20 April 2001

Hon Richard Prebble MP
Room 8.07A
Bowen House
Parliament Buildings

Dear Richard

I have been sent a copy of your booklet Closing the Gaps with an invitation to respond to it. I am glad to take the opportunity to do so.

The booklet presents itself as a set of policy papers. My principal response after I had read it was disappointment, particularly as it emanated from a group which announces itself as ‘the party of ideas’, because it did not seem to qualify for that description. It struck me rather as a combination of ill thought through notions and badly digested half-truths directed at scoring political points. One example of each of these should suffice to illustrate my point.

Firstly, in your own section of the publication you make some observations under the heading of ‘The Treaty’, about what you are pleased to call ‘the racial grievance industry’. This seems to me to be a gratuitous slur on those lawfully pursuing Treaty claims under the current legislation, but let us leave that to one side and look at your solution to this alleged problem. You suggest that any outstanding difficulties can be best dealt with by making generous offers to settle genuine Treaty claims. I am sure that many would agree. But how might this best be achieved administratively?

At the very least it would require those who felt they had a Treaty claim to pursue to identify themselves without imposing such strict criteria that some are unfairly excluded. It would then require a serious presentation of their carefully prepared and well researched case, and a similarly constructed Crown response. This might be the subject of negotiation, and if that failed to resolve outstanding issues, claims might be subject to careful consideration and appropriate recommendations by a specialist judicial body acting within the requirements which usually govern courts conducting reviews. All of this would require to be adequately funded. It is very hard to see how it might be done otherwise if all parties, including the Crown on behalf of citizens at large, are to have an adequate opportunity for the matter to be canvassed and for everyone be treated fairly. I have no doubt that you would entirely agree with this.

My point is that what I have just described is exactly what we have now. Your apparent new direction, upon examination, is nothing of the sort and is instead suggesting to all practical purposes that we go on doing what we are doing already while trying to present your policies as a new and different direction. This seems to me to be less than frank with your readers. In fact, to the extent that your proposal has been worked through to its conclusion at all, it seems to me to be a thinly veiled appeal to some contemporary political prejudices of a particularly offensive sort. I wondered when I read the section of your booklet dealing with the Treaty what Maori members of the ACT party, and indeed your own Maori MP, Donna Awatere-Huata, make of it. This is what I mean by ‘ill thought through notions’.

The other objection I have is to the use of what I have suggested are ill digested half truths. In this case my example is drawn from the section of your booklet prepared by your colleague Rodney Hide, who says in his piece on taxation that ‘our grandparents won the Second World War paying one dollar in four’. What precise conclusion Rodney draws from this is unclear from the text itself although he obviously thinks that it is important because he highlights it in bold type on the page. I hope, however that he is not suggesting that we won the war in question (or more accurately made a contribution to that outcome) by paying what would amount to a flat tax of 25%. That would be completely untrue on two counts.

The first is that by the end of the war the taxation rate on incomes of individuals was on average 32%. In addition to that there was special war taxation from 1942 to 1946 of 33.3% of ordinary tax and a war surcharge tax of one shilling and six pence on every pound of income. These taxes were not, by and large, imposed at a flat rate. On the contrary they were very steeply graduated and the top marginal taxation rate was as high as 70%. The income taxes noted were also supplemented by a range of additional indirect taxes, mostly in the form of excise and sales taxes. These facts are readily available in the official history War Economy by J V T Baker, subsequently the Government Statistician. So your claim is wrong in fact.

But the second and even more telling response to your misuse of these facts is to point out that the war was fought by New Zealand much more on internal borrowing and lend lease than it was on taxation. It is calculated (Baker p260) that the total wartime expenditure over six years amounted to 628m pounds. Of this only 252m came from taxation (including and in large part from special wartime taxes). Another 242m was drawn from internal borrowing and between 50m and 60m was borrowed from the United Kingdom. 111m came in the form of lend lease under a variety of United States and Canadian schemes.

If your booklet is seeking to make the point that we can operate successfully at much lower levels of taxation than we do now then you have chosen the wrong example, because this example shows the exact opposite. I hesitate to say that the way the ‘one dollar in four’ quote is highlighted is a deliberate attempt to mislead. I would make the point however, that the way it is used, that is its effect. It also serves to highlight the need to have all of the facts available before making dubious assertions of the sort that your booklet is making.

I could draw your attention to many other instances of the same misleading use of information in the material presented in your publication, but the piling of such instances upon instances would no doubt quickly become tedious. I hope nevertheless that should you, in future, publish a similar set of political statements that you will take the opportunity to think through the policies propounded with greater care, and carefully check the facts presented both for their accuracy and their completeness.

Yours sincerely

Jim Anderton
Deputy Prime Minister and MP for Wigram

ATTACHED: 22 April Press Release

22 April 2001 Media Statement

Prebble should take responsibility

Act leader Richard Prebble should take responsibility for the abuse of the Electoral Act disclosed in the Sunday Star Times today and resign or give very good reasons why he should not, Deputy Prime Minister Jim Anderton says.

He says Act has been caught in what appears to be a political money-laundering scheme.

"This is a stomach-turning scandal of monumental proportions. The only possible interpretation of the scheme is that it has been designed to defeat the purposes of the Electoral Act.

"To put the scheme in perspective, if the Electoral Commission had been asked to approve a scheme where money was channelled through secret trusts to avoid or evade an electoral law, then it would have declined approval.

"The scheme must be either avoidance or evasion. Neither is acceptable. It is not a good look for political parties that are involved in making laws to go off and design schemes to get around the laws they make.

"Queries over the scheme include doubts over what tax was paid on contributions to the trust fund. A full declaration should be made of the gift duty paid to facilitate the arrangement.

"The use of family members' and nominees' names to channel donations raises further queries. For those donations to be acceptable, the individuals would have to use their own money to make donations they choose to make. If the money was simply put in their name, and the individuals involved did not make legitimate choices, then the scheme discloses an intention to deceive.

"The Act leader Richard Prebble needs to state clearly whether he knowingly had any involvement in the scheme. If he knew about it and said nothing, then he was part of the deception.

"Perk-buster Rodney Hide was the President of the Act Party at the time of the scheme. He, too, should be accountable.

"The National Party has some explaining to do as well. It operates a so-called Free Enterprise Trust that is obviously designed to launder anonymous political donations. If the National Party thinks it is any cleaner than Act then it should come clean and disclose all of its significant anonymous donations to the 'Free Enterprise Trust.'

Jim Anderton wants changes to tighten up disclosure of party funding.

"All donations over $250 should be required to be disclosed. Anonymous donations over that level should be banned. The Alliance is not against donations over that sum, but donors should be prepared to put their names along side their contribution."

ENDS

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