  That’s the speed at which the Councils will move.

CORIN Your government as potential government if you get there will have to do the same thing with Kiwi Build.  You're intervening in a market, it's a broken market.

DAVID Well it is, that’s why we're intervening.  You’ve got to deal with both supply and demand pressures.  You actually to take some of the speculative pressures out of the market through capital gains tax, very important on that front as well.  In addition you actually have to add to supply particularly at the affordable homes, and it actually comes down to the Labour Party, where two or three decades we roll up our sleeves and we actually build some houses.  So we're going to build 100,000 and we build by the private sector they’ll be onsold to first home buyers and they’ll be affordable homes that add to supply.  Land supply is not the only issue important though it is.

CORIN David Parker thank you very much for your time, Bill English thank you very much for your time.